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THE  LAW  OF  PARTNERSHIP. 


A  TREATISE 


ON  THE 


LAW  OF  PARTNERSHIP. 


FIFTH  ENGLISH  EDITION. 

BY 

THE  RIGHT  HONORABLE 

SIR  NATHANIEL  LINDLEY,  Knt.} 

ONE  OF  THE  LORDS  JUSTICES   OF  HER  MAJESTY'S 
COURT  OF  appeal; 

ASSISTED  BY 

WILLIAM  C.  GULL,  M.A., 

of  Lincoln's  inn,  esq.,  barrister-at-law, 
vtnerian  scholar  in  the  university  of  oxford,  1883, 

AND 

WALTER  B.  LIKDLEY,  M.A., 

OF  LINCOLN'S  INN,  ESQ.,  EARRISTER-AT-LAW. 


SECOND  AMERICAN  EDITION. 

EDITED  AND  ANNOTATED 

BY 

MARSHALL   D.  EWELL,  LL.D. 


IN  TWO  VOLUMES. 
VOL.  I. 


CHICAGO: 

CALLAGHAN  AND  COMPANY, 

1888. 


Entered  according  to  the  Act  of  Congress,  in  the  year  1888,  by 

CALLAGHAN  AND  COMPANY, 
In  the  office  of  the  Librarian  of  Congress,  at  Washington,  D.  C. 


DA  VI I  >   AT  WOOD, 

rniNTF.li  and  Stereotypes, 

Madison,  wis. 


AUTHOR'S  PREFACE. 


The  present  volume  is  the  fifth  edition  of  a  portion  of  the 
author's  former  "  Treatise  on  the  Law  of  Partnership,  in- 
cluding its  application  to  Companies."  When  that  treatise 
was  first  published,  viz.,  in  1860,  the  law  of  companies  was 
being  developed  by  legislative  enactment  and  judicial  decis- 
ion out  of  the  law  of  partnership;  and  it  appeared  to  the 
author  desirable  to  trace  that  development,  and  to  endeavor 
in  one  treatise  to  investigate  the  law  of  partnership  and  to 
determine  the  extent  to  which  its  principles  were  applicable 
to  companies.  But  in  the  course  of  the  last  quarter  of  a 
century  company  law  has  been  developed  to  such  an  extent 
as  to  justify,  if  not  to  require,  separate  treatment;  and  with 
a  view  to  convenience  and  expense,  advantage  has  been 
taken  of  the  opportunity  afforded  by  the  demand  for  a  fifth 
edition,  to  divide  the  former  treatise  into  two  parts,  each  of 
which  shall  be  complete  without  the  other,  viz.,  the  law  of 
partnership  proper,  and  the  law  of  companies,  in  so  far  as 
it  has  any  connection  with  the  former.  This  volume  is  de- 
voted to  the  first  of  these  parts,  viz.,  the  law  of  partnership 
proper.  The  volume  relating  to  companies  is  in  course  of 
preparation  and  will  be  published  shortly. 

In  arrangement,  the  order  of  treatment  previously  adopted 
has  been  retained,  with  the  exceptions  that  the  causes  of 
dissolution,  the  right  to  retire,  and  the  right  to  expel,  have 


VI  AUTHOR  S    PREFACE. 

been  transferred  to  the  chapter  on  dissolution  in  Book  IY. 
This  modification  will,  it  is  hoped,  be  considered  an  im- 
provement. 

Great  pains  have  been  taken  to  render  this  edition  deserv- 
ing of  the  favorable  reception  accorded  to  those  which  have 
preceded  it.  Several  very  important  cases,  and  especially 
Kendall  v.  Hamilton,  Scarf  v.  Jar  dine,  and  The  Yorkshire 
Banking  Company  v.  Beatson,  have  been  decided  since  the 
publication  of  the  last  edition.  There  has  also  appeared  the 
Digest  of  the  Law  of  Partnership  bv  Mr.  Frederick  Pollock, 
which  is  full  of  observations  of  the  greatest  value;  and  the 
third  edition  of  which  the  author  has  constantly  consulted. 
In  the  appendix  to  it  will  be  found  the  draft  of  a  bill  to  con- 
solidate and  amend  the  law  of  partnership.  It  is  much  to 
be  regretted  that  this  branch  of  the  law  should  not  be  put 
into  shape  and  codified  by  legislative  authority.  Mr.  Pol- 
lock's remarks  on  this  subject  in  the  preface  to  the  third  and 
fourth  editions  of  the  digest  deserve  the  serious  attention 
of  the  legislature.  But  this  is  not  the  place  to  enlarge  on 
the  many  advantages  which  would  accrue  to  this  country 
if  its  laws  were  gradually  revised  on  the  model  of  the  Indian 
codes. 

The  whole  of  the  present  treatise  has  once  more  been 
carefully  revised  throughout;  whatever  is  obsolete  has 
been  omitted,  or,  if  retained  as  being  still  useful,  has  been 
printed  in  small  type.  The  author's  increased  experience 
has  suggested  additions  and  alterations;  and  many  por- 
tions have  been  rewritten  and  adapted  to  the  most  recent 
decisions. 

Notwithstanding,  however,  the  labor  bestowed  upon  the 
work,  and  the  anxiety  of  the  author  to  render  it  a  trust- 


AUTHOK  S    PREFACE.  Vll 

worthy  guide  to  the  subject  to  which  it  relates,  the  multi- 
plicity and  difficulty  of  the  questions  with  which  he  has 
had  to  deal  are  such  that  he  dare  not  venture  to  hope  that 
he  has  always  avoided  error,  or  that  his  work  is  free  from 
serious  faults;  and,  although  it  has  engaged  his  unremitting 
attention  for  more  than  thirty  years,  he  is  painfully  aware 
that  it  is  even  now  but  an  imperfect  production. 

The  author's  thanks  are  due  to  Mr.  "W.  C.  Gull  and 
Mr.  "W.  B.  Lindley  for  their  assistance  in  revising  the 
sheets,  and  to  the  former  gentleman  also  for  his  aid  in  pre- 
paring materials,  in  examining  American  and  Irish  reports 
and  authorities  on  doubtful  points,  and  for  the  preparation 
of  the  indexes. 

Royal  Courts  of  Justice, 
1st  March,  1888. 


EDITOR'S  PREFACE  TO  THE  FIRST  AMERI- 
CAN EDITION. 


The  English  edition  of  Lindley  on  Partnership  has  *ong 
enjoyed  an  enviable  reputation  with  the  profession;  and 
only  the  fact  that  no  American  edition  has  been  published 
in  many  years,  and  the  high  cost  of  the  English  edition, 
have  prevented  its  securing  the  place  in  the  libraries  of 
American  practitioners  which  its  great  value  deserves.  In 
order  to  supply  what  is  believed  to  be  a  felt  want,  this  edi- 
tion is  presented  to  the  profession.  The  English  law  of 
partnership,  from  which  we  have  derived  the  greater  part 
of  our  American  law  upon  this  subject,  is  more  exhaust- 
ively treated  by  our  author  than  by  any  other;  and  in  the 
preparation  of  this  edition  it  has  been  the  aim  of  the  editor 
to  present  in  the  notes  the  substance  of  the  American  law 
upon  the  subject  of  partnership  down  to  the  time  of  going 
to  press.  It  has  been  thought  inadvisable  to  publish  in  this 
edition  the  chapter  upon  the  English  Bankruptcy  Act,  and 
also  the  latter  part  of  the  second  volume  pertaining  to  the 
winding  up  of  companies  under  the  English  statutes,  there 
being  no  corresponding  legislation  in  this  country.  To  have 
included  them  in  this  edition  would  have  rendered  neces- 
sary a  third  volume,  thereby  largely  increasing  the  cost  of 
the  book  to  the  practitioner  without  any  corresponding 
benefit.     In  their  place  a  chapter  has  been  inserted  upon 


EDITOK  S    PREFACE. 


American  unincorporated  joint-stock  companies,  which  it 
was  thought  would  be  of  more  value  to  the  American  prac- 
titioner than  the  matter  omitted. 

The  editor  desires,  in  this  connection,  to  acknowledge  his 
obligation  to  Mr.  Adelbert  Hamilton,  of  the  Chicago  Bar, 
for  valuable  assistance  in  reading  the  proof,  verification  of 
the  cases  cited,  and  in  the  preparation  of  the  Table  of 

American  Cases. 

Marshall  D.  Ewell. 
Union  College  of  Law, 
Chicago,  May  3,  1881. 


EDITOR'S  PREFACE   TO   THE  SECOND 
AMERICAN   EDITION. 


In  the  preparation  of  this  edition  the  notes  of  the  pre- 
ceding edition  have  been  retained,  and  the  cases,  American, 
Canadian  and  Colonial,  decided  since  its  publication  have 
been  brought  down  to  date.  Cases  deciding  well-settled 
principles  have  been  simply  cited,  while  those  deciding 
new  questions  or  points  of  more  than  ordinary  interest 
have  been  digested  in  the  notes,  with  the  view  of  making 

the  notes  as  useful  as  possible  to  practitioners. 

M.  D.  E. 
Chicago,  May  1, 1888. 


ANALYSIS  OF  CONTENTS. 


[the  references  are  to  the  marginal  pages.] 

Author's  Preface v 

Editor's  Prefaces ix-xi 

Authorities  Cited  by  the  Author See  Volume  II 

Authorities  Cited  by  the  Editor See  Volnme  II 

Introductory 1 

Book     I.— Of  Contracts  of  Partnership 7 

Book  II.— Of  the  Rights  and  Obligations  of  Partners  as 

Regards  Non-Partners 124 

Book  III.—  Of  the  Rights  and  Obligations  of  the  Members 

of  Partnerships  Between  Themselves  .     .     .    301 
Book  IV. —  Of  the  Dissolution  and  Wlnding-up  of  Partner- 
ships       570 

Index 757 

INTEODUCTOKY. 

1.  Meaning  of  the  word  partnership 1 

2.  Distinction  between  partnerships,  corporations,  and  companies        4 

BOOK  I. 

OF  CONTRACTS  OF  PARTNERSHIP. 

CHAP.  I.— The  Nature  of  the  Contract  Determined  ...  7 

Preliminary  observations 7 

Sect.  1. —  Of  true  partnerships 10 

1.  Partnership  is  the  result  of  an  agreement  to  share 

profits  and  losses 10 

2.  Partnership  is  prima  facie  the  result  of  an  agree- 

ment to  share  profits  although  nothing  may  be 
said  about  losses,  and  although  there  may  be 

no  common  stock 12 

8.  Partnership  is  prima  facie  the  result  of  an  agree- 
ment to  share  profits  although  community  of 

loss  is  stipulated  against 15 

xiii 


XIV  ANALYSIS    OF   CONTENTS. 

4.  Partnership  is  not  the  result  of  an  agreement  to 

share  gross  returns 17 

5.  Partnership  is  not  the  result  of   an  agreement 

which  is  not  concluded 19 

6.  Partnership  is  not  the  result  of  an  agreement  to 

share  profits  so  long  as  anything  remains  to 
be  done  before  the  right  to  share  them  ac- 
crues      20 

Application  of  this  principle  to  — 

Ordinary  partnerships '20 

Promoters  of  companies 23 

Sect.  2.—  Of  quasi- partnerships 25 

1.  By  sharing  profits 25 

Of  the  doctrine  that  persons  who  share  profits  are 

liable  for  each  other's  acts  as  if  they  were 
partners  — 

1.  State  of  the  law  anterior  to  Cox  v.  Hickman    .  26 

2.  Modifications  introduced  by  Cox  v.  Hickman  .  30 
8.  The  act  of  28  and  29  Vict.  eh.  86         ....  35 

2.  By  holding  oneself  out  as  a  partner       ....  40 

Sect.  3. —  Of  sub-partnerships 48 

Sect.  4.—  Of  general  and  particular  partnerships     ....  49 
Sect.  5.—  Of  clubs  and  societies  not  having  gain  for  their  ob- 
ject         50 

Sect.  6.— Of  co-ownership  as  distinguished  from  copartner- 
ship    51 

Note  on  the  remedies  between  co-owners  ...  57 

CHAP.  II.—  Of  the  Consideration  of  a  Contract  of  Part- 
nership    63 

Of  the  return  of  premiums 64 

CHAP.  III.—  Of  the  Persons  Capable  of  Entering  into  Part- 
nership        70 

Sect.  1.—  Of  their  number 70 

Sect.  2. —  Of  their  capacity 71 

1.  Aliens 72 

2.  Felons  and  outlaws 73 

3.  Infants 74 

4.  Lunatics 76 

5.  Married  women 77 

6.  Corporations  and  companies 78 

CHAP.  TV.—  Of  the  Evidence  by  which  a  Partnership  or 

Quasi-Partnership  May  be  Proved   ...  80 

The  statute  of  frauds 80 

The  facta  to  be  proved 83 

The  means  of  proving  it 84 


ANALYSIS    OF    CONTENTS.  XV 

CHAP.  V. —  Op  Illegal  Partnerships 91 

Sect.  1. —  What  partnerships  are  illegal  — 

In  general 91 

By  particular  statutes,  and  herein  of — 

Bankers 95 

Brokers     .  . 97 

Insurers 97 

Medical  practitioners 98 

Newspaper  proprietors 99 

Patentees 99 

Pawnbrokers 99 

Solicitors 100 

Theatrical  managers,  etc 101 

Unincorporated     joint-stock      companies 

with  transferable  shares 101 

Unregistered  partnerships 101 

Sect.  2. —  Consequences  of  illegality 102 

Especially  as  regards  actions  between  the  part- 
ners         ...  104 

CHAP.  VI.—  Of  the  General  Nature  op  a  Partnership  .     .  110 

Sect.  1. —  Of  the  mercantile  and  legal  notion  of  a  firm        .     .  110 
Sect.  2. —  Consequences  of  the  non-recognition  of  the  firm  as 

distinguished  from  the  persons  composing  it       .  118 

1.  Generally  as  regards  its  name 112 

2.  In  legal  proceedings 115 

3.  Partnership  disabilities 116 

4.  As  regards  sureties  and  securities,  and  in  particu- 

lar of  the  effect  produced  on  them  by  a  change 

in  the  firm 117 

CHAP.  VII. —  Of   the  Duration   of   Contracts   of  Partner- 
ship         121 

Of  partnerships  at  will  and  for  a  term      ....  121 
[As  to  causes  of  dissolution,  see  Bk.  IV.] 


BOOK  II. 

ON  THE  RIGHTS  AND  OBLIGATIONS  OF  PARTNERS  AS  RE- 
GARDS NON-PARTNERS. 

CHAP.  I. — Of  the  Liabilities  of  Partners  for  the  Acts  of 

Each  Other 124 

Sect.  1. — General  principles  of  agency  as  applied  to  ordinary 

partnerships 124 


XVI  ANALYSIS    OF   CONTENTS. 

Sect.  2. —  Liability  of  partners  in  respect  of  acts  which  are 

neither  torts  nor  frauds 128 

And  herein  of  the  implied  powers  of  partners  in  mat- 
ters relating  to  — 

1.  Accounts 128 

2.  Admissions 128 

8.  Agents 129 

4.  Arbitration 129 

5.  Banking  accounts ,  129 

6.  Bills  of  exchange  and  promissory  notes      .     .  129 

7.  Bonds 131 

8.  Borrowing  money 131 

9.  Checks 133 

10.  Contracts 134 

11.  Debts 134 

12.  Deeds 136 

13.  Distress 137 

14.  Extension  of  business 137 

15.  Guarantees        138 

16.  Insurances 139 

17.  Interest  % 139 

18.  Judicial  proceedings        139 

19.  Leases 139 

20.  Mortgages  and  pledges 139 

21.  Notice 141 

22.  Payments 143 

23.  Penalties 143 

24.  Purchases 144 

25.  Receipts 145 

26.  Releases 145 

27.  Representations 146 

28.  Sales 146 

29.  Servants 147 

30.  Ships        147 

Sect.  8. —  Liability  of  partners  in  respect  of  torts  and  frauds  .  147 

1.  Torts 149 

2.  Frauds 150 

Liability  of  partnerships  for  the  misapplication 

of  money  by  their  members 150 

Liability  of  partnerships  for  the  false  represen- 
tations of  their  members        162 

Sect.  4. —  Liability  of  partners  in  respect  of  acts  which  are  un- 
authorized, and  are  known  so  to  be 167 

SECT.  5. —  Effect  of  the  form  of  a  contract  on  the  liability  of 
partners  in  respect  of  contracts  not  entered  into 

on  behalf  of  the  firm,  or  not  so  in  proper  form     .  176 


ANALYSIS    OF    CONTENTS.  XVii 

1.  Contracts  under  seal 177 

2.  Ordinary  contracts  not  under  seal 177 

3.  Bills  of  exchange  and  promissory  notes      .     .     .  180 
Bills  in  the  name  of  the  firm 180 

Not  in  the  name  of  the  firm 184 

Promissory  notes 187 

Sect.  6. —  Liability  of  partnerships  in  respect  of  contracts  not 
binding  on  them,  but  of  which  they  have  had  the 

benefit 18!> 

CHAP.  II. —  Op  the  Natuee,  Extent  and  Dueation  of  the  Lia- 
bility of  Paetnees  to  Ceeditoes       ....  192 
Sect.  1. —  Nature  of  the  liability,  and  herein  of  joint  and  sev- 
eral liability  — 

1.  As  regards  contracts 193 

2.  As  regards  torts  and  frauds 19S 

Sect.  2.—  Extent  of  the  liability 200 

Sect.  3.—  Duration  of  the  liability 201 

1.  Commencement  of  liability 201 

Liability  of  firm  for  acts  preceding  its  formation  202 
Liability  of    incoming  partners  for  debts    con- 
tracted before  they  join  the  firm 205 

2.  Termination  of  liability 210 

A.  As  to  future  acts 210 

1.  Without  notice  of  dissolution 211 

Death 211 

Bankruptcy 212 

Retirement  of  dormant  partners       .     .     .  213 

2.  By  notice  of  dissolution  or  retirement    .     .     .  213 

The  effect  of  such  notice 215 

When  there  is  a  continued  holding  out 

notwithstanding  the  notice     .     .     .  216 
With  reference  to  the  doctrine  that  a 
partnership,  though  dissolved,  sub- 
sists so  far  as  is  necessary  for  the 

winding  up  of  its  affairs    ....  217 

What  amounts  to  notice 221 

And  herein  of  tiie  distinction  between 

old  customers  and  other  people  .     .  221 

B.  As  to  past  acts 223 

And  especially  by  — 

1.  Payment 225 

Of  the  appropriation  of  payments        .     .  226 
Where  there  is  a  single  current  account  228 
Where  there   are  several  distinct  ac- 
counts      .231 

Vol.  I— b 


XV111  ANALYSIS    OF    CONTENTS. 

2.  Release 237 

3.  Substitution  of  debtors  and  securities       .     239 
(a)  By  agreement 239 

A.  Where  a  retired  partner  has  not 

been  discharged  — 

a.  No  new  partner  having  been 

introduced    .     .     .     .     .     .     242 

b.  Although  a  new   partner  has 

been  introduced     ....    .245 

B.  Where  a  retired  partner  has  been 

discharged 247 

Discharge  of  the  estate  of  a  de- 
ceased partner 249 

(6)  By  merger  and  judgment      ....     254 
And  herein  of  the  effect  of  taking 
fresh  securities  for  an  old  debt      .     254 

4.  Lapse  of  time  and  the  statutes  of  limita- 

tion         257 

CHAP.  III.— Of  Actions  Between  Partners  and  Non- Partners. 

Sect.  1. —  Of  actions  by  and  against  partners 264 

1.  General  observations 264 

2.  Where  no  change  in  the  firm  has  occurred  since 

the  right  accrued         273 

A.  Actions  in  respect  of  legal  rights      ....     273 
',a)  Actions  by  the  firm 273 

Actions  ex  contractu 273 

Actions  ex  delicto 278 

(6)  Actions  against  the  firm 280 

Actions  ex  contractu 280 

Actions  ex  delicto 283 

B.  Actions  in  respect  of  equitable  rights    .     .     .  283 

3.  Where  a  change  in  the  firm  has  occurred  since  the 

right  accrued 284 

Sect.  2.— Of  set-off 290 

Sect.  3. —  Of  execution  against  partners  for  the  debts  of  the 

firm 298 


BOOK  III. 

OF  THE  RIGHTS  AND   OBLIGATIONS   OF  THE    MEMBERS   OF 
PARTNERSHIPS  BETWEEN  THEMSELVES. 

CHAP.  I.—  Of  the  Right  to  Take  Part  in  the  Management  of 

the  Affairs  of  the  Firm 301 


ANALYSIS    OF    CONTENTS.  XIX 

CHAP.  II.—  Of  the  General  Duties  of  Partners  to  Observe 

Good  Faith 303 

Sect.  1. —  Preliminary  remarks 308 

Sect.  2.— Of  the  obligation  of  partners  not  to  benefit  them- 
selves at  the  expense  of  their  copartners     .     .     .  305 
Sect.  3.—  Of  the  powers  of  a  majority  of  partners     ....  313 

1.  In  matters  arising  in  the  ordinary  course  of  busi- 

ness         •     •  314 

2.  In  matters  involving  a  change  in  the  nature  of 

the  business 315 

CHAP.  III.— Of  the  Capitals  of  Partnerships 320 

CHAP.  IV.—  Of  Joint  and  Separate  Property 322 

Sect.  1. —  Of  joint  estate 323 

Sect.  2. —  Of  separate  estate 327 

Sect.  3.— Of  the  conversion  of  joint  estate  into  separate,  and 

vice  versa 334 

CHAP.  V.— Of  Shares  in  Partnerships        339 

SECT.  1.—  Of  the  nature  of  a  share  and  the  rules  which  govern 

its  devolution  in  case  of  death 339 

Of  the  doctrine  of  non-survivorship  between  part- 
ners      340 

Of  the  doctrine  that  shares  are  personal  estate     .     .  348 

SECT.  2. —  Of  the  amount  of  each  partner's  share        ....  348 

The  presumption  in  favor  of  equality    ....  348 
SECT.  3.—  Of  the  lien  which  each  partner  has  on  the  property 

of  the  firm,  and  on  the  shares  of  his  copartners.  351 
Sect.  4. —  Of  the  mode  in  which  a  share  is  taken  in  execution 

for  the  separate  debts  of  its  owner     ....  356 

1.  The  duty  of  the  sheriff        350 

2.  The  position  of  the  purchaser  from  the  sheriff     .  358 

3.  The  position  of  the  execution  debtor      ....  359 

4.  Modifications  introduced  by  the  Judicature  Acts  361 
Sect.  5. —  Of  the  transfer  of  shares 363 

[N.  B. —  As  to  the  relinquishment  and  forfeiture 
of  shares,  and  as  to  the  right  to  retire  and  ex- 
pel, see  infra,  Bk.  IV.  chap.  I,  §  1.] 

CHAP.  VI.— Of  Contribution  and  Indemnity 367 

Sect.  1. —  General  observations 368 

1.  Foundation  of  the  right  to  contribution      .      .      .  368 

2.  Of  the  right  of  agents  and  trustees  to  indemnity 

from  their  principals  and  cestuis  que  trustent  369 

3.  Of  some  former  differences  between  contribution 

at  law  and  in  equity        374 

4.  Of  contribution  between  wrong-doers    ....  377 


XX  ANALYSIS    OF    CONTENTS. 

Sect.  2. —  Of  compensation  for  trouble 380 

Sect.  3. —  Of  outlays  and  advances 381 

Sect.  4. —  Of  debts,  liabilities  and  losses 385 

Sect.  5.—  Of  interest 389 

CHAP.  VII.— Of  the  Division  of  Profits 393 

CHAP.  VIII.— Of  the  Accounts  of  Partnerships    ...     .396 

Sect.  1. —  Of  the  mode  of  keeping  partnership  accounts      .     .  396 

Sect.  2. —  Of  the  duty  to  keep  and  the  right  to  inspect  them  404 

CHAP.  IX. —  Of  Partnership  Articles 406 

Sect.  1. —  General  observations 406 

1.  Partnership  articles  are  not  intended  to  define  all 

the  rights  and  duties  of  partners 406 

2.  Partnership  articles  are  to  be  construed  with  ref- 

erence to  the  objects  of  the  partners       .     .     .  407 

3.  And  so  as  to  defeat  fraud 407 

4.  And  to  prevent  unfair  advantages 408 

5.  Any  clause,  however  express,  is  capable  of  being 

abandoned  by  the  tacit  consent  of  all  the  part- 
ners      408 

6.  Articles  of  partnership  are  presumed  to  apply  so 

long  as  the  parties  to  them  remain  partners     .  410 
Sect.  2. —  On  the  usual  clauses  in  articles  of  partnership,  and 
especially  of  those  relative  to  — 

1.  The  nature  and  place  of  the  business       .     .     .  412 

2.  The  time  of  the  commencement  of  the  partner- 

ship         412 

3.  The  name  or  style  of  the  firm 413 

4.  The  duration  of  the  partnership 413 

5.  The  premium 413 

6.  The  capital  and  property  of  the  firm  ....  414 

7.  Interest,  allowances,  etc 418 

8.  Conduct  and  powers  of  the  partners  ....  418 

9.  Partnership  books 420 

10.  Accounts 420 

11.  Retiring 422 

12.  Dissolving 405 

13.  Expelling 426 

14.  Valuation  of  shares 429 

15.  Transmission  of  shares  and  introduction  of  new 

partner 433 

16.  Annuities  to  widows 435 

17.  Prohibitions  against  carrying  on  business     .      .  436 

18.  Good-will 439 

19.  Getting  in  debts 448 


ANALYSIS    OF    CONTENTS.  XXI 

20.  Assignment  of  share  by  retiring  partner      .     .  449 

21.  Indemnities 450 

22.  Arbitration  clauses 451 

23.  Penalties  and  liquidated  damages 454 

CHAP.  X.— Of  Actions  Between  Partners 456 

Sect.  1. —  General  observations 456 

1.  Law  before  the  Judicature  Acts 456 

2.  Effect  of  the  Judicature  Acts 458 

Sect.  2. —  Parties  to  actions  between  partners 459 

1.  General  rule  as  to  partnership  actions  ....     459 

2.  Where  some  partners  may  sue  or  be  sued  on  be- 

half of  themselves  and  others 461 

SECT.  3. —  Cases  in  which  courts  will  not  interfere  between 

partners 464 

1.  Of  the  rule  not  to  interfere  except  with  a  view  to 

a  dissolution 464 

2.  Of  the  rule  not  to  interfere  in  matters  of  inter- 

nal regulation 466 

3.  Of  the  rule  not  to  interfere  at  the  instance  of 

those  who  have  been  guilty  of  laches     .     .     .  466 

Sect.  4. —  Actions  for  specific  performance 475 

Sect.  5. —  Actions  for  misrepresentation  and  fraud  ....  479 

1.  General  observations 479 

2.  Actions  for  damages 481 

3.  Actions  for  rescission  of  contract 482 

Sect.  6. —  Actions  for  dissolution,  account,  etc 491 

1.  Of  account  and  discovery 492 

(a)  Of  account  and  discovery  generally      .     .     .  492 

As  to  account 492 

As  to  discovery  and  production  of  docu- 
ments        501 

As  to  payment  into  court 505 

(&)  The  defenses  to  an  action  for  an  account  and 

discovery 506 

1.  Denial  of  partnership 507 

2.  The  statute  of  limitations 508 

3.  Account  stated 512 

4.  Award 514 

5.  Payment.     Accord  and  satisfaction       .     .  515 

6.  Release 516 

(c)  The  judgment  for  a  partnership  account  .     .  516 

Just  allowances 519 

The  period  over  which  the  account  is  to  ex- 
tend      519 

Account  of  profits  since  dissolution  .     .     .  521 


XX11  ANALYSIS    OF   CONTENTS. 

The  evidence  upon  which  the  accounts  are 
to  be  taken 536 

2.  Of  injunctions 538 

3.  Of  receivers 545 

4.  Of  the  sale  of  partnership  property  under  the 

order  of  the  court 555 

Sect.  7. —  Other  miscellaneous  actions 559 

1.  Between  persons  who  have  agreed  to  become 

partners 559 

2.  Between  partners 560 

Note  on  the  law  as  it  stood  before  the  Judica- 
ture Acta 562 


BOOK  IV. 

OF  THE  DISSOLUTION  AND  WINDING  UP  OF  PARTNERHIPS. 

CHAP.  I.— Causes  of  Dissolution 570 

Sect.  1. —  The  will  of  any  partner 571 

1.  Of  the  right  to  dissolve     .........  571 

2.  Of  the  right  to  retire 573 

3.  Of  the  right  to  expel 574 

Sect.  2. — The  impossibility  of  going  on;  in  consequence  of — 

1.  The  hopeless  state  of  the  partnership  business  .  576 

2.  Insanity 577 

3.  Misconduct  and  destruction  of  mutual  confidence  580 
Sect.  3. — The  transfer  of  a  partner's  interest 583 

[N.  B. —  As  to  Death  and  Bankruptcy,  see  below.] 
Sect.  4. —  The  occurrence  of  some  event  which  renders  the 

continuance  of  the  partnership  illegal  ....  585 

CHAP.  II.—  Consequences  of  Dissolution 586 

1.  As  regards  the  creditors  of  the  firm 586 

2.  As  regards  the  partners  themselves 587 

CHAP.  III.—  Of  Death  and  its  Consequences 590 

Sect.  1. —  As  regards  the  surviving  partners  and  the  executors 

of  the  deceased 590 

Sect.  2. —  As  regards  joint  creditors 594 

1.  With  reference  to  what  occurred  before  death     .  594 

And  herein  of  actions  against  executors  of  de- 
ceased partners  by  creditors  of  the  firm    .     .  599 

2.  With  reference  to  what  has  occurred  since  death  604 

And  herein  of  the  effect  of  a  trust  to  employ 

assets  in  the  business  of  the  firm     ....  607 


ANALYSIS    OF   CONTENTS.  XXI 11 

Sect.  3.— As  regards  the  separate  creditors,  legatees  and  next 

of  kin  of  the  deceased 610 

1.  Of  the  rights  of  the  separate  creditors  and  lega- 

tees, etc.,  generally 610 

2.  When  the  share  of  the  deceased  is  not  got  in      .  614 

3.  Of  shares  specifically  bequeathed 619 

CHAP.  IV.— Of  Bankruptcy 622 

Preliminary  observations 622 

Sect.  1.—  Adjudications  of  bankruptcy  against  partners     .     .  625 

1.  Acts  of  bankruptcy 625 

And  herein  particularly  of  fraudulent  convey- 
ances       627 

2.  The  petitioning  creditor's  debt 633 

3.  Of  joint  and  separate  adjudications       ....  637 

And  herein  of  annulling  and  consolidating  ad- 
judications        640 

4.  Choice  of  trustee 644 

And  herein  of  inspectors  to  protect  special  in- 
terests    645 

Sect.  2. —  The  property  which  vests  in  the  trustee  and  the 

consequences  of  such  vesting 646 

1.  Generally        646 

2.  Property  divisible  amongst  the  creditors  .     .     .  650 

3.  Of  set-off  and  mutual  credit 654 

4.  Of  the  time  from  which  the  title  of  the  trustee 

dates 663 

And  herein  of  the  consequences  of  the  doc- 
trine of  relation  back  as  regards  — 

(a)  Transactions  with  the  bankrupt  partners  666 

(b)  Transactions  with  the  solvent  partners  669 

(c)  Execution  creditors 674 

Sect.  3.—  Of  the  doctrine  of  reputed  ownership       ....  676 

1.  Generally        676 

2.  Particularly  as  regards  partners 683 

Where  there  has  been  a  change  in'the  firm  .  685 

Where  there  is  a  dormant  partner      .     .     .  689 

Sect.  4. —  The  administration  of  the  bankrupt's  estates     .     .  691 

1.  General  principles 691 

2.  Of  joint  estate  and  of  separate  estate    ....  697 

3.  Of  joint,  separate,  and  joint  and  separate  debts    701 

4.  Of  the  proof   and   payment  of  partners'   debts 

generally 707 

Of  secured  creditors  and  the  rule  in  Ex  parte 

Waring 709 


XXIV  ANALYSIS    OF   CONTENTS. 

A.  Proof  against  the  joint  estate 720 

The  joint  creditors 720 

The  partners 721 

The  separate  creditors 728 

B.  Proof  against  the  separate  estates  ....  729 

The  separate  creditors 730 

The  joint  creditors 730 

The  partners 737 

C.  Proof  against  both  estates 743 

General  rule  as  to  election 743 

Cases  in  which  double  proof  is  allowed     .  747 
Cases  where  a  secured  creditor  may  split 

his  demand 749 

Sect.  5. —  The  bankrupt's  order  of  discharge 751 

Sect.  6. — Arrangements  with  creditors 754 

CHAP.  V.— Joint-Stock  Companies  in  the  United  States      .  757 


THE  LAW  OF  PARTNERSHIP. 


INTRODUCTORY. 


1.  Meaning  of  the  word  partnership. 

To  frame  a  definition  of  any  legal  term  which  shall  be 
both  positively  and  negatively  accurate  is  possible  only  to 
those  who,  having  legislative  authority,  can  adapt  the  law 
to  their  own  definition.  Other  persons  have  to  take  the 
law  as  they  find  it;  and  rarely  indeed  is  it  in  their  power  to 
frame  any  definition  to  which  exception  may  not  justly  be 
taken.  All  that  they  can  usefully  attempt  is  to  analyze  the 
meanings  of  the  words  they  use,  and  to  take  care  not  to 
employ  the  same  word  in  different  senses  where  so  to  do 
can  possibly  lead  to  confusion. 

Without  attempting,  then,  to  define  the  terms  partners 
and  partnership,  it  will  suffice  to  point  out  as  accurately  as 
possible  the  leading  ideas  involved  in  those  words.  The 
terms  in  question  are  evidently  derived  from  to  part,  in  the 
sense  of  to  divide  amongst  or  share,  and  this  at  once  limits 
their  application,  although  not  very  precisely ;  for  persons 
may  share  almost  anything  imaginable,  and  may  do  so 
either  by  agreement  amongst  themselves  or  otherwise.  But 
in  order  that  persons  may  be  partners  in  the  legal  accepta- 
tion of  the  word,  it  is  requisite  that  they  shall  share  some- 
thing by  virtue  of  an  agreement  to  that  effect,  and  that 
that  which  they  have  agreed  to  share  shall  be  the  profit 
arising  from  some  predetermined  business  engaged  in  for 
their  common  benefit.  An  agreement  that  something  shall 
Vol.  I  —  1  1 


*2  INTRODUCTORY. 

[*2]  be  attempted  with  a  view  to  gain,  and  *that  the  gain 
shall  be  shared  b}^  the  parties  to  the  agreement,  is  the 
grand  characteristic  of  every  partnership,  and  is  the  lead- 
ing feature  of  nearly  every  definition  of  the  term,  (a) 

Partnership,  although  often  called  a  contract,  is  in  truth 
the  result  of  a  contract ;  the  relation  which  subsists  between 
persons  who  have  agreed  to  share  the  profits  of  some  busi- 
ness rather  than  the  agreement  to  share  such  profits. 

By  some  writers  associations  which  have  not  gain  for 
their  object  are  occasionally  termed  partnerships ;  and  even 
in  the  Companies  Act,  1862,  partnerships  having  gain  for 
their  object  are  referred  to,  and  the  reader  is  thereby  led 
to  suppose  that  there  may  be  partnerships  of  some  other 
kind,  (b)  But  to  use  the  word  partnership  to  denote  a  so- 
ciety not  formed  for  gain  is  to  destroy  the  value  of  the  word, 
and  can  lead  only  to  confusion,  (c)  Nor  is  it  consistent  with 
modern  usage.  Lord  Hale  and  older  writers  use  copartner- 
ship in  the  sense  of  co-ownership,  but  this  is  no  longer  cus- 
tomary ;  and  as  will  be  shown  hereafter,  there  are  many 
important  differences  between  the  two.  (d) 

Although  for  the  reasons  already  stated  the  writer  has 
not  attempted  to  give  a  definition  of  the  term  partnership, 
he  appends  for  the  consideration  of  the  reader  the  following 
definitions  taken  from  works  of  celebrity : 

Civil  Code  of  New  York. —  Partnership  is  the  association  of  two  or 
more  persons  for  the  purpose  of  carrying  on  business  together,  and  di- 
viding its  profits  between  them,  (e) l 

(a)  Moll  wo,  March  &  Co.  v.  Court  an  adventure  or  business,  or  in  the 

of  Wards,  L.  R.  4  P.  C.  436 ;  R.  v.  profits  as  affected  by  losses. 

Robson,  16  Q.  B.  D.  137.  When  the  same  persons  carry  on 

(o)  See  sec.  4  of  the  act.  the  same  business  as  partners  in 

(c)  See  as  to  clubs,  infra,  chap,  two  different  places  and  under  dif- 
1,  §  5.  ferent  firm  names,  there  is  in  law 

(d)  See  infra,  chap.  1,  §  6.  but  a  single  partnership,  and  the 

(e)  Civil  Code  of  the  State  of  New  assets  of  both  nominal  firms  are 
York,  §  1283.  equally  applicable  to  the  payment 

1  In  Chapman  v.  Devereux,  32  Vt.  of  all  the  creditors.  Campbell  v. 
616,  partnership  is  denned  to  be  a  Colorado  Coal  &  Iron  Co.  9  Colo.  60. 
joint  interest  in  the  net  profits  of        From  the  facts  of  this  case,  held 


MEANING    OF    THE   WORD    PARTNERSHIP.  *3 

Code  civil. —  La  societe  est  un  contrat,  par  lequel  deux  ou  plusieurs 
personnes  conviennent  de  mettre  quelque  chose  en  corntnun,  dans  la 
vue  de  partager  le  benefice  qui  pourra  en  resulter.  (/) 

Collyer. —  [Partnership  as  between  the  parties  themselves  is  a  volun- 
tary contract  between  two  or  more  persons  for  joining  together  their 
money,  goods,  labor  and  skill,  or  any  or  all  of  them,  under  an  understand- 
ing that  there  shall  be  a  communion  of  profit  between  them,  and  for  the 
purpose  of  carrying  on  a  legal  trade,  business  or  adventure.]1 

Dixon. — A  partnership  is  a  voluntary  unincorporated  association  of  in- 
dividuals standing  to  one  another  in  the  relation  of  principals  for  carry- 
ing out  a  joint  operation  or  undertaking  for  the  purpose  of  joint  profit,  (g) 

Domat. —  La  societe  est  une  convention  entre  deux  ou  plusieurs  per- 
sonnes, parlaquelle  ils  mettent  en  commun  entre  eux  ou  tous  leurs  biens 
ou  une  partie,  ou  quelque  commerce,  queique  ouvrage,  ou  quelque 
autre  affaire,  pour  *partager  tous  ce  qu'ils  pourront  avoir  de  gain  [*3] 
ou  souffrir  de  perte  de  ce  qu'ils  auront  mis  en  societe.  (7i) 

Kent. —  Partnership  is  a  contract  of  two  or  more  competent  persons 
to  place  their  money,  effects,  labor  and  skill,  or  some  or  all  of  them,  in 
lawful  commerce  or  business,  and  to  dn'id^  the  profit  and  bear  the  loss 
in  certain  proportions.  (£) 

Indian  contract  act. —  Partnership  is  the  relation  which  subsists  be- 
tween persons  who  have  agreed  to  combine  their  property,  labor  or  skill 
in  some  business,  and  to  share  the  profits  thereof  between  them,  (k) 

Parsons. —  Partnership  is  the  combination  by  two  or  more  persons  of 
capital,  or  labor,  or  skill,  for  the  purpose  of  business  for  their  common 
benefit.  (I) 

Pollock. —  Partnership  is  the  relation  which  subsists  between  persons 
who  have  agreed  to  share  the  profits  of  a  business  carried  on  by  all  or 
any  of  them  on  behalf  of  all  of  them,  (rn) 

Pothier  (1). —  Le  contrat  de  societe  est  un  contrat  par  lequel  deux  ou 
plusieurs  personnes  mettent,  ou  s'obligent  de  mettre,  en  commun  quelque 
hose,  pourfaire  en  commun  un  profit  honnete,  dont  ils  s'obligent  recip- 
roquement  de  se  rendre  compte.  (n) 

that  the  vendor  of  goods  was  en-  (g)  Dixon's  Law  of  Partnership,  1. 

titled  to  treat  the  vendee  either  as  (//,;  Domat,  les  Louis  Civiles,  liv. 

partner  or  sole  owner  of  a  branch  i,  tit.  8,  §  1. 

store  for  which  the    goods  were  (i)  ?>  Kent's  Comm.  23. 

bought,  and  hence  liable  for  the  (k)  Indian  Contract  Act,  §  239. 

price  of  the  goods.     Woodward  v.  (!)  Parsons'   Part.  chap.   2,   §  1. 

Clark,  30  Kan.  78.  This  definition  is  inaccurate.     The 

(/)  Code  Civil,  §  1832.  word  denotes  a  combination  of  per- 

1  Setzer  v.  Beale,  19  "W.  Ya.  274 ;  sons,  not  a  combination  of  capital. 

Cogswell  v.  Wilson,  11  Oreg.  371;  (?,/)  Pollock's  Digest  of  the  Law  of 

Tillar  v.  Cook,  77  Va.  477 ;  Tyler  on  Partnership,  g  4,  ed.  3. 

Part.  p.  11.  (n)  Pothier,  Traite  du  Contrat  de 


*4  INTKODUCTOKY. 

Pothier  (2). —  Societas  est  contractus  de  conferendis  bona  fide  rebus 
aut  operis,  animo  lucri  quod  honestum  sit  ac  licitum  in  commune  faci- 
endi.  (o) 

Prussian  code—  Ein  Vertrag  durcb  welchen  mehrere  Personen  ihr 
Vermogen  oder  Gewerbe  oder  auch  ihr  Arbeiten  und  Bemiihungen  ganz 
oder  zum  Theil  zur  Erlangung  eines  gemeinschaftlichen  Endzwecks 
vereinigen,  wird  ein  Gesellschaftsvertrag  genannt.  (p) 

Pufendorf. —  Le  contrat  de  societe  se  fait  lorsque  deux  ou  plusieurs 
personnes  mettent  en  commun  leur  argent,  leurs  biens,  ou  leur  travail, 
a  la  charge  de  partager  entr'eux  le  gain  et  de  supporter  les  pertes  qui  en 
arriveront,  chacun  a  proportion  de  ce  qu'il  contribue  du  sien.  (q) 

Rutherford. —  When  two  or  more  persons  join  money,  or  goods,  or 
labor,  or  all  of  these  together,  and  agree  to  give  each  other  a  common 
claim  upon  such  joint  stock,  this  is  partnership,  (r) 

Story. —  Partnership,  often  called  copartnership,  is  usually  defined  to 
be  a  voluntary  contract  between  two  or  more  competent  persons  to  place 
their  money,  effects,  labor  and  skill,  or  some  or  all  of  them,  in  lawful 
commerce  or  business,  with  the  understanding  that  there  shall  be  a  com- 
munion of  the  profits  thereof  between  them,  (s) 

Thibaut. —  Verbinden  sich  mehrere  zur  Erreichung  eines  ihnen 
[*4]  gemeinschaftlichen  *Endzwecks   so  wird  diesz   ein   Gesellschafts- 
vertrag (societas  Mascopei,  Magenschaft)  genannt.     Geschieht  diese 
Verbindung  zu  eigenniitzigen  Zwecken  so  nennt  man  sie  societas  quozs- 
tuaria,  oder  negotiatoria,  sonst  aber  non  quazstuaria.  (t) 

Vinnius.—  Societas  est  contractus,  quo  inter  aliquos  res  aut  operae 
communicantur,  lucri  in  commune  faciendi  gratia,  (u) 

Voet. —  Societas  est  contractus  jurisgentium,  bonas  fidei,  consensu  con- 
6tans  semper  re  honesta,  de  lucri  et  damni  communione.  (x) 

Watson. —  Partnership  is  a  voluntary  contract  between  two  or  more 
persons  for  joining  together  their  money,  goods,  labor  and  skill,  or  either 
or  all  of  them,  upon  an  agreement  that  the  gain  or  loss  shall  be  divided 
proportionably  between  them,  and  having  for  its  object  the  advance- 
ment and  protection  of  fair  and  open  trade,  (y) 

Societe,  §  1.    There  is  a  useful  Eng-  (s)  Story  on  Partn.  §  2. 

lish  edition  of  this  work  by  O.  D.  (t)  Thibaut,  System  des  Pandek- 

Tudor,  Esq.  ten  Rechts,  §  467,  edition  9.     This 

(o)  Pothier,  Pand.  lib.  xvii,  tit.  2,  division  of  partnerships  into  part- 

§  1,  art.  1.  nerships  having  gain  for  their  ob- 

(X>)  Allgem.   Landsrecht  fur  die  ject,    and    other   partnerships,    is 

Preuss.  Staat.  th.  i,  tit.  3,  §  169.  noticed  by  most  German  writers  on 

(q)  Pufendorf,    Le    Droit    de    la  the  civil  law. 

Nat.  et  des  Gens,  ed.  Barbeyrac,  (u)  Vinn.  Inst,  iii,  26. 

liv.  v,  chap.  8,  §  1.  (x)  Voet.   Comm.  ad  Pand.  lib, 

(r)  Inst,  of  Nat.  Law,  bk.  i,  c.  13,  xvii,  tit.  2,  Pro  Socio,  §  1. 

§  9-  (V)  Watson,   Partn.    p.    1.     This 


CORPORATIONS    AND    COMPANIES.  *5 

All  the  above  definitions,  however,  with  the  exception  of 
Mr.  Dixon's,  are,  with  reference  to  the  law  of  England,  too 
wide;  for  they  include  not  only  partnerships  in  the  proper 
sense  of  the  word,  but  also  many  corporations  and  com- 
panies which  differ  from  partnerships  in  several  important 
respects,  and  which  it  is  better  therefore  not  to  denote  by 
the  same  word.  Mr.  Dixon's  definition  avoids  this  error, 
but  the  relation  of  principals  to  which  he  refers  is  not 
altogether  free  from  objection,  (s) 

If  partnership  is  defined  so  widely  as  to  include  incor- 
porated and  other  companies,  partnerships  must  be  sub- 
divided into  (1)  ordinary  and  (2)  extraordinary  partnerships 
as  in  the  Indian  Contract  Act.  (a)  But  it  is  more  in  accord- 
ance with  ordinary  usage  to  confine  the  word  to  unincorpo- 
rated societies  not  governed  by  any  special  statute  or  custom. 

2.  Distinction  between  p>art?ierships,  corporations  and 
companies. 

Corporations. —  A  corporation  is  a  fictitious  person,  cre- 
ated by  special  authority  (by  the  law  of  England  by  the 
Crown  or  by  parliament),  and  endowed  by  that  author-  [*5] 
ity  with  a  capacity  to  acquire  rights  and  incur  obliga- 
tions, as  a  means  to  the  end  for  the  attainment  of  which  the 
corporation  is  created.1  A  corporation,  it  is  true,  consists  of 
a  number  of  individuals,  but  the  rights  and  obligations  of 
these  individuals  are  not  the  rights  and  obligations  of  the 
fictitious  person  composed  of  those  individuals;  nor  are  the 
rights  and  obligations  of  the  body  corporate  exercisable 
by  or  enforceable  against  the  individual  members  thereof, 
either  jointly  or  separately,  but  only  collectively,  as  one  ficti- 
tious whole.     As  the  civilians  neatly  express  it  —  Si  quid 

definition  is  copied  by  Gow  in  his        (a)  See  §  266. 
work  on  partnership.  1  See  Pilcher's  Succession,  1  So. 

(z)  See  the  observations  of  the    Rep.  929;  New  Orleans  v.  Gauth- 
Master  of  the  Rolls  on  the  above    reaux,  32  La.  Ann.  1128. 
definitions  in  Pooley  v.  Driver,  5 
Ch.  D.  471  et  seq. 

5 


*5 


INTRODUCTORY. 


tmiversitati  debetur  singulis  non  debetur,  nee  quod  debet  uni- 
versitas  singuli  debent. 

With  partnerships  the  case  is  otherwise;  the  members  of 
these  do  not  form  a  collective  whole,  distinct  from  the  indi- 
viduals composing  it;1  nor  are  they  collectively  endowed 
with  any  capacity  of  acquiring  rights  or  incurring  obliga- 
tions. The  rights  and  liabilities  of  a  partnership  are  the 
rights  and  liabilities  of  the  partners,  and  are  enforceable  by 
and  against  them  individually:2  Si  quid  societati  debetur 
singulis  debetur  et  quod  debet  societas  singuli  debent.  (b) 


1 A  partnership  is  not  a  legal  en- 
tity having  as  such  a  domicile,  al- 
though for  purposes  of  taxation 
and  for  similar  purposes  it  may  be 
treated  by  statute  as  having  a 
locality.  Eicker  v.  American  Loan 
&  Trust  Co.  140  Mass.  345;  S.  P. 
Faulkner  v.  Hyman,  143  Mass.  53. 

In  Iowa  a  partnership  is  a  legal 
entity,  and  for  jurisdictional  pur- 
poses may  be  considered  as  having 
a  residence  in  every  county  in 
which  it  does  business,  though 
neither  partner  rosides  in  such 
county.  Fitzgerald  v.  Grimmell, 
54  la.  261.  See,  also,  Rosenbaum  v. 
Hayden,  36 N.  West.  Rep.  (Neb.)  147. 

Under  the  law  of  Louisiana,  a 
commercial  partnership,  so  far  as 
jurisdiction  is  concerned,  stands  in 
the  same  category  as  a  corpora- 
tion. Liverpool  Navigation  Co.  v. 
Agar,  4  Woods,  201. 

8  An  association  which  does  busi- 
ness under  an  unsuccessful  attempt 
to  incorporate,  or  before  the  com- 
pletion of  the  corporation,  is  a  part- 
nership composed  not  only  of  the 
directors  but  of  the  subscribers  to 
the  articles.     Coleman  v.  Coleman, 


78  Ind.  344 ;  Smith  v.  Warden,  86 
Mo.  382;  Ridenour  v.  Mayo,  40 
Ohio  St.  9;  Richardson  v.  Pitts,  71 
Mo.  128;  Whipple  v.  Parker,  29 
Mich.  369;  Flagg  v.  Stowe,  85  111. 
164;  Pettis  v.  Atkins,  60  Til.  454; 
Haslett  v.  Wotherspoon,  2  Rich. 
Eq.  395 ;  Hodgson  v.  Baldwin,  65 
111.  532;  Jessup  v.  Carnegie,  12 
Jones  &  Sp.  261 ;  Garnett  v.  Rich- 
ardson, 35  Ark.  144;  Martin  v. 
Fewell,  79  Mo.  401;  Farnum  v. 
Patch,  60  N.  H.  294;  S.  C.  49  Am. 
Rep.  313;  Connor  v.  Abbott,  35 
Ark.  365. 

See,  also,  Farmers'  Bk.  v.  Smith, 
26  W.  Va.  541,  where,  from  the 
particular  facts  of  the  case,  certain 
parties  were  held  liable  as  part- 
ners, notwithstanding  the  fact  of 
organization  as  corporation  for  the 
purpose  of  carrying  on  the  same 
business. 

In  the  absence  of  a  statutory 
provision  making  shareholders  lia- 
ble in  case  of  failure  to  comply 
with  the  requirements  of  the  char- 
ter or  act  under  which  the  com- 
pany is  incorporated,  persons  who 
have  contracted  with  a  de  facto 


(b)  See  Lloyd  v.  Loaring,  6  Ves.    B.  180;  Ryhope  Coal  Co.  v.  Foyer,  7 
773;  Beaumont  V.  Meredith,  3V.&    Q.  B.  D.  498. 

6 


CORPORATIONS    AND    COMPANIES. 


*5 


Companies  —  1.  Unincorporated. —  The  fundamental  dis- 
tinction between  partnerships  and  unincorporated  compa- 


corporation  cannot  deny  its  corpo- 
rate existence  in  order  to  charge 
its  shareholders  individually  as 
partners.  Stout  v.  Zulick,  7  Atl. 
Rep.  (N.  J.)  362. 

An  association  claiming  to  be  a 
corporation  took  out  a  policy  of 
insurance  on  personal  property 
which  it  claimed  to  own.  Held, 
that  as,  if  not  a  corporation,  it  was 
a  partnership,  and  as  such  could 
hold  personal  property  and  make 
contracts  in  the  name  it  assumed, 
it  was  immaterial,  so  far  as  con- 
cerned the  validity  of  the  policy, 
whether  it  was  or  was  not  a  cor- 
poration. Holbrook  v.  St.  Paul  F. 
and  M.  Ins.  Co.  25  Minn.  229. 

A  corporation  cannot  be  sued  for 
the  debts  of  the  firm  out  of  which 
it  has  been  organized,  even  though 
there  is  no  difference  in  member- 
ship. McLellan  v.  Detroit  File 
Works,  56  Mich.  579. 

A  suit  and  judgment  against  an 
imperfectly  organized  corporation, 
as  between  plaintiffs  and  defend- 
ant corporation,  will  bar  the  same 
plaintiffs  from  recovering  from  the 
members  of  the  corporation  as 
partners  in  the  same  cause  of  ac- 
tion. Cresswell  v.  Oberly,  17 
Bradw.  281. 

Persons  associated  for  the  pur- 
pose, not  of  gain  or  profit,  but  to 
secure  the  extension  and  grading 
of  the  public  streets,  with  the  in- 
tention to  become  incorporate,  but 
who  have  failed  to  perfect  an  in- 
corporation, while  individually  lia- 
ble upon  a  contract  authorized  by 
them,  do  not  constitute  a  partner- 
ship proper  with  implied  authority 
in  each  member  to  bind  all  the 


associates  by  any  act  within  the 
scope  of  the  business  undertaken. 
Johnson  v.  Corser,  34  Minn.  355. 

Persons  held  meetings  and  sub- 
scribed for  stock  in  a  proposed  cor- 
poration for  running  a  particular 
steamboat ;  but,  failing  to  obtain  a 
charter,  it  was  finally  agreed  to 
form  a  limited  partnership;  but 
the  provisions  of  the  act  in  relation 
to  such  partnership  had  not  been 
complied  with.  Held,  that  such 
persons  were  not  liable,  as  general 
partners,  for  debts  contracted  in 
the  meantime  by  the  owner  of  the 
boat  for  repairs.  West  Point 
Foundry  Association  v.  Brown,  3 
Edw.  Chy.  284. 

The  "New  England  Express 
Company,"  being  a  copartnership 
and  not  a  corporation,  any  stock- 
holder subscribing  for  shares,  and 
paying  in  part  of  his  subscription, 
becomes  a  member  of  the  company 
and  liable  for  its  debts,  although  he 
never  attended  any  meetings,  or 
received  any  certificate  of  stock, 
or  knew  of  the  contract  of  plaint- 
iff. A  statute  of  New  York,  re- 
quiring a  suit  to  be  brought  against 
the  officers  of  a  copartnership,  be- 
fore the  private  stockholders  could 
be  sued,  relates  only  to  the  remedy, 
and  is  not  in  force  in  Massachu- 
setts. Boston,  etc.  R.  R.  Co.  v. 
Pearson,  10  Reporter,  81. 

As  to  the  creditors,  each  mem- 
ber of  an  insolvent  voluntary  asso- 
ciation is  liable  for  all  the  debts, 
the  same  as  in  ordinary  partner- 
ships. Hodgson  v.  Baldwin,  65 
111.  532. 

Where  two  or  more  parties  agree 
to  form  a  corporation,  some  put- 


*5 


INTRODUCTORY. 


nies  is,  that  a  partnership  consists   of  a  few  individuals 
known  to  each  other,  bound  together  by  ties  of  friendship 


ting  in  machinery  and  patents,  and 
others  money  and  labor,  but  no 
corporation  is  formed  by  reason  of 
a  failure  to  comply  with  the  stat- 
ute, if  the  parties  are  entitled  to 
share  in  the  profits  and  losses,  it 
will  constitute  a  gutm-partner- 
ship,  although  the  title  to  the 
property  put  in,  whether  real  or 
personal,  may  not  be  changed. 
Flagg  v.  Stowe,  85  111.  164. 

But  in  such  case,  the  persons  so 
operating  together  will  not  become 
jointly  entitled  to  the  property 
itself,  but  simply  to  its  use,  except 
as  to  the  money  advanced.  If  the 
party  furnishing  the  machinery 
withdraws  and  files  his  bill  for  an 
account  and  a  sale  of  the  property, 
he  will  be  liable  to  account  to  the 
party  advancing  the  money  for 
any  loss  that  has  occurred.  Flagg 
v.  Stowe,  supra. 

In  accounting  in  such  case,  it  is 
error  to  allow  a  certain  per  cent, 
for  the  use  of  the  machinery.  It 
should  be  the  fair  value  of  its  use 
as  situated,  and  not  what  it  might 
have  been  worth  if  used  at  some 
other  place.    Flagg  v.  Stowe,  supra. 

Associates  in  forming,  and  stock- 
holders in,  a  company,  assuming  to 
be  a  corporation,  but  without  legal 
corporate  existence,  are  liable  as 
copartners  upon  contracts  made  in 
the  name  adopted  as  its  corporate 
name,  although  the  parties  deal- 
ing with  the  company  believed  it 
to  be  a  corporation  and  dealt  with 
it  as  such ;  and  although  the  asso- 
ciates and  stockholders  did  not  in- 
tend to  become  copartners  and 
liable  as  such.  Jessup  v.  Carnegie, 
12  Jones  &  Sp.  261. 


In  Merchants,  etc.  Bank  v.  Stone, 
38  Mich.  779,  however,  it  was  held 
that  where  a  body  professing  to  be 
a  corporation  has  been  dealt  with 
expressly  as  such,  those  who  have 
so  dealt  with  it  cannot  question 
its  corporate  existence  for  the  pur- 
pose of  charging  its  members  indi- 
vidually as  if  they  were  partners. 
To  the  same  point  see  Planters' 
Bank  v.  Padgett,  69  Geo.  159 ;  Staf- 
ford Bk.  v.  Palmer,  47  Conn.  443. 

Actions  upon  a  promissory  note 
dated  June  3,  1867,  made  by  one 
of  the  defendants  as  agent  of  the 
Utica  Steam  Woolen  Mills  Com- 
pany, a  corporation  whose  charter 
had  expired  by  statutory  limita- 
tion on  February  27,  1866,  in  igno- 
rance of  which  fact  the  business 
had  thereafter  been  carried  on  by 
the  trustees  as  usual.  The  action 
was  brought  against  certain  of  the 
stockholders,  plaintiff  claiming 
that  they  were  liable  as  copartners 
for  the  debts  contracted  after  the 
expiration  of  the  charter.  Held, 
that  the  action  could  not  be  main- 
tained ;  that  the  business  must  be 
deemed  to  have  been  carried  on  by 
the  directors  acting  as  trustees, 
and  that  persons  dealing  with  the 
said  officers  must  be  considered  as 
contracting  with  them  in  their  rep- 
resentative capacity,  and  as  relying 
upon  their  responsibility  in  such 
capacity.  Central,  etc.  Institution 
v.  Walker,  5  Hun,  34. 

Evidence  that  the  officers  of  a 
corporation  did  business  as  if  they 
were  partners  was  held  inadmis- 
sible where  the  party  dealing  with 
them  had  not  been  misled  by  their 
neglect  to  observe  corporate   for- 


8 


C0RP0KATI0NS    AND    COMPANIES. 


and  mutual  confidence,  and  who,  therefore,  are  not  at  lib- 
erty, without  the  consent  of  all,  to  retire  from  the  firm 
and  substitute  other  persons  in  their  places ;  whilst  a  com- 
pany consists  of  a  large  number  of  individuals  not  neces- 
sarily nor  indeed  usually  acquainted  with  each  other  at  all, 
so  that  it  is  a  matter  of  comparative  indifference  whether 
changes  amongst  them  are  effected  or  not.  (c)  Nearly  all 
the  differences  which  exist  between  ordinary  partnerships 
and  unincorporated  companies  will  be  found  traceable  to 
the  above  distinction.  Indeed  it  may  be  said  that  the  law 
of  unincorporated  companies  is  composed  of  little  else  than 
the  law  of  partnership  modified  and  adapted  to  the  wants  of 
a  large  and  fluctuating  number  of  members.1 

2.  Incorporated   companies. —  Incorporated    com- 
panies are  societies  consisting  usually  of  *many  per-  [*6] 
sons,  having  transferable  shares  in  a  common  fund, 


malities,  and  in  a  suit  against  them 
he  was  required  to  establish  a  cor- 
porate liability.  New  York  Iron 
Mine  v.  Negaunee  Bank,  39  Mich. 
644. 

Stockholders  in  a'  rnannf acturing 
corporation  who,  upon  the  expira- 
tion of  its  charter,  agree  to  continue 
the  business  in  the  name  of  the 
corporation,  and  appoint  one  of 
their  number  as  managing  agent 
to  carry  on  the  business,  and  who 
agree  to  furnish  money  when 
called  for  by  him  in  proportion  to 
the  number  of  shares  held  by  each 
of  them  in  the  corporation,  are  lia- 
ble to  third  persons,  as  partners, 
upon  commercial  paper  made  by 
such  agent  for  the  benefit  of  the 
firm,  and  signed  with  the  name  of 
the  former  corporation  by  him  as 
agent.  National,  etc.  Bank  v. 
Landon,  45  N.  Y.  410. 

Several  persons  formed  an  asso- 
ciation, making  no  provision  for 
future     incorporation,    by    which 


they  severally  agreed  to  furnish 
certain  sums,  respectively,  towards 
a  joint  adventure,  and  afterwards 
the  "directors"  of  the  association 
obtained  an  act  of  incorporation, 
varying  considerably  the  terms  of 
the  original  agreement.  Held, 
that  members  of  the  association 
who  did  not  assent  to  the  incorpo- 
ration were  absolved  from  their 
agreement,  and  could  not  be  com- 
pelled to  pay  in  the  sums  sub- 
scribed by  them.  Southern  Steam 
Packet  Co.  v.  Magrath,  1  McMull. 
Ch.  93. 

(c)  See  per  James,  L.  J. ,  in  Smith 
v.  Anderson,  15  Ch.  D.  273. 

1  Joint  stock  associations,  except 
as  otherwise  provided  by  statute, 
are  partnerships,  and  a  creditor 
must  proceed  against  the  surviving 
shareholders  before  an  action  can  be 
maintained  against  the  representa- 
tives of  a  deceased  shareholder. 
Moore  v.  Brink,  6  Thomp.  &  C.  22; 
S.  C.  4  Hun,  402.    See  last  chapter. 


9 


*6  INTRODUCTORY. 

but  incorporated  by  Koyal  Charter  or  by  act  of  Parliament. 
They  are  not  pure  partnerships,  for  their  members  are  rec- 
ognized as -an  aggregate  body;  nor  are  they  pure  corpora- 
tions, for  their  members  are  more  or  less  liable  to  contribute 
to  the  debts  of  the  collective  whole.  Incorporated  com- 
panies are  intermediate  between  corporations  known  to  the 
common  law  and  ordinary  partnerships,  and  partake  of  the 
nature  of  both;  and  the  law  relating  to  these  companies 
depends  as  well  on  the  principles  which  govern  ordinary 
partnerships  as  on  those  which  are  applicable  to  corpora- 
tions strictly  so  called,  (d) 

The  present  volume  is  confined  to  partnerships  in  the 
ordinary  sense.  Incorporated  companies  and  companies 
which,  although  unincorporated,  consist  of  numerous  mem- 
bers and  are  governed  by  special  statutes  or  by  special  cus- 
toms, e.  g.,  Cost  Book  Mining  Companies,  will  be  dealt  with 
in  another  volume. 

(d)  See  the  judgments  in  5  Ch.     Pharmaceutical  Soc.  v.  The  London 
431  and  732.     As  to  when  corpora-    and  Provincial  Supply  Assoc.  5  Q. 
tions  are  persons  within  the  mean-    B.  D.  310,  aff.  5  App.  Ca.  857. 
ing  of  acts  of  Parliament,  see  The 

10 


BOOK  I. 

OF  CONTRACTS  OF  PARTNERSHIP. 


CHAPTER  I. 

THE    NATURE    OF   THE    CONTRACT    DETERMINED. 


PRELIMINARY  OBSERVATIONS. 

Agreement  to  share  profits  the  essence  of  a  partner- 
ship.—  The  basis  of  all  partnerships  is  an  agreement  to 
share  the  profits  arising  from  some  business  or  undertaking. 
Usually,  but  not  necessarily,  partners  have  a  joint  capital  or 
stock,  by  the  employment  of  which  the  profits  to  be  shared 
are  expected  to  arise ;  and  in  ordinary  partnerships,  but  not 
in  companies,  each  partner  usually  takes  an  active  part  in  the 
prosecution  of  the  partnership  business.  Nothing,  perhaps, 
can  be  said  to  be  absolutely  essential  to  the  existence  of  a 
partnership  except  a  community  of  interest  in  profits  re- 
sulting from  an  agreement  to  share  them.  But,  although 
this  is  so,  the  usual  characteristics  of  an  ordinary  partner- 
ship are  a  community  of  interest  in  profits  and  losses,  a 
community  of  interest  in  the  capital  to  be  employed,  and  a 
community  of  power  in  the  management  of  the  business 
engaged  in.1 

1  In  Nebraska  R.  R.  Co.  v.  Lett,  8  sponsibility  for  the  partnership 
Neb.  251,  it  is  said  that  the  two    contracts. 

leading  features  of  partnership  are  In  Culley  v.  Edwards,  44  Ark. 
a  common  interest  in  the  stock  of  423 ;  S.  C.  51  Am.  Rep.  614,  the  rule 
the   company  and   a   personal  re-    that  participation  in  profits  of  a 

11 


*8 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK 


Profits  and  losses  — Gross  profits  — Net  profits. —  Profits 
(or  net  profits)  are  the  excess  of  returns  over  advances;  the 
excess  of  what  is  obtained  over  the  cost  of  obtaining;  it. 
Losses,  on  the  other  hand,  are  the  excess  of  advances  over 
returns;  the  excess  of  the  cost  of  obtaining  over  what  is 
obtained.  Profits  and  net  profits  are  for  all  legal  purposes 
synonymous  expressions;  but  the  returns  themselves  are 
often  called  gross  profits;  hence  it  becomes  necessaiy  to 
call  profits  net  profits  in  order  to  avoid  confusion.  In 
[*8]  the  *present  treatise,  however,  the  word  profits  will 
be  used  in  the  sense  of  net  profits ;  and  the  expression 
gross  profits  will  be  avoided  as  much  as  possible. 

Persons  who  share  both  advances  and  returns,  and  also 
persons  who  share  the  difference  between  them,  whatever 


business  was  the  test  of  partnership 
as  to  liability  to  creditors  is  said  to 
have  been  abandoned  in  England 
and  generally  in  America;  and  the 
test  is  now  stated  to  be,  whether 
the  business  has  been  carried  on  in 
behalf  of  the  person  sought  to  be 
charged  as  a  partner;  i.  e.,  did  he 
stand  in  relation  of  principal  to- 
wards the  ostensible  traders  by 
whom  the  liabilities  were  incurred 
and  under  whose  management  the 
profits  have  been  made.  As  be- 
tween the  parties  themselves  the 
test  of  partnership  has  always  been 
their  actual  intent. 

The  relationship  of  partnership 
does  not  exist  between  persons  as- 
sociated in  a  common  undertaking 
unless  each  has  the  right  to  man- 
age the  whole  business  and  to  dis- 
pose of  the  entire  property  involved 
in  the  enterprise  for  its  purposes, 
in  the  same  manner  and  with  the 
same  power  as  all  can  when  act- 
ing together.  Ashby  v.  Shaw,  82 
Mo.  76. 

Mere  agency,  however,  does  not 
constitute  a  partnership.     Thus,  an 


agreement  by  which  a  manufact- 
uring firm  give  another  firm,  to 
whom  they  are  largely  indebted, 
the  entire  control  and  management 
of  their  business,  assigning  all  their 
machinery  and  tools  to  the  latter 
firm,  and  authorizing  them  to  col- 
lect all  moneys  due  the  former,  and 
therewith  to  pay  said  indebtedness, 
at  their  pleasure,  does  not  consti- 
tute the  two  firms  copartners. 
Brundred  v.  Muzzey,  25  N.  J.  L. 
268. 

So,  an  agreement  to  appoint  a 
person  to  manage  a  mine  until  the 
proceeds  pay  the  creditor  does  not 
make  latter  liable  as  partner  of 
debtor.  Davis  v.  Patrick,  30  U.  S. 
L.  1090. 

An  arrangement  between  B.  and 
C.  for  "mutually  keeping  house," 
by  which  C.  is  to  pay  the  house- 
rent  and  butcher's  bill,  and  B.  is 
to  pay  the  other  bills  for  the  fam- 
ily expenses,  does  not,  as  matter  of 
law,  make  B.  and  C.  partners,  or 
authorize  C.  to  bind  B.  to  third 
parties  for  the  rent.  Austin  v. 
Thompson,  45  N.  H.  113. 


12 


CS.  I.]  NATURE   OF   CONTRACT   DETERMINED.  *8 

that  difference  may  be,  necessarily  share  both  profits  and 
losses ;  profits,  if  the  returns  exceed  the  advances ;  losses,  if 
the  advances  exceed  the  returns.  But  persons  who  share 
profits,  i.  e.,  the  excess  of  returns  over  advances,  do  not 
necessarily  share  losses ;  for  profits  may  be  shared  by  those 
who  make  no  advances ;  and  persons  may  stipulate  for  a 
division  of  gain,  if  any,  and  yet  some  one  or  more  of  them 
may  by  agreement  be  entitled  to  be  indemnified  against 
losses  by  the  others ;  so  that  whilst  all  share  profits,  some 
only  bear  losses. 

Sharing  gross  returns.— The  actual  or  gross  returns 
obtained  by  advances  obviously  include  profits  if  profits 
have  been  made.  But  those  returns  do  not  include  losses, 
if  losses  are  incurred ;  for  losses  are  the  excess  of  the  ad- 
vances over  the  returns,  and  come  out  of  the  advances  and 
not  out  of  the  returns.  Hence,  persons  who  share  gross 
returns  necessarily  share  profits,  but  they  do  not  by  sharing 
the  returns  share  losses,  for  these  fall  entirely  on  those  mak- 
ing the  advances.  Moreover,  although  a  division  of  gross 
returns  is  a  division  of  profits,  if  there  are  any,  it  is  so 
only  incidentally,  and  because  such  profits  are  included  in 
what  is  divided;  it  is  not  a  division  of  profits  as  such;  and 
under  an  agreement  for  a  division  of  gross  returns,  what- 
ever is  returned  must  be  divided,  whether  there  be  profit 
or  not. 

On  the  other  hand,  if  the  persons  sharing  gross  returns 
also  share  the  advances  by  means  of  which  the  returns  are 
made,  there  is  necessarily  community  both  of  profit  and  of 
loss ;  community  of  profit  if  the  returns  exceed  the  advances; 
community  of  loss  if  the  advances  exceed  the  returns. 

Distinction  between  sharing  profits  and  gross  returns. 
The  above  remarks  have  appeared  necessary  in  order  to 
explain  the  reasons  for  the  distinction  made  by  English  law- 
yers between  agreements  to  share  profits  (i.  e.,  net  profits 
and  profits  as  such)  on  the  one  hand,  and  agreements  to 
share  gross  returns  (sometimes  called  gross  profits)  on  the 
other;  and  in  order  to  account  for  the  rule  that  whilst  an 

13 


*9  CONTRACTS  OF  PARTNERSHIP.  [BOOK  I. 

agreement  to  share  profits  creates  a  partnership,  an 
[*9]  agreement  to  share  gross  ^returns  does  not.1  The  rea- 
sonableness, however,  of  the  above  distinction  is  very 
questionable,  at  least  where  there  is  any  community  of  cap- 
ital or  common  stock;  and  the  rule  itself  is  probably  attribu- 
table less  to  the  difference  which  exists  between  net  profits 
and  gross  returns  than  to  the  doctrine  which  so  long  con- 
fused the  whole  law  of  partnership  in  this  country,  and  ac- 
cording to  which  all  persons  who  shared  profits  incurred 
liability  as  if  they  were  really  partners.  When  this  doctrine 
was  rife,  the  distinction  between  sharing  net  profits  and 
gross  profits  (i.  e.,  returns)  had  considerable  practical  value ; 
but,  as  will  be  seen  hereafter,  the  doctrine  in  question  is 
now  wholly  exploded,  and  the  distinction  alluded  to  is  of 
little  importance. 

Quasi-partnerships. —  The  doctrine  to  which  reference 
has  been  made  renders  it  necessary  to  caution  the  reader 
against  an  ambiguity  in  the  word  partnership  as  used  by 
English  lawyers.  Partnerships  are  by  them  divided  into 
partnerships  (properly  so  called),  and  partnerships  as  regards 
third  persons,  which  are  not  in  fact  partnerships  at  all,  and 
should  never  be  so  styled.2     What  is  called  a  partnership 

i  See  this  distinction,  approved  in  10  Atl.    Rep.  (N.  J.)  392 ;  S.  C.  8 

Turner    v.   Bissell,    14  Pick.    192;  Cent.  Rep.  643. 

Everett  v.  Coe,  5  Den.  180 ;  Heim-  2  Parties  may  often  be  adjudged 

street  v.  Howland,  id.  68;  Ambler  partners  as  to  third  persons,  when 

v.  Bradley,  6  Vt.  119;  Bowman  v.  they  could  not  be  so  regarded  as 

Bailey,  10  id.  170;  Mason  v.  Potter,  between    themselves.     Stanchfield 

26  id.  722;  Patterson  v.  Blanchard,  v.  Palmer,  4  G.  Greene,  23;  Gill  v. 

5  N.  Y.   186;  Moore  v.  Smith,   19  Kuhn,  6  Serg.  &  R.  333;  Kellogg 

Ala.  774.     See,  also,  Sankey  v.  Co-  v.  Griswold,  12  Vt.  291. 

lumbus  Iron  Works,  44  Geo.  228,  Where  two  persons  agree  to  raise 

explaining    section    1880,    Revised  together  a  crop  of  corn,  and  divide 

Code ;  Wood  v.  Valette,  7  Ohio  St.  the  product,  the  agreement  consti- 

172.    See  post.  tutes  a  partnership.  Allen  v.  Davis, 

See,  however,  contra,  Denny  v.  13  Ark.  28. 

Cabot,  6  Mete.  82;  Pars,  on  Part.  But    a    contract   by   which  A. 

*88,  and  note.     See  post.  agreed  to  let  B.  have  all  the  pine 

Parties  manufacturing  a  product  timber  on    his  lands  suitable   for 

and  dividing  the  proceeds,  held,  to  good  lumber,  and  B.  agreed  to  pay 

be  copartners.     Teas  v.  Woodruff,  A.   therefor  annually,  in  money, 

14 


CH.  I,  SEC.  I.]       NATURE   OF   CONTRACT   DETERMINED.  *10 

as  regards  third  persons  (^wasa-partnership)  is  nothing  more 
than  a  number  of  persons,  who,  in  consequence  of  certain 
acts  done  by  them,  are  held  liable  for  each  other's  conduct, 
as  if  they  had  entered  into  a  contract  of  partnership  amongst 
themselves.  "What  these  acts  are  will  be  considered  here- 
after; but  the  reader  is  requested  to  bear  in  mind  that,  for 
the  present,  partnerships  properly  so  called,  and  not  quasi- 
partnerships,  are  intended  to  be  spoken  of. 

Having  made  these  preliminary  observations,  it  is  pro- 
posed to  consider  what  agreements  do,  and  what  do  not, 
result  in  a  partnership  in  the  proper  sense  of  the  word. 

^Section  I. —  Of  True  Partnerships.  [*10] 

1. —  Partnership  is  the  result  of  an  agreement  to  share  profits 

and  losses. 

Agreements  to  share  profits  and  losses. —  Whether  an 
agreement  creates  a  partnership  or  not  depends  on  the  real 
intention  of  the  parties  to  it.  (a) x     If  the  agreement  is  not 

one-Sfth  of  the  lumber  sold  and  and    obligations  of  partnership  is 

collected  by  him,  does  not  consti-  necessary.     Hedge's  Appeal,  63  Pa. 

tute  A.  and  B.  partners  inter  sese.  St.  273. 

Fail  v.  McKee,  36  Ala.  61.  The  facts  that  several  persons  as- 

(a)  Moll  wo,  March  &  Co.  v.  Court  sociated  together  to  run  a  line  of 

of  Wards,  L.  R.  4  P.  C.  419 ;  Pooley  stage-coaches ;  that  they  had  a  gen- 

v.  Driver,  5  Ch.  D.  460 ;  Walker  v.  eral  meeting,  and  that  debts  were 

Hirsch,  27  Ch.  D.  460 ;  Ross  v.  Par-  contracted  on  account  of  the  com- 

kyns,  20  Eq.  331,  and  otber  cases  pany,  do  not  prove  a  partnership 

cited  infra,  p.  13,  note  (r).  as    between    them.      Chandler    v. 

1  Whether  two  or  more  persons  Brainard,  14  Pick.  285 ;  Clark  v. 
associating  in  business  are  partners  Reed,  11  id.  450. 
as  between  themselves  depends  The  defendants  signed  articles  of 
upon  their  intentions  as  legally  as-  association  in  trade  under  the  name 
certained.  Salter  v.  Ham,  31  N.  Y.  of  "  The  Farmers'  and  Mechanics' 
321;  Stevens  v.  Faucet,  24  111.  483;  Store,"  by  which  it  was  provided 
Nichoff  v.  Dudley,  40  111.  406 ;  Macy  that  any  stockholder  might  with- 
v.  Combs,  15  Ind.  469 ;  Gray  v.  draw  upon  giving  six  months'  no- 
Gibson,  6  Mich.  300;  Hazard  v.  tice,  and  that  the  business  of  the 
Hazard,  1  Story,  371.  See,  also,  company  should  be  done  pursuant 
Manhattan  B.  Manufg.  Co.  v.  Sears,  to  a  major  vote  of  those  present. 
1  Sweeny,  426.     See  post.  The  defendants  subscribed  a  certain 

Voluntary  consent  to  the  relation  sum,  and  a  by-law  provided  that 

15 


*10 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


in  writing  the  intention  of  the  parties  must  be  ascertained 
from  their  words  and  conduct.     If  the  agreement  is  in  writ- 


each  subscriber  should  become  a 
partner.  Held,  that  the  defendants 
■were  partners  in  the  company.  At- 
kins v.  Hunt,  14  N.  H.  205. 

A.,  who  was  the  remaining  part- 
ner of  a  manufacturing  firm  which 
had  been  dissolved,  said  to  B.  that, 
as  his  business  was  so  extensive,  it 
was  necessary  for  him  to  have  a 
partner,  so  that  in  case  of  his  de- 
cease there  would  be  some  one  who 
could  go  on  and  close  up  the  con- 
cern without  the  delay  arising  from 
an  administration  of  his  estate,  and 
proposed  to  take  him  (B.)  as  such 
partner,  saying  he  should  have 
$1,500  the  first  year,  and  the  next 
year  an  interest  in  the  business ;  to 
which  B.  assented,  and  thereupon 
an  agreement  was  drawn  and 
signed  by  them  as  follows:  "Co- 
partnership. The  subscribers  have 
this  day  formed  a  copartnership 
under  the  style  of  A.  &  Co. ,  and  will 
hereafter  carry  on  the  business 
formerly  conducted  by  A.  &  C." 
Public  notice  of  this  agreement  was 
given  subsequently,  and  until  the 
death  of  A.,  which  occurred  before 
the  expiration  of  the  first  year,  all 
purchases,  sales  and  consignments 
of  goods  were  made,  and  all  drafts 
were  drawn,  and  promissory  notes 
given  by  A.  &  B.  in  the  name  of  A. 
&  Co. ;  and  each  of  them  exercised 
the  full  power  of  a  partner  in  rela- 
tion to  all  their  business.  Held, 
that  they  were  partners,  and  that 
after  A.'s  death,  B.,  as  surviving 
partner,  had  power  to  commence 
proceedings  in  insolvency  which 
should  include  the  estate  of  the 
firm.  Adams  Bank  v.  Rice,  2  Allen, 
480. 


L.  and  G.  agreed  in  writing  to 
"  have  the  right  to  use  the  name  of 
each  other  as  a  firm  name,"  and  G. 
did  "  grant  that  L."  should  "  have 
the  right  to  go  to  any  of  the  whole- 
sale markets  and  purchase  goods, 
and  sell  the  same  at  W."  and  G. 
did  "do  this  for  the  benefit  of  L., 
not  claiming  any  of  the  profits 
arising  from  the  sale  of  any  goods 
or  articles  sold  at  W."  It  was  also 
agreed  that  "  all  money  furnished 
to  enable  the  said  firm  L.  &  G.," 
etc.," to  each  other,"  should  be 
held  at  the  rate  of  seven  per  cent." 
Held,  that  this  agreement  consti- 
tuted L.  and  G.  partners.  Hen- 
drick  v.  Gunn,  35  Ga.  234. 

B.  orally  agreed  to  contribute  his 
inchoate  interest  in  an  invention, 
and  S.  to  furnish  the  money  neces- 
sary to  make  that  invention  avail- 
able in  the  form  of  a  patent,  both 
to  contribute  their  services  to  make 
it  remunerative.  Held,  to  be  an 
agreement  for  a  partnership  and 
not  a  contract  for  the  sale  of  goods, 
wares  and  merchandise,  within  the 
statute  of  frauds.  The  patent  when 
obtained  would  be  in  equity  part- 
nership property,  no  matter  in 
whose  name  it  might  be  taken  out. 
Somerby  v.  Buntin,  118  Mass.  279. 

An  agreement  between  two  firms 
that  one  should  furnish  the  money 
to  build  wagons  and  the  other  do 
the  work,  make  the  sales,  repay 
the  money  to  the  first  firm  and  di- 
vide the  profits,  does  not  constitute 
the  two  firms  copartners.  Clark  v. 
Barnes,  34  N.  West.  Rep.  (la.)  419. 

A  contract  whereby  A.  was  to 
furnish  money  to  B.  to  obtain 
title  to  property  in  his  own  name 


16 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


*10 


ing  its  true  construction  must  be  determined ;  but,  as  will  be 
more  fulty  shown  in  a  subsequent  chapter,  even  a  written 

and  manage  it  for  compensation, 
and  when  enough  land  has  been 
sold  to  pay  the  advances  made  by 
A.,  the  remainder  of  property  to  be 
divided  between  them,  does  not  cre- 
ate a  partnership.  Blair  v.  Schaef- 
fer,  IT.  S.  C.  C,  W.  D.   Mo.,   1887. 

Where  persons  desiring  to  secure 
provisions  for  themselves,  without 
the  cost  of  middlemen,  associate 
themselves  together  without  incor- 
poration, open  a  store  under  the 
name  of  "Bridgeport  Co-operative 
Association,"  and  conduct  business 
through  their  own  managers,  who 
are  authorized  to  go  into  the 
market  and  buy  provisions  under 
such  name,  which  shall  be  resold 
at  cost  to  the  members  and  the 
public  generally,  the  members  of 
such  association  are  liable  as  indi- 
viduals for  goods  so  bought  by 
managers,  although  they  never  held 
themselves  out  as  partners  and 
credit  was  never  given  to  them  as 
such  or  as  individuals.  Davidson 
v.  Hold  en,  10  Atl.  Rep.  (Conn.)  515; 
S.  C.  4  N.  Eng.  Rep.  818. 

An  agreement  forming  an  asso- 
ciation to  be  known  as  "The 
Grant's  Pass  Real-Estate  Associa- 
tion," stating  that  the  association 
was  for  the  mutual  benefit  and 
profit  of  the  parties  thereto,  and 
that  its  business  should  be  the  buy- 
ing, selling,  renting,  leasing  and 
mortgaging  of  real  estate,  and  spec- 
ifying the  interest  of  each  party 
therein,  constitutes  the  parties  sign- 
ing it  partners  inter  se.  Kelley  v. 
Bourne,  16  Pac.  Rep.  (Or.)  40. 

A  contract  between  A.  &  B.  and 
C. ,  by  which  the  former  were  to 
furnish  the  latter  goods  at  cost,  to 


hawk  and  peddle,  adding  seven  per 
cent,  at  such  time  as  C.  might  re- 
quire, C.  to  furnish  a  wagon  and  to 
devote  his  whole  time  to  peddling 
the  goods,  the  expense  of  the  li- 
cense, traveling  expenses,  etc.,  to 
be  deducted  from  the  amount  of 
the  sales,  and  the  balance  or  profits 
to  be  divided,  two-fifths  to  C,  and 
three-fifths  to  A.  &  B.,  the  goods 
and  merchandise,  as  well  as  the 
notes  received  on  the  sale  of  the 
goods,  to  be  at  the  risk  of  the  par- 
ties, in  the  proportion  of  two-fifths 
to  C,  and  three-fifths  to  A.  &B., 
makes  the  parties,  as  between 
themselves,  partners.  Emanuel  v. 
Draughn,  14  Ala.  203. 

An  agreement  to  engage  in  the 
business  of  prospecting  for  and  the 
development  of  lode  mining  prop- 
erty, for  the  joint  use  of  all,  is  in 
the  nature  of  a  partnership  agree- 
ment, and  under  it  each  party 
thereto  becomes  the  agent  of  the 
other.  Lawrence  v.  Robinson,  4 
Col.  567. 

Where  a  manufacturing  business 
connection,  carried  on  for  many 
years  by  a  father  and  his  four  sons, 
had  all  the  elements  of  a  partnei-- 
ship  except  the  father's  consent, 
held,  that  there  was  no  partner- 
ship ;  but  the  supreme  court  allowed 
the  bill  praying  a  dissolution  and 
account  to  be  retained  in  order 
that  the  question  might  be  pre- 
sented whether  such  a  state  of 
facts  appeared  from  the  record  as 
would  entitle  the  complainant  (one 
of  the  sons)  to  compensation  on 
the  principle  of  a  quantum  meruit, 
and  to  have  the  cause  remanded, 
with  leave  to  amend  the  bill  for 


Vol.  1  —  2 


17 


10 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


contract  may  be  departed  from  and  modified  by  a  new  ver- 
bal agreement  between  all  the  partners  proved  by  conduct 
inconsistent  with  the  written  document,  (b) 


that  purpose.     Phillips  v.  Phillips, 
49  111.  437. 

If  two  persons  enter  into  a  joint 
contract  in  writing  to  perform  cer- 
tain labor  and  furnish  certain  ma- 
terials for  another,  which  contract 
does  not  define  the  relations  of 
such  persons  between  themselves, 
and  if,  by  the  understanding  be- 
tween themselves,  one  is  to  perform 
one  part  of  the  labor  and  the  other 
another,  and  each  is  to  receive  a 
proportional  sum  of  the  money 
paid  for  the  whole,  the  relation  of 
partners  does  not  by  reason  of 
these  facts  exist  between  them. 
Smith  v.  Moynihan,  44  Cal.  53. 

A.  and  B.,  by  a  written  contract, 
agreed  to  carry  on  a  trade  or  busi- 
ness in  partnership,  and  in  the 
same  instrument  B.  and  C.  agreed 
to  carry  on  a  different  trade  or 
business  in  partnership.  Held,  that 
the  relation  of  partners  was  not 
created  between  the  three,  so  as 
to  enable  a  person  dealing  with  A. 
&  B.,  or  with  B.  &  C,  to  commence 
an  action  against  the  whole.  El- 
derkin  v.  Winne,  1  Chand.  27. 

The  joint  prosecution  of  a  law- 
suit does  not,  per  se,  create  a  part- 
nership between  the  parties  as  to 
the  subject-matter  in  dispute. 
Wilson  v.  Cobb,  28  N.  J.  Eq.  177. 

An  agreement  between  a  sawyer 
in  Wisconsin  and  a  lumber  mer- 
chant in  Chicago,  whereby  the  lat- 
ter was  to  advance  $10,000  to  be 
used  by  the  former  in  sawing,  etc., 
and  the  former  to  deliver  all  the 
lumber  produced  to  the  latter  at 


$1  per  M.  less  than  the  market  rates 
at  the  time  of  the  arrival  of  each 
cargo  in  Chicago,  does  not  create  a 
partnership.  Freese  v  Ideson,  49 
111.  191. 

A.  made  the  following  written 
agreement  with  B. :  "Sold  B.,  on 
joint  account  with  A.,  two  thou- 
sand boxes  of  candles  at  twenty- 
six  cents,  six  months  from  delivery; 
B.  to  be  allowed  two  and  one-half 
per  cent,  on  sales ;  on  all  sales  not 
approved  by  A.,  B.  is  to  guaranty 
the  same,  receiving  a  commission 
of  two  and  one-half  per  cent. ;  for 
half  of  the  sales  made  by  B.  he  is 
to  pass  over  the  paper  to  A. ;  there 
are  to  be  no  charges  for  storage ; 
property  in  store  to  be  covered  by 
insurance  by  B.  for  joint  account 
and  expense."  A.  delivered  the 
candles  to  B.  under  this  agreement, 
and  received  from  time  to  time,  as 
the  candles  were  delivered,  eight 
notes  of  B.  for  half  the  value  of 
the  candles,  payable  in  six  months, 
two  of  which  were  paid  by  B.  at 
maturity,  and  the  others  indorsed 
and  negotiated  by  A.,  and  after- 
wards paid  by  him,  B.  having  be- 
come insolvent.  Held,  that  these 
facts  showed  a  sale  of  an  undivided 
half  of  the  candles  by  A.  to  B., 
and  not  a  partnership  between  A. 
and  B.  with  regard  to  the  candles ; 
and  therefore  that  A.  had  no  lien 
on  B.'s  half  of  the  candles  as 
against  B.'s  assignees  in  insolvency. 
Hawes  v.  Tillinghast,  1  Gray,  289. 
A.,  having  given  his  note  to  cer- 
tain creditors  of  a  partnership  for 


(6)  Infra,  Book  III,  c.  9. 


18 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


'10 


But  an  agreement  to  share  profits  and  losses  may  be  said 
to  be  the  type  of  a  partnership  contract.     Whatever  dif- 


debts  due  to  them  from  the  part- 
nership, gave  a  written  agreement 
to  one  of  those  creditors  that  he 
would  not  enforce  the  amount  of 
said  notes  against  the  partnership 
until  said  creditors  should  have 
been  fully  paid  all  sums  then  due 
and  thereafter  to  be  due  from 
the  partnership,  and  that  the 
amount  of  his  notes  "  as  to  all  said 
creditors  should  remain  as  part  of 
the  business  capital  of  "  the  part- 
nership for  three  years.  Held,  that 
this  agreement  did  not  make  A.  a 
copartner,  nor  prevent  his  proving 
against  the  estate  of  the  partner- 
ship in  insolvency  a  note  given  to 
him  by  them,  in  consideration  for 
his  said  notes.  Wall  v.  Balcom,  9 
Gray,  92. 

Where  the  plaintiff  and  one  P. 
purchased  a  mail  contract  from  the 
original  contractors,  and  executed 
to  them  a  bond  for  the  performance 
of  the  contract,  and  procured  four 
of  the  five  defendants  to  sign  with 
them  as  sureties;  and  afterwards 
the  plaintiff  sold  his  interest  in  said 
contract  to  P.  and  took  from  him  a 
like  bond,  signed  by  the  remaining 
defendant,  with  one  of  the  others 
as  sureties ;  and  afterwards,  P.  hav- 
ing failed  to  perform  the  contract, 
the  plaintiff  and  five  defendants 
signed  a  contract  which  recited  that 
the  "undersigned"  had  taken 
charge  of  said  property,  and  by 
which  they  constituted  the  plaint- 
iff their  "  agent  or  superintendent " 
on  said  mail  route,  for  which  he  was 
to  "  receive  a  reasonable  compensa- 
tion, and  by  which  they  bound 
themselves  to  indemnify  all  per- 
sons who  might  assist  the  plaintiff 


in  the  execution  of  said  business ; 
and  also  to  pay  the  bills  which  had 
accrued  under  the  plaintiff  and 
P., —  it  was  held  that  the  plaint- 
iff did  not  thereby  become  a  part- 
ner with  the  defendants,  but  might 
sustain  an  action  against  them  on 
the  contract.  Stearns  v.  Haven, 
16  Vt.  87. 

An  instrument  in  the  following 
form :  "  The  following  is  the  prop- 
erty owned  jointly  or  as  described 
below,  by  G.  F.  and  J.  W.  One 
hundred  acres  in,  etc.,  bought  from 
O.  W.,  and  since  sold  for  $7,500  to 
V.  S.,  $2,100  paid,  out  of  which  J. 
W.  received  $1,000.  Two  acres  on 
the  hill,  etc. ;  each  paid  half  in  full, 
and  sold  by  G.  F.  for  $2,600,  no  part 
of  which  has  been  given  to  J.  W. 
Six  lots  in,  etc.,  one-third  undi- 
vided belongs  to  J.  W. ,  as  per  deed 
on  record.  Nineteen  acres  on,  etc., 
bought  of  D.  U.,  the  whole  of  the 
purchase  money  was  paid  by  J.  W. 
G.  F.  paid  A.  B.  $50  for  getting 
the  land.  See  the  deed  for  partic- 
ulars. The  titles  to  the  above 
lands  are  in  the  name  of  G.  F.  and 
on  record,  which  the  deeds  will  ex- 
plain. I  certify  that  the  above 
statement  is  correct,  except  the 
taxes  and  other  expenses. 

(Signed)  "  G.  F." 

Held,  not  to  show  a  partnership 
between  G.  F.  and  J.  W.  in  pur- 
chasing and  selling  lands.  White 
v.  Fitzgerald,  19  Wis.  480. 

A  bill  in  equity,  filed  before  St. 
of  1857,  ch.  214,  alleged  that  the 
parties  made  an  oral  agreement 
that  the  defendant  should  advance 
the  requisite  money  to  purchase  a 
tract  of  land,  and  to  build  ware- 


19 


■10 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


ference  of  opinion  there  may  be  as  to  other  matters,  per- 
sons engaged  in  any  trade,  business  or  adventure  upon  the 


houses    thereon,   in    consideration 
that  the  defendant  should  be  paid 
from  the  proceeds  all  the  money  so 
advanced  by  him,  with  interest  and 
five  per  cent,  commission  for  the 
use  and  advancement  of  the  money ; 
that,  for  greater  security,  a  deed 
of  the  land  was  made  to  the  de- 
fendant, which,  although  absolute 
on  its  face,  conveyed  the  land  to 
him  as  security  for  the  money  to 
be  so  advanced,  and  in  trust  for  the 
plaintiff;    that    warehouses    were 
erected  on  the  land  with  money  so 
advanced  by  the  defendant,    and 
money  advanced  by  the  plaintiff ; 
that  portions  of  the  property  were 
sold,  and  the  proceeds  received  by 
the  defendant;  and  that  a  part  of 
the  property  remained  unsold ;  and 
prayed  for  a  conveyance  of  this 
part  of  the  property,  and  for  an  ac- 
count.    The  answer  denied  the  al- 
legations in  the  bill,  and  averred 
that  the  actual  agreement  was  that 
a  partnership,  of  which  the  defend- 
ant was  a  member,  should  advance 
the  money,  and  receive  from  the 
proceeds    the    amount    advanced, 
with  interest  and  five  per    cent, 
commission  for  advancement,  and 
six  per  cent,    commission  on    all 
amounts  received  by  them  there- 
from ;  and  that  the  surplus,  if  any, 
should  be  paid  to  the  plaintiff,  and 
averred  performance  of  the  agree- 
ment on  the  part  of  the  defendant 
and   his  partner.    Held,  that  this 
agreement  did  not  constitute  a  part- 
nership between  the  parties;  that 
it  could  not  be  enforced  as  a  trust, 
nor  as  a  case  of  constructive  fraud, 
and   that    the    complainant  could 
not,    without  amending    his    bill, 


avail  himself  of  the  agreement  ad- 
mitted in  the  answer.  Buck  v. 
Dowley,  16  Gray,  555. 

The  Washington  Medical  College 
of  Baltimore  executed  on  the  24th 
of  July,  1835,  a  deed  of  trust,  con- 
veying to  certain  trustees  therein 
named,  upon  the  trust  therein  ex- 
pressed, a  leasehold  interest  in  a 
lot  of  ground  in  the  city  of  Balti- 
more.     The    deed    recites    "that 
towards  erecting  a  building  on  said 
lot,  the  sum  of  $50,000  has  been 
agreed  to  be  contributed  by  vari- 
ous persons,  who  are  to  be  identi- 
fied by  being  the  owners  of  certifi- 
cates therein  described,    and  that 
said  college  has  agreed  with  said 
persons  to  secure  the  reimburse- 
ment of  their  respective  contribu- 
tions,  and    the    payments  of   the 
dividends  arising  thereon  in    the 
manner  therein  pointed  out."    The 
form  of  the  certificate  is  then  pre- 
scribed, each  being  for  the    sum 
"  of  $60,  part  of  said  $50,000,  to  be 
entitled  to  a  dividend  proportioned 
to  its  amount,  when  the  same  shall 
arise,    payable  semi-annually,    by 
the  treasurer,  for  the  time  being, 
of  the  college ;  said  sum  to  be  ac- 
cepted by  the  party  to  whom  the 
certificate  is  issued  or  his  assigns, 
in  discharge  to  that  extent  of  said 
deed,  and  of  his  claim  to  the  prop- 
erty thereby  conveyed,  when  tend- 
ered at  any  time  after  the  4th  of 
July,  1845,  by  the  grantors  or  their 
assigns."  The  trusts  are :  1st.  That 
the  grantor  shall  occupy  and  use 
the  property,  and  receive  the  rents 
and  profits  thereof  until  sold  and 
disposed  of,   as  therein  provided. 
2d.  That  if  the  dividends  on  said 


20 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


*10 


terms  of  sharing  the  profits  and  losses  arising  therefrom, 
are  necessarily  to  some  extent  partners  in  that  trade,  busi- 
ness or  adventure; x  nor  is  the  writer  aware  of  any  case  in 


certificates  shall  be  in  arrear  and 
unpaid  for  one  year  from  the  date 
thereof,  then  it  shall  be  lawful  for 
the  grantees  to  sell  the  property, 
and  out  of  the  proceeds  pay  and  re- 
imburse the  owners  of  said  certifi- 
cates the  full  amount  of  the  prin- 
cipal moneys  mentioned  in  them, 
and  all  dividends  that  shall  have 
accrued  thereon,  and  pay  over  the 
residue,  if  any,  to  the  grantor,  or 
its  successors  or  assigns.  Held, 
that  this  deed  does  not  place  the 
contributors  and  corporation  in 
the  relation  of  partners  with  each 
other,  or  among  themselves;  that 
it  provides  simply  for  a  loan  of 
money  by  the  contributors  to  the 
corporation,  to  secure  the  repay- 
ment of  which  the  latter  gave 
them  a  lien  upon  the  lot  and  prem- 
ises in  question,  and  that,  conse- 
quently, they  have  superior  rights 
to  any  creditor  of  the  corporation 
becoming  such  after  the  execution 
of  the  deed.  Conkling  v.  Washing- 
ton University,  2  Md.  Ch.  497. 

Several  persons  signed  articles  of 
association,  fixed  the  amount  of 
the  capital  stock,  chose  officers,  and 
issued  certificates  of  stock,  intend- 
ing to  form  a  corporation  under  St. 
of  1866,  Ch.  C.  290.  but  the  associ- 
ation failed  to  become  a  corpora- 
tion. Some  of  the  members  of  the 
association  subscribed  for  stock  and 
received  certificates  therefor,  and 
others  did  not  subscribe.  A.  and 
B.,  two  of  the  subscribers,  who  had 
been  chosen  president  and  treas- 
urer, respectively,  took  possession 
of  real  estate,  authorized  to  be  pur- 


chased by  a  vote  of  the  association, 
and  carried  on  the  business  in- 
tended to  be  cai-ried  on  by  the  cor- 
poration when  formed,  as  agents 
of  the  proposed  corporation,  bor- 
rowing money  on  their  own  notes 
and  putting  it  into  the  business, 
with  the  knowledge  of  the  other 
members,  buying  goods  from  the 
other  subscribers  and  from  persons 
who  had  not  subscribed,  and  in- 
tending to  turn  over  the  busiuess 
to  the  corporation  upon  its  organi- 
zation. Held,  on  a  bill  in  equity  by 
A.  and  B.  against  all  the  other  sub- 
scribers, as  partners,  for  a  settle- 
ment of  the  alleged  partnership 
affairs,  that  neither  the  defendants 
who  had  subscribed  to  the  stock  of 
the  proposed  corporation,  nor  those 
who  had  not  subscribed,  were 
partners  with  A.  and  B.  Ward  v. 
Brigham,  127  Mass.  24. 

1  Scott  v.  Colmesnil,  7  J.  J. 
Marsh.  416 ;  Miller  v.  Hughes,  1  A. 
K.  Marsh.  181 ;  Brown  v.  Robbins, 
3  N.  H.  64 ;  Parviance  v.  M'Clintle, 
6  Serg.  &  R.  259 ;  Winship  v.  Bank 
of -United  States,  5  Pet.  529;  Cump- 
ston  v.  M'Nair,  1  Wend.  457 ;  Perry 
v.  Butt,  14  Ga.  699;  Solomon  v. 
Solomon,  2  Ga.  18;  Gregory  v. 
Dodge,  14  Wend.  593;  Belknap  v. 
Wendell,  21  N.  H.  175 ;  Nicoll  v. 
Mumford,  4  John.  Ch.  522;  Meador 
v.  Hughes,  14  Bush,  652;  Bulfinch 
v.  Winchenbach,  3  Allen,  161 ;  Mar- 
tin v.  Tidwell,  36  Ga.  332;  Smith 
v.  Small,  54  Barb.  223;  Pierce  v. 
Shippee,  90  111.  371;  Eldridge  v. 
Troost,  6  Robt.  518;  Johnson  v. 
Fowler,  12  West.  Rep.  (Mich.)  437; 


21 


*10 


CONTRACTS    OF    PARTNERSHIP. 


[BOOK   I. 


which  persons  who  have  agreed  to  share  profits  and  losses 
have  been  held  not  to  be  partners,  (c)     But  it  does  not  fol- 


Aultman  v.  Fuller,  53  Iowa,  GO; 
Ai-guimbo  v.  Hillier,  49  N.  Y. 
Super.  Ct.  253;  Cogswell  v.  Wil- 
son, 11  Oreg.  371 ;  McGill  v.  Dow- 
dle,  33  Ark.  311 ;  Mayrant  v.  Mars- 
ton,  67  Ala.  453;  Harriss  v.  Hille- 
grass,  51  Cal.  463;  Kuhn  v.  New- 
man, 49  la.  424;  Priest  v.  Chouteau, 
12  Mo.  App.  252;  Jones  v.  Call,  93 
N.  C.  170;  Morris  v.  Litchfield,  14 
Bradw.  83;  Chapman  v.  Lipscomb, 
18  S.  C.  222 ;  Wilcox  v.  Dodge,  12 
Bradw.  517 ;  Mauney  v.  Coit,  86  N. 
C.  463 ;  Sailors  v.  Nixon-Jones  Pub- 
lishing Co.  20  Bradw.  509 ;  Bohrer 
v.  Drake,  33  Minn.  408;  Flint  v.  Mar- 
ble Co.  53  Vt.  669 ;  Day  v.  Stevens, 
88  N.  C.  83;  S.  C.  43  Am.  Rep.  732; 
Pierce  v.  Shippee,  90  III.  371 ;  Mo- 
hawk Nat.  Bk.  v.  Van  Slyck,  29 
Hun,  188.  See,  also,  Adee  v.  Cor- 
nell, 25  Hun,  78;  S.  C.  93  N.  Y. 
572. 

Where  there  is  no  joint  expense, 
no  joint  property,  no  joint  fund,  no 
joint  losses,  no  joint  profits,  and 
no  arrangement  to  share  profit  and 
loss,  there  is  no  partnership.  A 
communion  of  profit  is  of  the  very 
essence  of  the  contract  of  partner- 
ship, for,  without  this  communion 
of  profit,  a  partnership  cannot,  in 
contemplation  of  law,  exist.  Irvin 
v.  Nashville,  Chattanooga  &  St. 
Louis  R'y  Co.  92  111.  103.  See, 
also,  McDonough  v.  Bulloch,  2 
Pearson  (Pa.),  191. 

So,  even  though  the  parties  in- 


tend to  become  partners.  Sailors 
v.  Nixon-Jones  Publishing  Co.  20 
Bradw.  509. 

■  Community  of  loss  is  not,  how- 
ever, essential  to  the  partnership 
relation.  Kayser  v.  Maugham,  8 
Colo.  232. 

Mere  participation  in  the  profits 
and  loss  does  not  necessarily  con- 
stitute a  partnership.  In  addition 
to  the  community  of  interest  ex- 
tending to  both  profit  and  loss,  in 
order  to  constitute  a  partnership, 
the  parties  must  stand  to  each 
other  in  the  relation  of  principals, 
and  not  of  master  and  servant. 
Hunt  v.  Erikson,  57  Mich.  330 
(Wells  v.  Babcock,  56  Mich.  276, 
distinguished);  Newburger  v. 
Friecle,  23  Mo.  App.  631 ;  Kellogg 
Newspaper  Co.  v.  Farrell,  88  Mo. 
594;  Clifton  v.  Howard,  89  Mo. 
192;  McDonald  v.  Matney,  82  Mo. 
358. 

Where,  by  the  contract,  one 
might  gain  and  the  other  lose, 
there  is  no  partnership.  Flint  v. 
Marble  Co.  53  Vt.  669. 

Provision  for  sharing  profits  and 
losses,  which,  in  an  ordinary  trad- 
ing association,  where  there  is  a 
community  of  capital  and  stock  and 
a  common  undertaking,  is  conclu- 
sive evidence  of  a  partnership,  is, 
nevertheless,  not  a  conclusive  test  of 
the  partnership  where  there  is  an 
extraordinary  adventure  between 
two  partnerships  presenting  a  well 


(c)  In  Mair  v.  Glennie,  4  M.  &  S.  profit  and  loss  did  not  apply  to  the 

240,  the  expression  profit  or  loss  person  as  to  whom  the  question  of 

seems  to  have  been  used  for  gross  partnership  or  no  partnership  was 

retains.  And  in Geddes  v.  Wallace,  raised. 


2  Bligh,  270,  the  arrangement  as  to 


22 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


10 


low  that  each  of  several  persons  who  share  profits  and  losses 
has  all  the  rights  which  partners  usually  have.     For  exam- 


defined  and  well  known  separation 
of  interests  and  ownerships.  The 
way  in  which  the  profit  is  to  be 
participated  in  is  the  essence  of  the 
matter ;  and  when  the  right  to  call 
for  a  proportion  of  the  profits 
arises  by  virtue  of  express  contract 
to  that  effect,  which  would  not 
otherwise  flow  from  the  relations 
of  the  parties,  the  right  exists  qua 
debt,  and  not  by  virtue  of  the 
partnership.  Merchants'  Bank  v. 
Thompson,  3  Out,  541. 

An  arrangement  with  a  firm  by 
which  A.  was  to  buy  standing  tim- 
ber, cut,  pile  and  ship  it,  being 
paid  its  cost  and  a  certain  sum  per 
thousand,  and  the  firm  was  to  sell 
it,  and,  after  paying  all  expenses, 
to  divide  the  net  proceeds  equally 
with  A.,  who  was  to  bear  one-half 
the  losses,  but  had  nothing  to  do 
with  disposing  of  it  after  ship- 
ment, and  the  firm  had  no  control 
over  it  before  shipment,  does  not 
amount  to  a  partnership,  as  to  the 
unshipped  lumber  at  least,  and  the 
parties  concerned  cannot  be  taxed 
as  a  firm  upon  such  lumber.  Mon- 
roe v.  Greenhoe,  54  Mich.  9. 

Railroads  doing  business  to- 
gether, sharing  profits,  and  sending 
freight  over  one  or  the  other  of  the 
combined  lines  at  their  pleasure  or 
the  shipper's  request,  may  make 
themselves  jointly  liable  to  the 
shipper.  Barrett  v.  Railroad  Co.  9 
Mo.  App.  226. 

Same  rule  laid  down  as  to  sev- 
eral steamboats  advertised  as  form- 
ing a  line  under  a  common  name. 
In  this  case  companies  doing  busi- 
ness by  a  common  name  and  a 
common  agent  were  held  partners. 


Sun  Insurance  Co.  v.  Kountz  Line, 
122  U.  S.  Rep.  585. 

An  agreement  between  railway 
companies  forming  a  continuous 
line,  and  last  carrier  collecting 
charges  and  dividing  freights,  etc., 
does  not  constitute  them  partners 
inter  se  or  as  to  third  persons.  In- 
surance Co.  v.  Railroad  Co.  104  U. 
S.  146;  Irvin  v.  Nashville,  etc. 
Railway  Co.  92  111.  103;  Watkinsu. 
Terre  Haute,  etc.  R'y,  8  Mo.  App. 
570;  Hot  Springs  R.  R.  Co.  v. 
Trippe,  42  Ark.  465.  See,  aho, 
Wright  V.  Delaware,  etc.  Canal 
Co.  40  Hun,  343. 

The  sale  of  a  through  ticket  over 
a  route  formed  by  the  connecting 
lines  of  several  railroads,  and  the 
checking  of  baggage  to  the  end  of 
the  route,  without  other  evidence 
of  the  relations  between  the  com- 
panies or  the  basis  through  which 
business  was  done  by  them,  fails 
to  show  such  a  community  of  in- 
terest as  to  make  them  partners 
inter  se  or  as  to  third  persons. 
Atchison,  etc.  R.  R.  Co.  v.  Roach, 
35  Kan.  740. 

An  agreement  between  two  rail- 
road corporations  that  any  injuries 
to  persons  or  goods  shall  be  paid 
for  by  the  corporation  on  whose 
road  it  may  occur,  and  that  when 
the  damage  cannot  be  traced  to 
either  of  the  corporations  it  shall 
be  paid  for  by  each  in  the  propor- 
tion it  shares  in  the  through  price 
of  carriage,  does  not  make  the 
two  corporations  partners.  Aigen 
v.  Railroad  Co.  132  Mass.  423. 

To  constitute  a  partnership  it  is 
not  essential  that  all  the  parties 
should  be  liable  to  share  indefinitely 


23 


no 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


pie,  a  person  may  share  profits  and  losses  and  yet  have  no 
right  actively  to  interfere  with  the  management  of  the  busi- 


in  the  losses.  If  they  participate 
in  the  profits  and  are  liable  to  bear 
or  be  affected  by  the  losses  to  only 
a  limited  extent,  it  will  be  suffi- 
cient. Nor,  in  a  general  partner- 
ship, is  it  essential  that  they  should 
be  proportionate  joint  owners  of 
the  property  of  the  concern.  The 
whole  capital  may,  by  a  stipulation 
to  that  effect,  be  the  property  of 
one  only  of  the  parties,  while  the 
joint  participation  of  all  in  the  net 
profits  may  be  such  as  to  make 
them  general  partners.  Brigham 
v.  Dana,  29  Vt.  1. 

If  parties,  after  they  become  part- 
ners, have  a  common  interest  in 
the  unsettled  business  of  a  former 
concern,  or  in  its  profits  and  losses, 
they  are,  as  between  themselves, 
partners  in  that  business.  McGill 
v.  Dowdle,  33  Ark.  811. 

An  agreement  between  parties  in 
regard  to  the  transaction  of  a  cer- 
tain business,  wherein  all  furnish 
specified  proportions  of  the  capital, 
jointly  own  the  property  pur- 
chased, which  is  to  be  sold  for  their 
joint  and  mutual  benefit,  and  each 
is  to  contribute  his  skill  and  assist- 
ance to  the  business,  and  share  in 
specified  proportions  in  the  final 
profit  or  loss  thereof,  which  are  to 
be  ascertained  at  the  close  of  the 
business,  will,  as  between  the  par- 
ties themselves,  although  they  may 
not  have  been  aware  that  such  %vas 
its  legal  effect,  create  a  partner- 
ship. Duryea  v.  Whitconib,  31  Vt. 
393. 

An  agreement  between  two  part- 
ners, on  the  dissolution  of  their  firm, 
to  the  effect  that  one  should  take 
all   the    goods   on   hand,    and   the 


notes  and  accounts  due  the  firm, 
and,  in  consideration  of  the  other's 
interest  therein,  should  pay  all 
the  outstanding  debts  of  the  firm 
"  and  give  him,  from  that  time 
forward,  one-third  interest  in  the 
profits  arising  from  the  sale  of  said 
goods,"  the  latter  "agreeing  to 
share  one-third  of  the.  losses  that 
might  accrue  from  said  sale  of  said 
goods,  and  to  act  as  clerk  in  the 
sale  of  said  goods  "  for  the  former, ; — 
constitutes  them  partners  inter 
sese.  Scott  v.  Campbell,  30  Ala. 
728. 

A  written  contract,  by  which  the 
defendant  was  to,  and  did,  receive 
of  the  plaintiff  $250,  with  which  to 
go  to  California  to  engage  in  gold- 
digging,  for  two  years,  during 
which  time  his  earnings  were  to 
be  divided  with  the  plaintiff,  con- 
strued as  making  the  return  of  the 
money  advanced  dependent  upon 
the  result  of  the  adventure,  and  as 
thus  constituting  the  parties  joint 
adventurers,  if  not  strictly  part- 
ners.    Brigham  v.  Dana,  29  Vt.  1. 

The  contract  in  this  case  men- 
tioned no  other  business  than  that 
of  gold-digging,  in  which  the  de- 
fendant engaged  upon  arriving  in 
California,  but  he  abandoned  it 
soon  after  and  engaged  in  teaming 
and  trading,  in  the  profits  of  which 
the  plaintiff  claimed  an  interest. 
Held,  from  the  correspondence  be- 
tween the  parties,  etc.,  that  the 
plaintiff  was  entitled  to  an  interest 
therein,  as  well  as  in  the  profits  of 
the  gold-digging.  Brigham  v. 
Dana,  supra. 

Where  two  persons  entered  into 
an  agreement  to  engage  together 


24 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


*11 


ness ;  (d)  or  he  may  have  no  such  right  to  dissolve  as  an 
ordinary  partner  has;  (e)  or  he  may  have  no  right  *to  [*il] 


in  a  mining  adventure,  under  a 
firm  name,  and  to  share  the  profits 
and  losses  equally,  and  as  a  firm 
they  purchased  a  mine,  and  paid  a 
note  given  in  the  firm  name  for  a 
poition  of  the  price,  held,  that 
the  contract  was  one  of  partner- 
ship in  the  ordinary  sense,  as  dis- 
tinguished from  what  is  known  as 
a  "  mining  partnership,"  and  that 
either  partner  had  the  same  au- 
thority to  bind  the  firm  as  if  it 
were  an  ordinary  trading  partner- 
ship. Decker  v.  Howell,  42  Cal. 
636.  See,  also,  Duryea  v.  Burt,  28 
Cal.  569;  Stapleton  v.  King,  33 
Iowa,  28. 

A  contract,  however  obscurel)'  or 
inartificially  drawn,  by  which  the 
parties  agree  to  contribute  mer- 
chandise to  "a  certain  concern," 
one  to  be  the  salesman,  the  other 
to  pass  as  proprietor,  and  both  to 
share  equally  in  the  expenses  and 
profits,  will  be  a  partnership. 
Marks  v.  Stein,  11  La.  Ann.  509. 

An  agreement  provided  that  the 
party  of  the  first  part  should  ob- 
tain in  his  own  name,  but  for  the 
joint  account  of  himself  and  the 
parties  of  the  second  part,  a  lease 
of  a  railroad,  and  manage  the  same 
at  a  designated  salary,  for  their 
mutual  benefit;  and  that  the  par- 
ties of  the  second  part  should  fur- 
nish the  money  necessary  to  carry 
out  the  enterprise,  to  be  reim- 
bursed, with  interest,  out  of  its  an- 


nual profits;  and  then  declared 
that,  after  the  payment  of  the  capi- 
tal thus  invested  and  interest,  the 
annual  profits  should  be  equally 
divided  between  all  the  parties, 
and  that  all  losses  should  be 
equally  borne  between  them.  Held, 
that  the  agreement  constituted  a 
partnership.  Beauregard  v.  Case, 
91  U.  S.  134 

Where  creditors  agreed  with  each 
other  to  advance  the  moneys  neces- 
sary to  continue  and  carry  on  the 
business  of  then*  debtor  for  their 
own  profit,  they  to  contribute  the 
funds  necessary  for  the  purchase 
of  stock  for  the  business  in  equal 
proportions,  and  the  profits  to  be 
realized  to  belong  to  the  creditors 
advancing  the  moneys  equally,  the 
losses  of  the  business  being  borne 
by  them  in  the  same  proportion, 
held,  that  a  copartnership  relation 
in  respect  to  such  enterprise  was 
established  between  the  parties. 
Wills  v.  Simmonds,  51  How.  Pr.  48. 

Where  two  agree  that  one  shall 
furnish  the  land  and  stock  and  the 
other  the  labor,  and  both  share  the 
expenses  and  the  crop  equally,  they 
are  inter  sese  partners.  Holifield  v. 
White,  52  Ga.  567.  (Holloway  v. 
Brinkley,  42  Ga.  226;  and  Smith 
v.  Summerlin,  48  Ga.  425,  distin- 
guished.) 

A.,  the  owner  of  an  invoice  of 
goods  in  the  city  of  New  York,  sold 
one-half  of  his  interest  therein  to 


(d)  As  in  Walker  v.  Hirsch,  27 
Ch.  D.  460. 

(e)  See  as  to  this  Moore  v.  Davis, 
11  Ch.  D.  261;  Pawsey  v.  Arm- 
strong,  18  Ch.  D.  698,  in  both  of 


which  the  right  to  dissolve  was 
held  to  exist.  But  qu.  whether 
Pawsey  v.  Armstrong  did  not  go 
too  far. 


25 


11 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


share  the  good- will  of  the  business  on  a  dissolution ;  and 
other  instances  of  restricted  rights  may  be  suggested.   "What 


B.,  who  was  to  proceed  to  San 
Francisco  and  there  dispose  of  the 
goods  on  joint  account.  Held,  that 
this  constituted  them  partners. 
Soule  v.  Hayward,  1  Cal.  345. 

A  joint  undertaking  and  com- 
munity of  profit  and  loss,  in  the 
results  of  the  business,  constitute 
a  partnership,  although  each  part- 
ner retains  the  exclusive  ownership 
of  the  separate  property  contributed 
by  him  to  the  use  of  the  partnership. 
McCrary  v.  Slaughter,  58  Ala.  230. 

A.,  in  a  letter  to  G.,  stated  the  re- 
sult of  conversations  agreed  upon, 
thus :  G.  was  to  go  to  Canton  and 
reside  there  for  five  years,  to  buy 
or  hire  a  factory  for  the  business  A. 
was  about  to  engage  in ;  to  trans- 
act no  other  business  except  that 
and  commission  business ;  to  incur 
no  liability  as  factor  or  for  goods, 
unless  authorized  by  A.  in  writing ; 
G.  to  have  one-fifth  and  A.  four- 
fifths  of  the  commissions ;  G.  to  be 
at  liberty  to  speculate  in  goods  for 
their  use  in  Canton,  to  not  over 
$100,000  per  year,  for  the  joint  ac- 
count and  risk  of  A.  and  G. —  one- 
fii'th  for  the  latter  and  four-fifths 
for  A. ;  A.  to  advance  $500,000  for 
the  business  in  money  and  ships, 
and  to  charge  interest  on  advances, 
the  profits  to  remain  in  the  trade, 
except  $2,000  a  year  to  G.  out  of 
his  share,  and  in  the  end  A.  was  to 
have  four-fifths  and  G.  one-fifth  of 
the  net  profits;  A.  was  to  place  to 
the  account  of  this  business  all  net 
commissions  arising  from  consign- 
ments to  him  at  New  York  from 
Canton ;  and  each  was  to  render  to 
the  other  a  yearly  account  of  the 
transactions  alluded  to.   G.,  at  the 


foot  of  a  duplicate  of  this  letter, 
bound  himself  to  abide  by  and 
comply  with  its  terms  and  condi- 
tions. Held,  to  constitute  A.  and 
G.  partners  inter  sese.  Ogden  v. 
Astor,  4  Sandf.  311. 

Stone  purchased  a  permit  to  cut 
timber  and  paid  for  it.  He  after- 
wards agreed  to  share  profit  and 
loss  with  Sawtelle,  who  helped  him 
to  get  out  the  lumber.  Dwinel, 
who  appears  to  have  been  an  indi- 
vidual creditor  of  Sawtelle's,  sum- 
moned Stone  as  trustee  in  an  action 
against  Sawtelle.  Stone  defended 
on  the  ground  that  one  partner 
cannot  be  charged  as  trustee  of  an- 
other. Held:  1.  That  Sawtelle's 
labor  having  been  performed  upon 
the  lumber,  and  its  price  and  value 
having  become  incorporated  with 
the  lumber,  there  were  no  funds, 
no  effects,  no  means  for  profit  and 
loss  separate  from  the  lumber,  or 
capital  or  subject-matter  of  the 
agreement  to  share  profit  and  loss, 
and  that  therefore  there  could  be 
no  profit  and  loss  or  interest  sepa- 
rate from  the  capital  or  subject- 
matter  in  which  there  was  a  com- 
munity of  interest.  2.  That  the 
title  to  the  subject-matter  or  capi- 
tal, i.  e.,  to  the  permit  and  lumber, 
was  in  Stone  alone,  and  that  be- 
tween Stone  and  Sawtelle  there 
was  no  community  of  interest  in 
it.  That  there  being  no  community 
of  interest  in  either  capital  or  in  a 
separate  profit  and  loss,  there  was 
no  partnership  between  Stone  and 
Sawtelle.  Dwinel  v.  Stone,  30  Me. 
384.  See,  also,  National  Union  Bank 
v.  Landon,  66  Barb.  189;  Chase  v. 
Barrett,  4  Paige,  148. 


26 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


*11 


in  any  given  case  the  rights  of  a  particular  partner  are  de- 
pends on  the  agreement  into  which  he  has  entered;  but 


Sharing  in  the  profits  and  loss  of 
a  business  is  not  decisive  in  invest- 
ing and  imposing  upon  two  parties, 
as  between  themselves,  the  rights 
and  liabilities  of  copartners ;  it  may 
be  merely  an  arrangement  with  a 
view  to  compensation  for  services 
rendered  by  one  in  the  employ- 
ment of  another,  the  amount  of 
compensation  to  depend  on  the 
success  of  the  business  in  which 
they  are  engaged  or  interested. 
Morgan  v.  Stearns,  41  Vt.  405. 
See  post. 

Where  two  wool  firms  agreed  to 
furnish  each  a  stated  proportion  of 
a  quantity  of  wool  to  be  sold  to  a 
certain  vendee,  and  to  share  profit 
and  loss  in  the  transaction,  but  the 
contract  to  furnish  the  wool  was 
made  by  one  of  the  firms,  and  the 
other  was  not  originally  a  party  to 
it,  but  the  contracting  firm  after- 
wards applied  to  the  other  firm  for 
a  part  of  the  wool  necessary  to  en- 
able it  to  fill  the  contract  which 
was  furnished  under  the  above 
stated  arrangement,  held,  that  they 
were  not  partners  inter  sese  in  the 
transaction,  and  could  not  jointly 
sue  the  vendee  for  non-fulfillment 
of  his  contract.  Snell  v.  De  Land, 
43  111.  323. 

Where  two  mercantile  firms  agree 
to  make  contracts  in  the  names  of 
their  respective  firms,  for  the  pur- 
chase and  sale  of  merchandise,  to 
be  executed  with  their  separate 
funds,  and  to  share  profit  and  loss 
on  such  contracts,  they  are  not  co- 
partners, either  as  between  them- 
selves or  with  respect  to  third  per- 
sons. Smith  v.  Wright,  5  Sandf. 
113. 


A.  &  M.,  partners,  owned  three- 
fourths  of  a  vessel,  and  B.  &  K., 
partners,  owned  the  one-fourth; 
they  agreed  to  fit  her  out  on  a  voy- 
age from  New  York  to  Laguira.  A. 
&  M.  purchased  three-fourths  of  the 
cargo,  and  chiefly,  if  not  wholly, 
with  notes  lent  and  advanced  to 
them  by  P.  &  E.,  commission  mer- 
chants. B.  &  K.  purchased  the 
other  one-fourth  of  the  cargo,  for 
which  they  paid  their  own  money, 
and  shipped  the  same  on  board  the 
vessel ;  but  it  was  not  distinguished 
from  the  rest  of  the  cargo  by  any 
particular  marks;  and  the  whole 
cargo  was  to  be  sold  at  Laguira  for 
the  joint  account  and  joint  benefit 
of  the  owners,  A.  &  M.  and  B.  &  K. 
M.  went  out  as  the  supercargo 
and  agent,  and,  having  sold  the 
cargo  at  Laguira,  he  invested  the 
proceeds  in  a  return  cargo,  with 
which  the  vessel  set  sail  for  New 
York,  but  was  obliged,  by  stress  of 
weather,  to  put  into  Norfolk,  where 
M.  sold  the  return  cargo,  except  a 
small  parcel  of  coffee,  and  for  the 
avails  received  bills  of  exchange, 
which  he  indorsed  and  remitted 
with  the  parcel  of  coffee  to  P.  & 
R.,  to  whom  A.  &  M.  were  jointly 
indebted,  and  M.  on  his  private 
account  to  a  greater  amount  for 
advances  made  at  the  time  of  the 
purchase  of  the  outward  cargo.  P. 
&  R.  collected  the  bills  and  sold 
the  coffee  so  remitted,  and  applied 
the  same  to  the  payment  of  the 
debts  so  due  to  them  from  A.  &  M. 
P.  &  R.  had  notice,  if  not  at  the 
time  of  the  shipment  of  the  out- 
ward cargo,  certainly  before  the 
bills  remitted  by  M.  were  collected, 


27 


^11 


CONTRACTS    OF    PARTNERSHIP. 


[book  I. 


unless  the  word  partner  is  to  be  deprived  of  all  definite 
meaning  its  proper  application  to  persons  who  share  profits 
and  losses  can  hardly  be  questioned,  (f) 


and  the  coffee  sold  and  converted 
into  money,  that  B.  &  K.  were  in- 
terested in  and  owned  one-fourth 
of  the  cargo  so  sold  by  M. ;  and  B. 
&  K.  demanded  of  P.  &  R.  their 
proportion  of  the  proceeds  so  re- 
mitted by  M.  after  deducting  com- 
missions, etc. ,  but  P.  &  R.  refused 
to  pay  or  deliver  the  same,  alleging 
their  right  to  retain  the  same  for 
the  payment  of  the  debt  due  to 
them  from  A.  &  M.  Held,  that  no 
partnership  existed  between  A.  & 
M.  and  B.  &  K.  so  far  as  to  render 
the  disposition  of  the  return  cargo 
by  M.  binding,  as  the  act  of  a  part- 
ner, on  B.  &  K.  That  there  was 
no  agreement  constituting  a  part- 
nership in  the  purchase  of  the  out- 
ward cargo  or  to  share  jointly  in 
the  ultimate  profit  and  loss  of  the 
adventure,  and  though  there  might 
be  a  partnership,  so  far  as  respected 
the  transportation  and  selling  of 
the  outward  cargo,  for  the  joint 
profit  and  loss  of  the  owners,  yet 
it  terminated  with  the  sale  of  the 
outward  cargo,  and  their  interest  in 
the  return  cargo  was  separate  and 
distinct,  each  being  entitled  to  his 
respective  proportion  of  it,  without 
any  concern  in  the  profit  or  loss 
which  might  ultimately  arise ;  and 
that  P.  &  K.  not  having  received 
the  bills  in  the  course  of  trade,  and 
knowing  of  the  interest  of  B.  &  K. 
before  the  bills  were  paid,  had  no 
right  to  retain  their  share  for  the 
payment  of  the  debt  of  A.  &  M., 
but  must  account  to  B.  &  K.  for 


their  proportion.  Post  v.  Kim- 
berly,  9  Johns.  470. 

Defendants  received  merchandise 
on  consignment  and  for  sale  on 
plaintiff's  account  in  New  Orleans, 
where  all  parties  resided,  and 
agreed  to  charge  no  commission 
for  purchasing  or  selling,  and  to 
allow  plaintiff  out  of  the  proceeds 
interest  for  his  advances  in  buying 
the  merchandise,  the  profit  or  loss 
from  the  adventure  to  be  equally 
divided.  With  defendants'  consent 
the  merchandise  was  shipped  to 
New  York,  where  it  was  sold  at 
a  sacrifice.  Held,  that  defendants, 
whether  agents  or  partners  in  an 
adventure,  were  not  liable  for  the 
loss.  Shaw  v.  Gandolfo,  9  La. 
Ann.  32. 

A  man  who  buys  and  ships  for  a 
firm  of  another  city,  whose  funds 
are  used,  the  profits  or  loss  to  be 
divided,  and  each  shipment  to  be  a 
distinct  venture,  is  not  a  partner, 
and  the  firm  can  sustain  a  libel  on 
a  policy  indorsed  to  them,  without 
prejudice  from  his  orders  or  mis- 
takes. Marsh  v.  Northwestern  Ins. 
Co.  3  Biss.  351. 

Certain  cattle  were  delivered  to 
plaintiff  and  two  other  persons,  to 
be  kept  for  a  time,  at  the  expira- 
tion of  which  they  were  to  be  sold 
by  defendant.  After  deducting  the 
first  cost  of  the  cattle,  defendant 
was  to  retain  one-half  of  the  re- 
mainder of  the  proceeds,  the  other 
half  to  be  equally  divided  between 
the  plaintiff  and  the  other  persons. 


(/)  See,  however,  the  judgment 
of    Cotton,   L.   J.,   in    Walker    v. 


Hirsch,  27  Ch.  D.  460. 


28 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED.  *11 

Accordingly  in  Green  v.  Beesley,  (g)  a  partnership  was 
held  to  result  from  an  agreement  that  the  plaintiff  should 
horse  a  mail  cart  and  be  paid  by  the  defendant  dl.  per 
mile  per  annum  for  so  doing,  and  that  the  plaintiff  and  the 
defendant  should  share  the  expenses  of  repairing  and  re- 
placing the  carts  and  the  moneys  received  for  the  convey- 
ance of  parcels  and  the  losses  occasioned  by  their  loss  or 
damage. 

So  in  Brett  v.  BecJavith,  (h)  a  partnership  was  held  to 
exist  between  underwriters,  one  of  whom  had  agreed  to 
take  a  joint  share  of  the  underwriting  risks  of  the  other, 
paying  or  receiving  sums  according  to  the  result  of  the 
accounts. 

These  authorities  are  sufficient  to  show  that  an  agreement 
to  share  profit  and  loss  is  an  agreement  for  a  partnership, 
although  the  words  partners  or  partnership  do  not  occur  in 
the  agreement,  (i) 

Partnership  not  intended. —  Cases  which  present  most 
difficulty  are  those  in  which  persons  agree  to  share  profits 
and  losses  and  at  the  same  time  declare  that  they  are  not  to 
be  partners.  The  question  then  arises,  What  do  they  really 
mean?  If  they  have  in  fact  stipulated  for  all  the  rights  of 
partners,  an  agreement  that  they  shall  not  be  partners  is  a 
useless  protest  against  the  consequences  of  their  real  agree- 
ment, (k)  But  a  clause  negativing  a  partnership  mav-  throw 
light  on  other  clauses,  and  rebut  inferences  which  might  be 

Held,  that  in   this  there  was  no  for  the  failure  of  the  defendant  to 

partnership,  for  there  was  no  corn-  perform  his  part  of  the  contract  in 

munity  of  profit  and  loss,   or  of  respect  to  selling  the  cattle,  and 

ownership  in  the   subject  of  the  dividing  the  proceeds  of  the  sale, 

contract.     Beckwith   v.   Talbot,   2  Beckwith  v.  Talbot,  supra. 

Col.  639.  (g)  2  Bing.  N.  C.  108. 

Upon  performance  of  such  con-  (h)  3  Jur.  N.  S.  31,  in  the  Rolls, 

tract  by  the  three  persons  named  (i)  See,  too,  Greenham  v.  Gray,  4 

therein,  who  were  to  have  the  care  Ir.  Com.  L.  Rep.  501. 

and  herding  of  the  cattle,  each  be-  (fc)  See  Ex  parte  Delhasse,  7  Ch. 

came  entitled  to  his  separate  share  D.  511 ;  Moore  v.  Davis,  11  Ch.  D. 

of  the  proceeds  of  the  cattle,  and  261.     See,  also,  Pooloy  v.  Driver,  5 

each  could  have  his  separate  action  Ch.  D.  460. 


*12  CONTRACTS  OF  PARTNERSHIP.  [BOOK  I. 

drawn  from  them  alone.  In  practical  life  such  questions 
do  not  arise  in  any  abstract  form.     Some  definite  dispute 

has  to  be  determined,  e.  g.,  liability  to  creditors, 
[*12]  *or  the  right  of  one  party  to  the  agreement  to  some 

particular  thing  or  to  some  particular  relief  as  to 
which  the  agreement  itself  is  the  true  guide. 

2. —  Partnership  is  prima  facie  the  result  of  an  agreement  to 
share  profits,  although  nothing  may  he  said  about  losses, 
and  although  there  marj  be  no  common  stock. 

Agreements  to  share  profits  only. —  Except  in  cases 
specially  provided  for  by  statute,  an  agreement  to  share 
profits,  nothing  being  said  about  losses,  amounts  prima  facie 
to  an  agreement  to  share  losses  also;  (I)  for  it  is  but  fair 
that  the  chance  of  gain  and  of  loss  should  be  taken  by  the 
same  persons;  and  it  is  natural  to  suppose  that  such  was 
their  intention  if  they  have  said  nothing  to  the  contrary,  (m) 
It  follows  from  this,  that,  where  no  statute  interferes,  an 
agreement  to  share  profits  is  prima  facie  an  agreement  for 
a  partnership;1  and  accordingly  it  has  been  held,  that,  un- 

(Z)  Greenham  v.  Gray,  4  Ir.  Corn.  Pool,  84  N.  C.  37;  S.  C.  37  Am. 

Law  Rep.  501;  Dry  v.  Boswell,  1  Rep.    607;    Wells  v.    Babcock,  56 

Camp.    330;   Heyhoe  v.    Burge,    9  Mich.    276;    Lockwood    v.  Doane, 

C.  B.  440,  per  Parke,  B.  107  111.   235.     See,   also,  Morse  v. 

(m)  This  prima  facie  inference  Richmond,  97    111.    303;    S.    C.    6 

was  held  to   be   excluded  by  the  Bradw.  166. 

rules  of  the  building  societies  which  Participation  in  profit  does  not  of 

were    considered  in    Brownlie    v.  itself  make  one  a  partner.  Beecher 

Russell,  8   App.  Ca.  235,  and  Tosh  v.  Bush,  45  Mich.  188 ;  S.  C.  40  Am. 

v.  North  British  Build.  Soc.  11  App.  Rep.  465. 

Ca.  489.  Thus,  where  two  firms  agreed  to 

1  In  re  "Ward,  2  Flip.  C.  Ct.  462 ;  divide  equally  the  profits  of  their 

Thayer  v.  Augustine,  55  Mich.  187;  business  after  excluding  a  certain 

Meehan  v.  Valentine,  29  Fed.  Rep.  portion  thereof  to  cover  expenses, 

276;  Parchen  v.  Anderson,  5  Mont,  it  being  stipulated  also  "that  the 

438;  S.  C.  51  Am.  Rep.  65;  Fourth  business  of  their  respective  firms 

Nat.  Bk.  v.  Altheimer,  91  Mo.  190 ;  should  be  conducted  entirely  sepa- 

S.  C.  3  So.  West.  Rep.  858 ;  Philips  rate,"  neither  being  bound  to  con- 

v.  Samuel,  76  Mo.  657;  Staples  v.  tribute  anything  to  the  expenses 

Sprague,  75  Me.  458 ;  Reynolds  v.  or  losses  of  the  other,  such  agree- 

30 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


*12 


less  an  intention  to  the  contrary  can  be  shown,  persons 
eno-ao-ed  in  anv  business  or  adventure  and  sharing  the  prof- 
its  derived  from  it,  are  partners  as  regards  that  business  or 
adventure,  (n) 1 

ment  does  not  make  the  two  firms    have  been  held  not  to  be  copartners, 
partners  inter  se.  Mayrant  v.  Mar- 
ston,  67  Ala.  453. 

While  mere  participation  in  the 
profits  does  not  constitute  a  part- 
nership, yet  it  is  not  necessary  in 
order  to  constitute  a  partnership 
that  there  be  an  express  agreement 
that  each  party  should  bear  a  share 
of  any  losses  which  may  occur. 
This  may  be  inferred  from  the 
other  provisions  of  the  contract 
and  from  other  circumstances. 
Richards  v.  Grinnell,  63  la.  44;  S. 
C.  50  Am.  Rep.  727. 

An  agreement  to  share  the  net 
profits  necessarily  implies  a  sharing 
of  the  losses  and  therefore  consti- 
tutes the  parties  partners.  Wilcox 
v.  Dodge,  12  Bradw.  517.  See,  also, 
Huguley  v.  Morris,  65  Ga.  666; 
Camp  v.  Montgomery,  75  Ga.  795; 
Epping  v.  Aiken,  71  Ga.  682;  Coth- 
ran  v.  Marmaduke,  60  Tex.  370; 
Fisher  v.  Sweet,  67  Cal.  228.  See, 
however,  Darrow  v.  St.  George,  9 
Pac.  Rep.  791. 

To  constitute  a  partnership  be- 
tween persons  sharing  in  the  prof- 
its, the  interest  in  the  profits  must 
be  mutual ;  each  must  have  a  spe- 
cific interest  in  them  as  a  principal 
trader.  Sodiker  v.  Applegate,  24 
W.  Va.  411 ;  S.  C.  49  Am.  Rep.  252. 
See  next  note,  infra. 

(n)  See  Pooley  v.  Driver,  5  Ch.  D. 
458. 

1  Where  two  or  more  engage  in 
business,  having  no  mutual  inter- 
est in  the  capital  invested,  and  no 
stipulation  for  mutual  loss,  they 


though  there  be  an  agreement  to 
share  profits.  Vanderburgh  v.  Hull, 
20  Wend.  70;  Patterson  v.  Blan- 
chard,  5  N.  Y.  186:*  Fitch  v.  Hall, 
25  Barb.  13;  Cummings  v.  Mills, 
1  Daly,  520;  Loury  v.  Brooks,  2 
McCord,  421. 

Sharing  profits  is  not  invariably 
a  test  of  partnership.  The  liability 
of  one  partner  for  the  contracts  of 
another  is  founded  on,  the  relation 
they  sustain  of  each  being  princi- 
pal and  also  agent  as  towards  the 
other.  Harvey  v.  Cliilds,  28  Ohio 
St.  319. 

In  order  to  constitute  a  partner- 
ship each  person  must  have  an  in- 
terest in  the  profits  as  a  principal 
in  the  joint  business;  a  mere  re- 
ception of  a  portion  of  the  profits 
is  insufficient.  Campbell  v.  Dent, 
54  Mo.  325;  Benedict  v.  Hettrick, 
35  N.  Y.  Superior  Ct.  405 ;  Harvey 
v.  Childs,  28  Ohio  St.  319;  Sodiker 
v.  Applegate,  24  W.  Va.  411 ;  S.  C. 
49  Am.  Rep.  252.  See,  also,  Loomis 
v.  Marshall,  12  Conn.  69. 

The  allegation  of  a  partnership 
between  the  master  and  mate  of  a 
vessel  is  not  sustained  by  proof  that 
the  mate  shipped  for  a  share  of  the 
profits,  unattended  by  other  cir- 
cumstances and  without  proof  of 
what  that  share  was  to  be.  The 
Crusader,  1  Ware,  448. 

Where  three  parties  enter  into  an 
agreement  and  intrust  the  invest- 
ment and  management  of  a  certain 
sum  from  a  common  fund  in  an 
enterprise  to  one  of  them,  with  a 


31 


*12 


CONTRACTS    OF    PARTNERSHIP. 


[book  I. 


Community  of  profit  as  a  test  of  partnership. —  Indeed, 
it  has  often  been  said  that  community  of  profit  is  the  test 

vances  as  might  be  procured  on 
said  pork,  and  B.  was  to  attend  per- 
sonally to  the  purchase  and  ship- 
ment, and  out  of  the  proceeds  of 
the  sale,  after  deducting  the  costs, 
expenses  and  disbursements  of 
every  kind,  A.  was  to  be  reim- 
bursed the  amount  advanced  by 
him,  with  interest,  and  the  residue, 
being  the  net  profits,  was  to  be 
equally  divided  between  them,  held, 
to  constitute  a  partnership.  Miller 
v.  Price,  20  Wis.  117. 

An  agreement  between  two  par-- 
ties  to  carry  on  a  particular  busi- 
ness, in  which  real  estate  belonging 
to  one  of  them  is  to  be  used,  will 
be  held  to  constitute  a  partnership, 
if  the  owner  of  the  real  estate  is  to 
be  compensated  for  its  use  by  a 
percentage  of  the  profits  of  the 
business.  And  it  is  immaterial  that, 
in  the  written  contract  between  the 
parties,  such  compensation  is  de- 
scribed as  rent.  Dalton  City  Co.  v. 
Dalton  Manuf.  Co.  33  Ga.  243. 

"Where  all  the  parties  had,  by  a 
contract  entered  into,  a  right  to 
share  in  the  profits  of  a  business, 
and  to  use  the  capital  invested, 
and  an  inchoate  title  to  it,  a  part- 
nership exists  between  them.  Vas- 
sar  v.  Camp,  14  Barb.  341. 

Where  two  persons  agree  to  burn 
lime  on  shares,  one  to  fill  a  kiln 
with  stone,  and  the  other  to  burn 
the  kiln  and  furnish  the  wood,  the 
lime  to  be  equally  divided  between 
them,  held,  that  a  technical  part- 
nership existed  between  the  par- 
ties. Musier  v.  Trumpbour,  5  Wend. 
275. 

The  owners  of  a  ship  agreed  to 
fit   her  out  for  a  voyage  at  the 


stipulation  that  they  shall  share 
equally  in  the  profits  after  detluct- 
ing  the  amount  of  the  investment, 
such  agreement  constitutes  a  co- 
partnership, and  an  accounting 
may  be  had.  Harris  v.  Hillegass, 
5  Pacific  Coast L.  J.  240;  54  Cal.  463. 

Plaintiff  and  defendant  agreed  as 
follows:  Plaintiff  was  to  furnish 
the  capital  to  carry  on  the  business 
of  manufacturing  and  selling  wood- 
enware,  defendant  to  receive  one- 
third  and  plaintiff  two-thirds  of  the 
profits,  nothing  being  said  as  to  any 
losses.  Held,  that  the  mere  fact 
that  no  provision  was  made  in  the 
agreement,  whereby  defendant  was 
bound  to  pay  his  proportion  of  the 
losses,  if  any,  did  not  prevent  the 
parties  to  the  agreement  from  be- 
coming partners  inter  sese.  Munro 
v.  Whitman,  15  N.  Y.  Supreme  Ct. 
553. 

Where,  however,  by  an  arrange- 
ment between  certain  parties,  one 
was  to  furnish  money  and  the  other 
was  to  buy  cattle  with  it  for  the 
market,  and  the  party  furnishing 
the  money  was  to  have  his  capital 
returned,  with  five  per  cent,  inter- 
est thereon,  together  with  one-half 
the  profits  on  the  sale  of  the  cattle, 
it  was  held  that  the  parties  to  this 
arrangement  were  not  partners,  as 
the  one  furnishing  the  money  was 
exposed  to  no  hazard  of  loss. 
Adams  v.  Funk,  52  111.  219. 

An  arrangement  between  A.  and 
B.  for  buying  and  selling  on  their 
joint  account  in  the  name  of  A. 
and  B.  a  certain  quantity  of  pork, 
by  which  A.  was  to  furnish  what- 
ever money  should  be  necessary  in 
the  business,  aside  from  such  ad- 


32 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


»12 


of  partnership,  (o)    This,  however,  is  not  accurate.     Whether 
persons  are  realty  partners  or  not  is  a  question  of  intention, 


joint  expense,  and  for  the  joint 
profit  of  both.  Held,  that  they 
were  partners  in  the  ship  as  well  as 
in  the  cargo;  and  the  ship  having 
been  sold,  under  an  authority  given 
to  the  master,  one  of  the  owners, 
to  whose  hands  the  proceeds  had 
come,  was  allowed  to  retain  for  so 
much  as  he  had  paid  more  than  his 
share  of  the  outfit,  repairs,  during 
the  voyage,  etc.,  though  the  other 
partner  had  made  an  assignment 
of  his  share  before  the  proceeds  of 
the  ship  were  received.  Mumford 
v.  Nicoll,  20  Johns.  611. 

A.  &  B.  agreed  by  parol  as  fol- 
lows :  A.  was  to  erect  a  steam  saw- 
mill on  the  land  of  B.  and  to  man- 
age the  same  at  his  own  cost,  and  B. 
was  to  deliver  at  the  mill,  at  his 
cost,  all  the  timber  growing  on  a 
certain  tract  of  land  belonging  to 
B.,  and  they  were  to  divide  the  prof- 
its of  the  sawing  between  them. 
The  contract  was  complied  with 
on  both  sides  until  B.'s  death,  and 
then  his  administratrix  declined  to 
go  on  with  it.  Held,  that  this  was 
a  copartnership  which  was  dis- 
solved by  B.'s  death.  Jones  v. 
McMichael,  12  Rich.  176. 

A.  &  B.  agreed  to  work  together 
in  the  business  of  manufacturing 
marble.  B.  was  to  furnish  the 
marble,  and  A.  was  to  pay  him 
one-half  the  cost  of  it.  B.  was  to 
board  A.,  and  both  were  to  contrib- 
ute their  labor  and  skill  in  the 
business,  and  the  products  and 
avails  of  the  business  were  to  be 
equally    divided    between    them. 


Held,  that  they  became  partners 
as  between  themselves.  Griffith  v. 
Buffum,  22  Vt.  181. 

An  agreement  between  T.,  a  tin- 
ner owning  a  shop,  and  D.,  a 
plumber  of  large  experience,  to 
work  together,  T.  to  be  allowed  out 
of  the  profits  of  the  business  ten  per 
cent,  on  his  stock  invested,  and  the 
remainder  of  the  profits  to  be  di- 
vided equally  between  them,  held, 
to  constitute  a  partnership,  though 
the  business  proceeded  in  T.'s 
name,  and  D.'s  share  of  the  profits 
remained  in  the  concern.  Tyler  v. 
Scott,  45  Vt.  261. 

An  agreement  whereby  W.  leased 
to  B.  for  five  years  a  manufactory, 
B.  to  furnish  capital  and  personal 
labor,  the  net  profits  to  be  shared 
by  the  parties,  the  accounts  to  be 
open  to  the  inspection  of  W.  and 
periodical  settlements  to  be  made, 
held,  to  constitute  a  partnership, 
and  a  breach  of  the  terms  to  be  a 
sufficient  ground  for  equitable  re- 
lief by  a  decree  of  dissolution. 
Wood  v.  Beatt,  23  Wis.  254. 

An  agreement  to  purchase  and 
run  a  ferry-boat  to  be  owned  by 
the  subscribers,  in  proportion  to 
the  amounts  subscribed  by  each, 
the  toll  to  be  applied  to  pay  ex- 
penses, and  the  balance,  if  any,  to 
be  divided  among  them  pro  rata, 
each  subscriber  to  have  the  right 
to  sell  his  stock,  the  purchaser  to 
have  all  the  rights  of  an  original 
subscriber,  and  the  association  to 
continue  as  long  as  a  majority  of 
subscribers    shall  determine,  con- 


Co)  Heyhoe  v.  Burge,  9  C.  B.  446 ;  Fox  v. 
parte  Langdale,  18  Ves.  300. 

Vol.  I  — 3  33 


Clifton,  9  Bing.  115;  Ex 


■12 


CONTRACTS  OF  PARTNERSHIP. 


[COOK 


to  be  decided  by  a  consideration  of  the  whole  agreement 
into  which  they  have  entered,  and  ought  not  to  be  made  to 
turn  on  one  or  two  only  of  the  clauses  in  it.  (p) l  A  good 
instance  of  this  is  afforded  by  the  Irish  case  of  Barklie  v. 

See  Day  v.  Stevens,  88  N.  C.  83; 
43  Am.  Rep.  732. 

An  agreement  by  which  L.  was 
to  furnish  machinery  and  appli- 
ances for  raising  a  sunken  steamer, 
P.  to  do  the  labor  and  to  fur- 
nish supplies,  etc.,  material  to  be 
saved  from  the  wreck  to  be  turned 
over  to  L.,  who  was  to  control  and 
sell  the  same  for  their  joint  ac- 
count, first  repaying  P.  the 
amounts  paid  by  him,  constitutes 
the  parties  partners  in  the  enter- 
prise both  inter  se  and  as  to  third 
persons.  Lynch  v.  Thompson,  61 
Miss.  354. 

An  agreement  between  two  per- 
sons that  each  shall  furnish  a  horse 
to  do  certain  work,  and  one  to  do 
the  work  and  the  other  pay  all  the 
expenses,  and  divide  the  earnings 
equally,  held,  to  constitute  a  part- 
nership. Gilbank  v.  Stevenson,  31 
Wis.  592. 

(p)  See  ante,  p.  10,  and  the  cases 
in  the  next  note  but  one. 

*An  agreement  between  two 
persons  to  share  in  the  profits  of  an 
adventure  or  concern  does  not  nec- 
essarily constitute  them  copartners 
in  respect  to  the  concern  or  ad- 
venture from  which  the  profits 
arise.  Rice  v.  Austin,  17  Mass.  197 ; 
Newman  v.  Bean,  21  N.  H.  93; 
Lamb  v.  Grover,  47  Barb.  317. 
See,  also,  Ferguson  v.  Alcorn,  1  B. 
Mon.  160. 

A  series  of  independent  transac- 
tions, wherein  W.  selects  lands  and 
B.  furnishes  money  and  buys  them, 
and  they  divide  the  profits  on  sell- 
ing  them   again,  do  not  in  them- 


stitutes  the  subscribers  partners. 
Whitman  v.  Porter,  107  Mass.  522. 

One  who  had  been  sent  by  Kan- 
sas creditors  of  a  merchant  of  Salt 
Lake  City  to  collect  their  claims, 
arranged  with  him,  with  their  con- 
sent, to  take  payment  in  flour, 
salt,  etc.,  ship  the  same  to  Mon- 
tana, and  there  sell  the  same;  but 
owing  to  a  decline  in  prices  the 
venture  resulted  in  a  loss.  Held, 
that  the  creditors  became  partners, 
and  should  share  the  loss  pro  rata. 
Stettauer  v.  Carney,  20  Kan.  474. 

A.,  being  the  owner  of  a  zinc 
mine,  entered  into  a  written  agree- 
ment with  B.,  by  which  he  agreed 
to  furnish  him  a  certain  quantity 
of  ore  per  annum  for  three  years, 
on  being  paid  therefor  $10  per 
ton,  and  B.  agreed  to  provide  suit- 
able buildings  and  machinery  for 
its  conversion  into  paints,  etc.,  and 
to  divide  with  A.  the  profits  of  the 
enterprise  in  the  proportion  of  one- 
fourth  to  himself  and  the  remain- 
der to  A. ;  the  cost  of  the  buildings 
and  machinery  to  be  paid  out  of 
the  profits  after  a  specified  time. 
Held,  that  this  constituted  A.  and 
B.  partners.  Wadsworth  v.  Man- 
ning, 4  Md.  59. 

Where  one  furnishes  land,  team 
and  its  feed,  and  another  gives 
time  and  attention,  and  meets  the 
expenses  requisite  to  the  making 
of  the  crop,  under  an  agreement 
that  the  gross  products  are  to  be 
evenly  divided  between  the  parties, 
a  partnership  is  thereby  constituted 
between  them.  Curtis  v.  Cash,  84 
N.  C.  41. 


34 


CH.  I.  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


*12 


Scott,  (q)     There  a  father  paid  a  sum  of  money  as  his  infant 
son's  share  of  the  capital  of  a  partnership,  and  it  was  agreed 


selves  establish  a  partnership;  nor 
would  an  accumulation  of  such 
purchases  and  the  holding  of  the 
larnl  for  suitable  opportunity  to 
sell  or  for  lumbering.  Wells  v. 
Babcock,  56  Mich.  276. 

A  mere  participation  of  profits 
will  not  make  the  parties  partners 
inter  sese,  unless  such  is  their  inten- 
tion. Hazard  v.  Hazard,  1  Story, 
371.     See,  also,  ante,  note. 

M.  took  a  job  of  finishing  a 
church  at  a  certain  price.  After- 
ward H.  agreed  to  do  it  with  him, 
the  work  of  each  to  offset  that  of 
the  other,  and  the  expense  of  ma- 
terials and  of  other  help  to  be 
deducted  from  the  contract  price, 
and  the  balance  divided  equally 
between  them.  They  did  it  ac- 
cordingly, H.  working  thirty  days 
more  than  M.  Held,  that  they 
were  not  partners  as  between 
themselves,  and  that  H.  could 
maintain  assumpsit  for  the  balance 
due  him  from  M.  Hawkins  v. 
Mclntyre,  45  Vt.  4S6. 

Where  a  certain  portion  of  the 
profits  of  a  concern  was  set  apart 
to  pay  the  debt  of  A.  B.,  by  a  stip- 
ulation in  their  articles,  A.  B. 
being  no  party  to  the  articles, 
held,  that  A.  B.  was  not  a  partner. 
Drake  v.  Ramey,  3  Rich.  37. 

Where  an  agreement  is  made  be- 
tween two  parties  that  one  shall 
furnish  a  farm  with  a  certain 
amount  of  teams  and  labor,  and 
the  other  shall  manage  the  farm 
and  give  certain  labor,  the  crops  to 


be  divided  between  them,  a  part- 
nership is  not  constituted.  Blue  v. 
Leathers,  15  111.  31.  See,  also, 
Burdick  v.  Washburn,  36  How. 
Pr.  468. 

A  contract,  by  which  one  party 
agrees  to  furnish  wheat  to  stock  a 
mill,  and  the  other  party,  with 
money  advanced  by  the  first,  to 
purchase  the  wheat  and  convert  it 
into  flour,  and,  after  deducting  the 
original  cost  of  the  wheat,  and 
two  and  a  half  per  cent,  thereon,  to 
receive  the  proceeds  of  the  sale  of 
the  flour,  does  not  constitute  a 
partnership.  Johnson  v.  Miller,  16 
Ohio,  431. 

An  agreement  by  a  firm  of  spice 
dealers  with  an  outside  party,  that, 
in  consideration  that  his  represent- 
ations as  to  certain  means  of 
knowledge  shall  prove  true,  and 
that  he  will  obtain  for  them  from 
a  congressional  committee  infor- 
mation of  the  rate  of  duties  to  be 
adopted  on  certain  articles,  they 
will  purchase  with  their  own 
means  a  specified  quantity  thereof, 
sell  on  joint  account,  and  pay  him 
half  the  net  profits,  does  not  create 
a  partnership  with  him.  Strong  v. 
Place,  4  Robt.  385. 

A  contract  between  the  owner 
of  land-warrants  and  a  locator  to 
locate  the  warrants  for  a  certain 
portion  of  the  lands,  each  party  to 
contribute  a  share  of  the  expenses, 
does  not  create  a  partnership  be- 
tween them.  M' Arthur  v.  Ladd, 
5  Ohio.  514. 


(q)  1  Huds.  &  Br.  83.     Compare    shares  into  his  infant  son's  name 
Reid's  Case,  24   Beav.  318,  where    was  held  a  contributory, 
the    father  who    had    transferred 

35 


*13 


CONTRACTS    OF    PARTNERSHIP. 


[book  I. 


[*13]  *that  during  the  son's  minority  the  profits  should 
be  accounted  for  to  the  father;  it  was  held  that  the 

farm,  that  the  landlord  shall  fur- 
nish stock  enough  to  eat  the  hay, 
oats  and  corn  raised  on  the  de- 
mised premises,  the  tenant  to  feed 
the  stock,  and  upon  sale  being 
made  the  landlord  to  be  repaid  his 
purchase  money  first  out  of  the 
proceeds,  and  the  remainder  to  be 
equally  divided  between  the  par- 
ties, does  not  constitute  them  part- 
ners in  respect  of  stock  bought  and 
fed  under  the  agreement.  Musser 
v.  Brink,  68  Mo.  242. 

The  occupancy  and  cultivation 
by  one  of  the  farm  of  another, 
under  an  agreement  that  the  crops 
raised  shall  be  divided  between 
them  in  a  certain  proportion,  does 
not  necessarily  constitute  them  co- 
partners. Donnell  v.  Harshe,  67 
Mo.  170. 

An  agreement,  by  which  one  is 
to  furnish  a  circular  saw-mill,  and 
men  and  horses  to  keep  it  in  opera- 
tion, and  another  is  to  furnish  the 
logs,  and  feed  for  the  hands  and 
horses,  the  lumber  to  be  equally 
divided  between  them,  such  agree- 
ment having  in  view  separate  and 
distinct  sales  by  each  person  on 
his  own  account,  and  no  commu- 
nity of  profit  in  the  sales,  does  not 
constitute  a  partnership.  Stoal- 
lings  v.  Baker,  15  Mo.  481. 

A.,  being  the  owner  of  a  number 
of  land-warrants,  agreed  with  B. 
that  the  latter  should  locate  the 
warrants,  and  take  the  agency  of 
the  lands  as  A.'s  attorney,  and  sell 
and  dispose  of  the  same,  paying  all 
necessary  expenses  of  surveying 
and  recording  deeds.  The  title 
was  to  remain  in  A.  until  the  lands 
should  be  sold,  and  the  first  pro- 


An  agreement  by  S.  to  divide 
his  commissions  for  purchasing 
cotton  with  T.,  in  consideration  of 
T.'s  having  procured  for  S.  the 
agency  from  the  principal,  held, 
not  to  constitute  S.  and  T.  part- 
ners. Southworth  v.  Thompson,  10 
Heisk.  10. 

Upon  principles  settled  in  Moore 
v.  Smith,  19  Ala.  774,  and  approved 
in  Fail  v.  McKee,  36  Ala.  61,  aeon-  . 
tract  by  two  parties,  by  which  one 
agreed  to  erect  and  operate  a  saw- 
mill for  a  given  time,  during  which 
the  other  was  to  supply  it  with 
logs  to  keep  it  running,  the  lum- 
ber sawed,  or  the  proceeds  thereof, 
after  sale,  to  be  equally  divided 
between  them,  does  not  create  a 
partnership.  Robinson  v.  Bullock, 
58  Ala.  618. 

A  contract  between  a  land  owner 
and  laborer  by  which  the  latter  is 
to  cultivate  the  former's  land  for  a 
year,  and  receive  half  the  crop, 
does  not  constitute  the  parties 
partners.  Halloway  v.  Brinkley, 
42  Ga.  226. 

An  agreement,  by  the  terms  of 
which  one  party,  in  consideration 
of  one-half  the  proceeds,  undertakes 
to  farm  certain  land  of  the  other 
and  to  render  him  regular  ac- 
counts, each  party  to  furnish  one- 
half  the  stock,  and  the  former  to 
furnish  all  the  working  stock  and 
farming  implements,  pay  the  road 
tax  and  half  the  other  taxes,  con- 
stitutes a  letting  on  shares  and  not 
a  partnership.  Brown  v.  Jacquette, 
10  Reporter,  318. 

An  agreement  between  land- 
lord and  tenant,  as  a  part  of  the 
consideration    for    the    lease  of  a 


36 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


*13 


father  was  not  himself  a  partner,  that  clearly  not  being  the 
intention  of  the  parties  to  the  agreement. 


ceeds  of  sale  were  to  be  applied  to 
reimburse  to  A.  the  cost  of  the 
land,  with  ten  per  cent,  interest; 
afterwards  B.  was  to  be  reim- 
bursed for  expenses  paid  by  him, 
and  the  residue  of  the  proceeds 
was  then  to  be  equally  divided  be- 
tween A.  and  B.  It  was  further 
agreed  that  B.  was  to  be  the  sole 
agent  for  selling  said  lands;  that 
they  should  all  be  sold  within  four 


make,  use  and  sell,  at  the  defend- 
ant's expense,  and  on  his  own 
account,  within  the  British  domin- 
ion, certain  machines  which  the 
plaintiff  had  invented,  and  to  sell 
the  right  to  others  to  make,  use 
and  sell  the  same,  the  defendant 
undertook  and  agreed  to  procure 
from  the  British  authorities  letters 
patent  to  the  plaintiff  for  the  ma- 
chines, and  to  pay  over,  quarterly, 


years,  and  if  any  remained  unsold    to  plaintiff,  one-half  the  proceeds 


at  the  expiration  of  that  time  that 
B.  should  make  no  claim  to  any 
interest  in  such  lands.  B.  further 
agreed  to  guaranty  to  A.  the  re- 
turn of  his  capital  with  interest. 
By  a  subsequent  contract  between 
the  same  parties,  in  reference  to 
other  lands,  it  was  agreed  that  B. 
should  "take  the  agency  "of  the 
latter  lands  upon  the  terms  men- 
tioned in  the  former  contract.  A. 
died  before  the  expiration  of  the 
four  years,  and  before  all  of  the 
lands  had  been  sold.  Held,  that 
the  contract  did  not  create  a  part- 
nership, nor  did  it  invest  B.  with 
any  equitable  interest  in  the  land ; 
also,  that  the  relation  of  the  par- 
ties was  that  of  principal  and 
agent.  Ellsworth  v.  Pomeroy,  26 
Ind.  158. 

A  writing:  "Received  of  G. 
$2,000,  to  invest  in  wool,  said  G. 
to  receive  two-thirds  of  the  net 
orofits  on  the  sale  of    the  wool, 


of  all  sales  made  by  him.  Held, 
not  a  contract  of  partnership. 
Wheeler  v.  Farmer,  38  Col.  203. 

A.  and  B.  entered  into  a  contract 
for  the  manufacture  and  sale  of 
hat-bodies;  B.  was  to  furnish  the 
wool  and  sell  the  hats,  charging 
nothing  for  his  time  in  selling; 
each  was  to  pay  half  the  expense 
of  extra  labor,  wood,  and  use  and 
wear  of  the  machinery;  A.  was  to 
manufacture  and  charge  nothing 
for  his  time  while  so  engaged ;  and 
B.,  after  selling  the  hats,  was  to 
retain  from  the  proceeds  the  cost 
of  the  wool,  and  the  profits,  after 
paying  for  the  wool,  were  to  be 
equally  divided.  Held,  that  this 
did  not  create  a  partnership  be- 
tween the  parties.  Mason  v.  Potr 
ter,  26  Vt.  722;  and  see  Tobias  v. 
Blin,  21  Vt.  544. 

Where  a  partner  disposed  of  his 
share  of  the  good-will,  and  the 
new  firm  agreed  to  allow  him   a 


and    O.    one-third.      (Signed)    O."    percentage  upon  the  gross  sales  of 


Held,  not  to  establish  a  partner- 
ship inter  sese,  there  being  no  pro- 
visions for  sharing  losses.  Ruddick 
v.  Otis,  33  Iowa,  402. 

In    consideration    of    the    right 
granted  him  by   the  plaintiff,  to 


the  firm,  held,  that  this  percent- 
age did  not  constitute  him  a  mem- 
ber of  the  new  firm.  Gibson  v. 
Stone,  43  Barb.  285;  S.  C.  28  How. 
Pr.  468. 
The    receipt  of  a  share  of  the 


37 


>13 


CONTRACTS  OF  PARTNERSHIP. 


[COOK  I. 


Servants,  etc.,  sharing  profits. —  Other  illustrations  of 
the  same  principle   are  afforded   by  those  cases  in  which 


profits  of  a  concern  does  not  neces- 
sarily create  a  partnership  in  the 
stock  as  between  the  parties.  Mc- 
Cauley  v.  Cleveland,  21  Mo.  438. 

By  an  agreement  between  A. 
and  B.,  A.  was  to  supply  B.  with 
stock  to  be  manufactured  into 
cloth,  at  his  mill,  on  A.'s  account, 
and  B.  was  to  manufacture  the 
stock  into  cloth,  and  to  deliver  the 
cloth  to  A.,  for  a  certain  sum  per 
yard.  A.  also  engaged  that,  if  B. 
should  fulfill  his  said  agreement  to 
manufacture  and  deliver  the  cloth, 
A.  would  pay  him  one-third  part 
of  the  net  profits  of  the  business. 
Held,  that  this  agreement  did  not 
make  A.  and  B.  partners,  either 
between  themselves  or  as  to  third 
persons.  Denny  v.  Cabot,  6  Mete. 
82. 

Two  parties  agreed  that  for  three 
years  one  should  furnish  lumber  at 
a  given  place  and  of  a  certain  kind 
and  quantity;  and  carry  the  ar- 
ticles manufactured  to  a  railroad 
station,  and  the  other  should  man- 
ufacture the  lumber  into  doors  and 
blinds,  be  allowed  a  certain  price 
therefor,  and  manage  the  business 
of  selling  them,  and  divide  the 
profits,  after  payment  of  the 
freight  and  expenses,  with  the  first 
party.  Held,  that  this  did  not 
make  the  parties  partners  among 
themselves;  that  the  first  party 
was  entitled  to  his  share  of  the 
profits  within  a  reasonable  time 
after  the  other  had  received  the 
money  for  sales,  without  waiting 
until  the  expiration  of  the  three 
years,  and  mighl  recover  it  by  ac- 
tion for  money  had  and  receive]. 
Hitching?  r.  Ellis,  12  Gray,  449. 


A.,  having  made  a  contract  with 
B.  to  manufacture  certain  articles 
for  him,  from  materials  to  be  fur- 
nished by  the  latter,  and  B.  having 
agreed  to  pay  therefor  such  an 
amount  as  should  arise  from  the 
profits  of  the  business,  together 
with  ten  per  cent,  on  the  amount  of 
sales  of  goods  manufactured,  held, 
that  the  terms  of  the  contract  did 
not  constitute  A.  and  B.  partners, 
and  that  articles  manufactured 
under  it,  and  in  the  shop  of  A. ,  were 
not  liable  to  attachment  as  his 
property.  Judson  v.  Adams,  8 
Cush.  556. 

An  agreement  to  purchase  gooils 
at  a  fixed  price,  and  to  allow  the 
seller  a  certain  portion  of  the  profit 
of  their  resale  by  the  purchaser, 
does  not  constitute  the  parties  part- 
ners. The  purchaser  is  the  agent 
of  the  seller  in  respect  to  the  lat- 
ter's  interest  in  the  profits.  Don- 
ley v.  Hall,  5  Bush,  549.  See  Ed- 
wards v.  Tracy,  62  Pa.  St.  374. 

Where  two  parties  enter  into  a 
contract  to  cut  certain  timber,  one 
to  furnish  money,  teams  and  sup- 
plies, and  the  other  his  own  serv- 
ices, the  latter  to  have  one-fourth 
of  the  profits,  and  the  former  to 
have  three-fourths,  beside  stump- 
age  and  interest  on  his  advances, 
held,  that  this  did  not  constitute  a 
copartnership,  if  one  of  the  par- 
ties had  not,  by  the  terms  of  the 
contract,  an  unqualified  right  to 
dispose  of  his  own  share  of  the 
lumber,  nor  any  right  to  dispose  of 
the  remainder,  on  any  terms  what- 
soever. Braley  v.  Goddard,  49 
Me.  115.     Appleton,  J.,  dissenting. 

A.  made  an  agreement  with  B. 


38 


CH.  I,  SEC.  I.]      NATURE   OF   CONTRACT   DETERMINED. 


*13 


managers  and  clerks  are  paid  salaries  proportionate  to  the 
profits  of  the  business  in  which  they  are  employed.1     The 


by  which  A.  was  to  purchase  a 
certain  quantity  of  hides  and  de- 
liver them  at  B.'s  tannery,  and  B. 
was  to  tan  them  at  his  own  ex- 
pense, being  answerable  for  all 
damage  the  hides  should  sustain 
while  they  remained  in  his  care; 
after  which  A.  was  to  send  them 
to  market  and  sell  them  at  his 
own  expense,  and  B.  was  to  have 
one-half  of  what  the  hides  should 
bring  more  than  the  original  cost 
of  them.  Held,  that  this  agree- 
ment did  not  constitute  a  partner- 
ship between  the  parties,  and  that 
a.  subsequent  agreement,  that  each 
party  might  use  such  portion  of 
the  leather  as  he  desired,  keeping 
an  account  of  it,  did  not  change 
the  case  in  this  respect.  Clement 
v.  Hadlock,  13  N.  H.  185. 

So,  where  a  party  furnished 
hides  to  another  to  be  tanned  and 
returned  to  the  consignor,  who 
was  to  sell  them  and  to  pay  one- 
half  the  profits  to  the  tanner,  after 
deducting  all  charges,  including  a 
stipulated  price  for  tanning,  held, 
that  no  partnership  was  thereby 
created  between  the  parties,  which 
would  enable  the  tanner,  while  the 
leather  was  in  his  possession,  solely 
for  the  purposes  of  the  contract, 
to  sell  it,  and  which  would  protect 
a  purchaser  from  him  as  against 
the  consignor.  Fawcett  v.  Osborn, 
32  111.  411. 

The  complaint  alleged  that  de- 
fendant agreed  to  manufacture 
into  cheese,  at  his  own  factory, 
milk  to  be  furnished  by  plaintiff, 
and  to  sell  the  cheese  and  pay 
plaintiff  the  proceeds,  less  two 
cents  per  pound ;  that  plaintiff  de- 


livered the  milk  and  defendant 
manufactured  it  into  cheese,  which 
he  sold ;  and  that  plaintiff's  share 
of  the  product  is  a  specified  sum, 
which  defendant  refuses  to  pay, 
etc.  The  answer  alleged  that  the 
milk  so  delivered  was  to  be  and 
was  mixed  with  milk  belonging  to 
defendant  and  to  other  persons  and 
then  made  into  cheese ;  that  each 
person  furnishing  milk  was  to  have 
his  proportion  of  the  cheese  made 
according  to  the  quantity  of  the 
milk  by  him  furnished,  after  pay- 
ing the  cost  of  manufacturing ;  that 
defendant  and  plaintiff,  and  others 
so  furnishing  milk,  were  partners 
therein  and  in  the  cheese  so  made ; 
that  plaintiff  and  other  patrons  of 
the  factory  made  defendant  their 
agent  to  sell  said  cheese ;  that  he 
sold  it  and  deposited  the  money  in 
a  certain  bank,  which  failed ;  that 
there  was  no  negligence  on  defend- 
ant's part  in  regard  thereto;  and 
that,  except  as  above  admitted,  he 
denies  all  allegations  of  the  com- 
plaint. Held,  that  the  answer  did 
not  state  any  facts  showing  a  part- 
nership, nor  otherwise  state  a  de- 
fense. Sargent  v.  Downey,  45 
"Wis.  498.  See,  also,  Hawley  v. 
Keeler,  62  Barb.  231. 

1  A  party  who,  without  any  in- 
terest in  the  property,  is,  by  agree- 
ment, to  receive  as  compensation 
for  his  services,  and  only  as  com- 
pensation therefor,  a  certain  pro- 
portion of  the  profits,  and  is  neither 
held  out  to  the  world  as  a  partner, 
nor  through  the  negligence  of  the 
owner  permitted  to  hold  himself 
out  as  partner,  is  not  a  partner, 
either  as  to  the  owner  or  third  per- 


*13 


CONTRACTS    OF    PARTNERSHIP. 


[BOOK    I. 


act,  2S  and  29  Victoria,  chapter  86,  which  will  be  noticed 
hereafter,  expressly  provides  for  such  cases  as  these;  but 


sons.  Burton  v.  Goodspeed,  69  111. 
237;  Commonwealth  v.  Bennett, 
118  Mass.  443;  Butler  v.  Finck,  10 
N.  Y.  Weekly  Dig.  163 ;  Shepard  v. 
Pratt,  16  Kan.  209;  Miller  v. 
Chandler,  29  La.  Ann.  88;  Cbaf- 
fraix  v.  Price,  id.  176 ;  Bell  v.  Hare, 
12  Heisk.  615 ;  Crawford  v.  Austin, 
34  Md.  49;  Meserve  v.  Andrews, 
104  Mass.  360;  Kerr  v.  Potter,  6 
Gill,  404;  Norwent  v.  Hull,  1 
Humph.  320;  Voorhees  v.  Jones, 
29  N.  J.  L.  270 ;  Bradley  v.  White, 
10  Met.  303 ;  Blanchard  v.  Coolidge, 
22  Pick.  151 ;  Smith  v.  Bodine,  74 
N.  Y.  30;  Smith  v.  Perry,  29  N. 
J.  L.  74;  Bull  v.  Schubert,  2  Md. 
38 ;  Taylor  v.  Sotolingo,  6  La.  Ann. 
154;  Reed  v.  Murphy,  2  G.  Greene, 
574 ;  Mason  v.  Hackett,  4  Nev.  420 ; 
Atherton  v.  Tilton,  44  N.  H.  452; 
Nutting  v.  Colt,  7  N.  J.  Eq.  539 ; 
Burckle  v.  Eckhart,  1  Den.  337 ;  3 
N.  Y.  132;  Merwin  v.  Playford,  3 
Robt.  (N.  Y.)  702;  S.  P.  Shropshire 
v.  Shepperd,  3  Ala.  733;  Hanna  v. 
Flint,  14  Cal.  73;  Hodges  v.  Daws, 
6  Ala.  215 ;  Hodgman  v.  Smith,  13 
Barb.  302;  Dunham  v.  Rogers,  1 
Pa.  St.  255;  Brockway  v.  Burnap, 
16  Barb.  309;  Good  v.  McCartney, 
10  Tex.  193;  Ambler  v.  Bradley,  6 
Vt.  119;  Richardson  v.  Hewitt,  76 
N.  Y.  55 ;  Miller  v.  Bartlett,  15  S. 
&  R.  137;  Sankey  v.  Columbus 
Iron  Works,  44  Geo.  228;  Loomis 
v.  Marshall,  12  Conn.  69;  Webb  v. 
Leggett,  6  Mo.  App.  345 ;  Clark  v. 
Gilbert,  32  Barb.  576;  Nicholaus 
V.  Thielges.  50  Wis.  491 ;  Holbrook 
v.  Obirne,  56  la.  324 ;  Clark  v.  Smith, 
52  Vt.  529;  McDonnell  v.  Battle 
House  Co.  67  Ala.  90;  S.  G  42  Am. 
Rep.  99 ;  Brown  v.  Hicks,  24  Fed. 


Rep.  811;  reversing  S.  C.  8  id.  155; 
Cothran  v.  Marmaduke,  60  Tex.  370 ; 
Halliday  v.  Bridewell,  36  La.  Ann. 
238;  Partridge  v.  Kingsman,  130 
Mass.  476;  Darrow  v.  St.  George, 
8  Colo.  592 ;  In  re  Ward,  2  Flip.  C. 
Ct.  462;  Le  Fevre  v.  Castagnio,  5 
Colo.  564;  State  v.  Donnelly,  9  Mo. 
App.  519;  Reddington  v.  Lanahan, 
59  Md.  429 ;  Vinson  v.  Beveridge,  3 
MacArthur  (D.  C),  597;  S.  C.  36 
Am.  Rep.  113;  Wass  v.  Atwater, 
33  Minn.  83;  Pond  v.  Cumins,  50 
Conn.  372;  Sangston  v.  Hack,  52 
Md.  173;  Whiting  v.  Leakin,  66 
Md.  255;  Cogswell  v.  Wi'lson,  11 
Oreg.  371;  Mauney  v.  Coit,  86 
N.  C.  463;  Sodiker  v.  Applegate,  24 
W.  Va.  411 ;  S.  C.  49  Am.  Rep.  252; 
Stevens  v.  Gainesville  Nat.  Bank, 
62  Tex.  499 ;  Gill  v.  Ferris,  82  Mo. 
156;  Maunsell  *>.  Willett,  36  La. 
Ann.  322  (compensation  by  a  cer- 
tain part  of  the  gross  receipts) ; 
Einstein  v.  Gourdin,  4  Woods,  C.  Ct. 
415;  Tayloe  v.  Bush,  75  Ala.  532; 
Buzard  v.  Greenville  Bank,  67  Tex. 
83.  See,  also,  Hall  v.  Edson,  40 
Mich.  651;  Price  v.  Alexander,  2 
G.  Greene,  427;  Whitehall  v. 
Shickle,  43  Mo.  538 ;  Covington  v. 
Leak,  88  N.  C.  133 ;  King  v.  Fraser, 
23  S.  C.  543. 

An  agreement  purporting  on  its 
face,  however,  to  be  a  copartner- 
ship agreement,  and  providing  that 
the  parties  thei-eto  shall  shai'e 
equally  in  expenses,  losses  and 
gains,  cannot  be  treated  as  a  mere 
contract  of  employment.  Smith  v. 
Walker,  57  Mich.  457. 

Payment  for  the  use  of  a  hotel  of 
a  sum  equal  to  one-third  of  the 
gross  receipts  and  gross  earnings 


40 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


'13 


independently  of  that  act  no  partnership  subsists  between 
persons  thus  paid  and  those  who  pay  them,  where  it  appears 


does  not  constitute  the  owner  and 
lessee  partners.  Beecher  v.  Bush, 
45  Mich.  188;  S.  C.  40  Am.  Rep. 
465. 

An  agreement  between  two  par- 
ties by  which  one  is  to  receive  a 
certain  per  cent,  net  upon  all  claims 
against  the  United  States  procured 
by  him  for  the  other,  who  was  to 
have  a  certain  per  cent,  for  collect- 
ing the  same,  does  not  create  a 
partnership  between  them.  Logie 
v.  Black,  24  W.  Va.  1. 

Participation  in  the  profits  of  a 
business  is  strong  presumptive  evi- 
dence of  a  partnership  in  it.  This 
rule  and  the  reason  apply  as  well  to 
a  party  who  receives  a  sum  equal 
to  a  certain  share  of  the  profits  of 
a  business  as  to  a  party  receiving 
such  share  of  profits  by  the  name 
of  profits.  There  are  cases,  how- 
ever, where  money  received  may 
appropriately  be  regarded  as  a  sum 
measured  by  profits  rather  than  as 
profits  themselves ;  but  whether  it 
shall  be  so  regarded  depends  upon 
no  arbitrary  use  of  phrases,  but 
upon  the  nature  of  the  contract  and 
the  real  consideration  upon  which 
the  money  is  received.  A  share  of 
profits  paid  to  agents  to  secure  ex- 
ertion is  not  such  a  participation  in 
profits  as  to  make  the  agent  liable 
as  partner,  and  in  such  cases  the 
money  so  paid  is  spoken  of  as  a  sum 
equal  to  or  measured  by  profits, 
rather  than  as  a  share  in  the  profits 
themselves.  Parker  v.  Canfield, 
37  Conn.  250.  See,  also,  cases 
above  cited. 

Where  A.,  residing  at  a  distance 
from  a  factory  of  cloths  occupied 
by  B.,  entered  into  an  agreement 


with  B.  by  which  A.  was  to  fur- 
nish a  full  supply  of  wool  for  the 
factory  for  two  years;  B.  was  to 
manufacture  such  wool  into  cloths 
in  a  good  and  workmanlike  man- 
ner, and  to  devote  the  entire  use 
of  the  factory  to  that  purpose  for 
such  term ;  and  the  net  proceeds  of 
the  cloths,  after  deducting  inciden- 
tal expenses  and  the  charges  of 
sale,  were  to  be  divided  so  that  A. 
should  have  fifty-five  per  cent,  and 
B.  forty-five  per  cent,  thereof;  in 
the  manufacture  of  satinets  from 
such  wool,  A.  was  to  pay  fifty-five 
per  cent,  and  B.  forty-five  per 
cent,  of  the  cost  of  the  warp ;  the 
expense  of  insurance  effected  on 
wool  or  cloths  was  to  be  borne  by 

A.  and  B.  in  the  same  ratio  as 
their  interest  was  in  the  final  divis- 
ion of  the  avails  of  the  cloths ;  and 
in  case  of  the  destruction  of  any 
wool  or  cloth  by  fire,  the  amount 
to  be  received  from  the  insurers 
was  to  be  divided  between  A.  and 

B.  according  to  the  loss  sustained 
by  each.     In  an  action  brought  by 

C.  for  work  and  labor  done  in  the 
factory,  against  A.  and  B.,  as  part- 
ners, it  was  held  that  B.  had  no 
other  interest  in  the  profits  than  a 
compensation  for  his  labor  and  ma- 
terials by  a  percentage  on  the 
avails  of  the  cloths;  and,  conse- 
quently, that  A.  and  B.  were  not 
liable  as  partners.  Loomis  v. 
Marshall,  12  Conn.  69. 

A  contract  whereby  one  is  to 
furnish  land,  team  and  tools  to 
make  a  crop,  and  another  to  work 
the  land  and  make  the  crop  for  a 
specified  portion  of  it,  does  not 
constitute  a  partnership,  but  simply 


41 


*13 


CONTRACTS    OF    PARTNERSHIP. 


[book  I. 


from  the  whole  agreement  that  a  partnership  was  not  in- 
tended. (•/•)    The  observations  on  agreements  to  share  profits 


fixes  a  rule  of  compensation  for 
services.  Gardenhire  v.  Smith,  39 
Ark.  280;  Christian  V.  Crocker,  25 
Ark.  327;  Romero  v.  Dalton,  11 
Pac.  Rep.  8G3.  See,  also,  Randle  v. 
State,  49  Ala.  14. 

A  certain  contract  for  the  use  of 
property  upon  payment  of  a  certain 
sum  quarterly,  provided  the  net 
profit  realized  a  certain  sum,  al- 
lowing §100  per  month  compensa- 
tion hefore  arriving  at  the  net 
profit;  and  if  the  net  profit  was 
more  than  the  rent,  the  surplus  to 
go  to  the  lessee,  less  the  rent  to  be 
rebated  to  that  amount,  etc.,  held, 
not  to  create  a  partnership,  but  to 
create  the  relation  of  landlord  and 
tenant.  National  Bank  of  Augusta 
v.  Bones,  75  Ga.  246.  See,  also, 
Brown  v.  Jaquette,  94  Pa.  St.  113. 

An  agreement,  however,  be- 
tween the  owner  of  a  farm  and 
another,  by  which  the  latter  and 
his  wife  in  conjunction  with  the 
owner  shall  together  work  the 
farm,  proceeds  of  their  joint  work 
and  labor  to  be  shared  together, 
creates  a  partnership,  and  is  not  a 
contract  for  hire  and  wages. 
Plummer  v.  Frost,  81  Mo.  425. 


A  contract  whereby  one  party  is 
to  furnish  a  certain  number  of  la- 
borers to  work  in  a  brick  yard,  is 
to  receive  therefor  one-half  of  the 
bricks  made,  to  have  the  option  of 
purchasing  a  fixed  number  at  a 
stated  price,  the  other  party  to 
make  the  bricks  and  to  defray  all 
other  expenses,  does  not  consti- 
tute a  partnership.  Chapman  v. 
Lipscomb,  18  S.  C.  222. 

Where  one  person,  as  agent  of 
another,  agrees  to  manufacture  and 
sell  a  medical  compound  o  .vned  by 
the  latter  for  a  certain  commission, 
and  to  account  for  proceeds,  less 
expenses;  and  it  was  also  agreed 
that  after  a  specified  sum  had  been 
paid  the  recipe  should  belong 
jointly  to  the  parties,  and  the  stip- 
ulated sum  was  paid,  held,  that 
between  themselves  the  parties 
were  not  partners.  Walker  v. 
Spencer,  86  N.  Y.  162. 

An  agreement  between  two  per- 
sons about  to  give  public  exhi- 
bitions that  one  should  provide 
audience  room,  etc.,  the  other  fur- 
nish articles  to  be  exhibited,  the 
first  to  receive  all  the  money  and 
to  pay  the  second  party  one-half  of 


(r)  Ex  parte  Tennant.  6  Ch.  D. 
303,  where  a  father  claimed  to  be 
a  partner  with  his  son;  Ross  v. 
Parkyns,  20  Eq.  331;  Rawlinson  r. 
Clarke,  15  M.  &  W.  292;  Stocker  v. 
Brocklebank.  8  Mc.  &G.  250 :  Shaw 
r.  Gait,  16  Ir.  C.  L.  897;  Radcliffe 
r.  Rushworth,  ;'.:'.  1'.  a  v.  -1S4,  where 
there  was  a  holding  out  and  a  deed 
executed  by  the  allege  I  partners, 
in  which  they  were  described  as 
carrying  on  business  together.  See, 


also,  Geddes  v.  Wallace,  2  Bligh, 
270.  In  R.  v.  Macdonald,  7  Jur. 
N.  S.  1127,  a  servant,  paid  by  a 
share  of  profits,  was  convicted  of 
embezzlement,  which  he  could  not 
then  have  been  if  he  had  been  a 
partner.  In  Withington  v.  Herring, 
3  Moo.  &  P.  30,  an  agent  paid  by  a 
salary  and  a  share  in  the  profits 
was  thought  to  be  a  partner,  but 
the  question  was  not  decided. 


43 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


*13 


and  losses  {ante,  p.  10)  are  applicable  to  agreements  to  share 
profits  only;  but  with  this  difference,  viz.,  that  in  the  latter 


all  the  gross  receipts,  does  not  con- 
stitute a  partnership.  McDonough 
v.  Bullock,  2  Pearson  (Pa.),  191. 

An  agreement  between  landlord 
and  tenant  whereby  the  landlord 
furnishes  the  stock  and  the  tenant 
feeds  the  stock,  and  upon  a  sale  the 
landlord  is  first  repaid  his  purchase 
nioney  and  the  remainder  is  to  be 
equally  divided,  does  not  constitute 
them  partners  as  to  the  stock. 
Musser  v.  Brink,  80  Mo.  350;  af- 
firming S.  C.  68  Mo.  242. 

Where  a  contract  was  entered 
into  between  L.  and  the  law  firm 
of  "J.  &  J.,"  whereby  the  latter 
agreed  to  transact  such  legal  busi- 
ness as  L.,  by  the  use  of  their 
names,  should  be  able  to  turn  into 
their  hands,  to  charge  fair  prices 
therefor,  and  divide  the  fees  there- 
for, giving  L.  one-third  and  re- 
serving two-thirds  to  themselves, 
held,  that  J.  &  J.  and  L.  did  not 
under  such  contract  become  co- 
partners in  the  general  practice  of 
the  law,  but  only  in  such  legal 
business  as  L.  should  turn  over  to 
J.  &  J.  Heshion  v.  Julian,  82  Ind. 
576. 

An  arrangement  between  A.  and 
B.  to  operate  a  saw-mill  owned  by 
A.,  whereby  it  is  agreed  that  B. 
shall  assist  A.  to  run  the  mill,  fur- 
nish means  to  run  it  and  support 
A.'s  family,  that  A.  and  his  sons 
are  to  operate  the  mill,  B.  to  sell 
the  lumber,  and,  after  deducting 
from  the  proceeds  thereof  the 
means  furnished  by  him  and  pay 
for  his  services,  the  net  surplus  to 
be  applied  to  the  payment  of  a 
debt  due  from  A.  to  B.,  does  not 
cjnstitute  a  partnership  inter  se  be- 


tween A.  and  B.    Dils  v.  Bridge,  23 
W.  Va.  20. 

A  special  agreement  by  which  P. 
was  to  contribute  a  certain  sum  to- 
wards the  founding  of  a  newspa- 
per, and  the  appellees  a  certain 
other  sum,  under  an  agreement 
that  P.  was  to  conduct  the  business 
and  the  other  subscribers  pay  their 
subscriptions  as  required,  P.  to 
have  the  px-ivilege  of  refunding  all 
or  any  of  the  sums  subscribed  and 
paid  in,  within  one  year,  with  in- 
terest, and  thereupon  to  assume 
sole  proprietorship  of  the  paper, 
but  until  such  sums  should  be  re- 
funded they  should  stand  as  so 
much  stock  in  the  business,  held,  to 
constitute  a  partnership,  and  a  con- 
ditional sale  of  the  appellee's  share 
to  P. ,  and  that  the  interest  of  the 
parties  in  the  profits  was  in  pro- 
portion to  the  amounts  paid  in. 
Pierce  v.  Scott,  37  Ark.  308. 

A  contract  by  which  the  plaintiff 
agreed  to  serve  the  defendant  as 
an  overseer  for  one  year,  to  fur- 
nish a  certain  number  of  hands  and 
horses,  which  were  to  be  worked 
on  defendant's  plantation  with  his 
hands  and  horses,  to  defray  the  ex- 
penses of  himself,  his  hands  and 
horses,  and  to  receive  one-fourth 
part  of  the  crop  raised  as  his  com- 
pensation, does  not  make  the  par- 
ties partners  inter  sese.  Moore  v. 
Smith,  19  Ala.  774. 

One  who  is  working  a  plantation 
on  an  agreement  that  he  is  to  re- 
ceive a  fixed  share  of  the  crop,  ir- 
respective of  profits  or  losses,  is  not 
a  partner  but  an  employee,  and  may 
be  discharged  for  cause.  His  loss 
of  health,    preventing    him    from 


43 


*13 


CONTRACTS   OF   PARTNERSHIP. 


[book 


case  it  is  easier  than  in  the  former  to  come  to  the  conclu- 
sion that  a  partnership  was  not  intended  to  be  formed. 

superintending  the  work,  is  cause 

justifying  a  discharge;  but  he  is 

entitled  to  compensation  for  the 

time  prior  to  the  discharge ;  and  a 

proper  mode  of  computing  it  is  to 

divide  the  total  value  of  the  crop 

by  the  number  of  days  in  the  year, 

and  allow  him  to  share  according 

to  the  number  of  days  he  served. 

Jeter  v.   Penn,  28  La.  Ann.  230. 

See,  also,  Gurr  v.  Martin,  73  Ga. 

529. 
A.  and  B.,  having  entered  into  a 

contract  with  a  turnpike  corpora- 
tion to  make  and  complete  a  cer- 
tain   road,    afterwards    made    an 

agreement  with  C.    "to    let  him 

have  a  share  of  the  profits,  if  any, 

in  making  the  second  ten  miles  of 

the  road,  in  proportion  to  the  help 

he    afforded    in    completing    the 

same ;  the  one-half  of  it  to  be  taken 

from  A.'s  part,  and  the  other  from 

B.'s  part."     Held,  not  to  create  a 

partnership  between  A.,  B.  and  C., 
but  a  mode  of  paying  C.  for  his 
help  and  labor.  Muzzy  v.  Whit- 
ney, 10  Johns.  225.       ■ 

In  an  action  for  damages  for  a 
breach  of  contract  the  complaint 
alleged  that,  at  a  certain  date,  the 
plaintiff  and  the  defendant  had  ex- 
ecuted a  written  contract,  by  the 
terms  of  which  the  defendant  was 
to  furnish  all  the  buildings,  ma- 
chinery, power  and  capital,  and  the 
plaintiff  was  to  perform  all  the 
labor  necessary  for  manufacturing 
all  the  raw  material  of  a  certain 
kind,  which  could  be  purchased  at 
a  certain  place  by  the  plaintiff,  at 
a  price  not  exceeding  the  ruling 
market  price  at  a  certain  other 
place;  that  such   contract  should 


terminate  at  a  specified  time ;  that 
the  defendant  should  make  all  sales 
of  the  manufactured  article,  and 
collect  the  pay  therefor;  and  that 
he  should  pay  to  the  plaintiff,  as 
compensation  for  his  services,  a 
certain  proportion  of  the  net  profits 
which  should  be  realized.  Held, 
that  the  parties  to  the  contract 
did  not  thereby  become  partners. 
Boyce  v.  Brady,  61  Ind.  432. 

Although  the  amount  which  a 
seaman  is  to  receive  for  his  labor 
is  made  to  depend  upon  the  amount 
of  fish  caught,  still  he  is  not  on 
that  account  a  partner  in  the  en- 
terprise, and  need  not  join  any  of 
the  crew  with  him  as  plaintiffs  in 
an  action  to  recover  his  share  of 
the  proceeds.  Holden  v.  French, 
68  Me.  241.  See,  also,  Coffin  v. 
Jenkins,  3  Story,  108;  Baxter  v. 
Rodman,  3  Pick.  435. 

An  action  at  law  is  proper  to  re- 
cover for  services  rendered  a  co- 
partnership, under  an  agreement 
providing  for  a  payment  of  a  share 
of  the  net  profits  of  the  firm  busi- 
ness as  a  compensation  for  the  serv- 
ices-; the  fact  that  an  accounting  is 
necessary  to  ascertain  the  amount 
of  the  compensation  does  not  re- 
quire an  equitable  action,  and 
plaintiff,  not  being  a  partner,  could 
not  bring  such  an  action;  an  ac- 
counting is  proper  in  the  action  at 
law,  and  the  introduction  of  the 
requisite  evidence  does  not  change 
the  nature  of  the  action.  Smith  v. 
Bodine,  74  N.  Y.  30. 

An  agreement  between  W.  and 
R.,  dated  October  2,  1865,  provided 
that  W.  should  enter  into  and  carry 
on  for  three  years,  from  April  17, 
44 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


'13 


If  the  servant  sharing  profits  has  also  an  interest  in  the 
partnership  capital  or  stock,  this  additional  circumstances 
goes  far  to  show  that  a  partnership  was,  in  fact,  intended,  (s) 


1865.  the  business  of  manufactur- 
ing oils  and  candles,  "under  the 
name,  style  and  firnv'  of  the  X. 
Company;  furnish  the  necessary 
capital  to  a  limited  amount :  let  the 
company  have  the  use  of  his  coal 
land  and  mining  apparatus,  with 
the  right  to  take  coal,  for  which  he 
was  to  be  paid  by  the  company  a 
certain  sum  per  ton,  and  be  allowed 
interest  on  the  capital  stock  in- 
vested in  said  company ;  that  R. 
should  be  employed  as  the  general 
agent  and  manager  of  said  busi- 
ness, devote  himself  wholly  thereto, 
receive  "in  payment  for  his  said 
services"  a  certain  sum  per  year, 
and  one-half  the  net  profits  of  the 
business;  let  to  the  company  his 
oil  works,  tools  and  apparatus  at  a 
certain  rent,  and  allow  to  the  com- 
pany, free  of  charge,  the  benefit  of 
all  trade-marks  and  patents  used 
by  him;  that  annual  settlements 
should  be  made,  and  all  sums  due 
thereon  to  R.  should  be  paid,  or,  if 
not  paid,  credited  to  him  and  in- 
terest allowed  thereon;  that  "all 
the  operations  of  the  late  limited 
partnership  of  R.  since  April  17, 
1865,  are  to  be  considered  done  and 
performed  under  this  agreement, 
so  far  as  the  business  of  the  com- 
pany is  concerned,  and  this  agree- 
ment relates  back  to  said  April  17." 
R.,  in  1867,  brought  an  action  of 
contract  against  W.,  declaring  on 
this  agreement  and  alleging  that 
W.  excluded  R.  from  the  manage- 
ment and  profits  of  the  business, 


refused  to  make  annual  settle- 
ments, and,  although  continuing 
the  business  on  the  premises  and 
with  the  tools  of  R.,  and  making 
large  profits,  refused  to  recognize 
that  R.  had  any  rights  under  the 
agreement.  Held,  a  partnership 
and  the  action  not  maintainable. 
Ryder  v.  Wilcox,  103  Mass.  24. 

A.  and  B.  entered  into  an  agree- 
ment, in  writing,  by  which  the 
former  agreed  to  employ  the  latter 
as  salesman  and  clerk  in  his  store, 
and  allow  him  for  his  services  one- 
fourth  of  the  net  profits  of  the  busi- 
ness, and  which  further  declared 
that  thereby  the  said  B.  was  not 
made  a  partner  in  trade  of  the  said 
A.,  but  that  the  allowance  of  one- 
fourth  of  the  net  profits,  after  de- 
ducting expenses,  etc.,  was  a  com- 
pensation for  the  services  of  the 
said  B.  in  lieu  of  clerk  hire.  Held, 
that  however  B.  might  be  held  lia- 
ble as  to  third  pex-sons  he  had  none 
of  the  rights  and  equities  of  an 
actual  partner,  and,  therefore,  had 
no  more  right  to  call  for  the  inter- 
position of  a  court  of  equity,  on 
the  ground  of  lien,  than  any  other 
creditor  of  A.  Kerr  v.  Potter,  6 
Gill,  404. 

Owner  of  a  vessel,  which  the 
master  runs  for  a  share  of  the  net 
profits,  should  not  join  in  an  action 
for  freight  due  on  an  agreement  in 
which  the  master  only  was  known 
to  the  shipper.  Board  man  v. 
Keeler,  2  Vt.  67. 

A  contractor    for    carrying  the 


(s)  See  Reid  v.  Holinshead,  4  B.     469;  Gilpin  v.  Euderby,  5  B.  &  A. 
&  C.  867;  Ex  parte  Chuck,  8  Bing.     954. 

45 


*13 


CONTKACTS    OF    PARTNERSHIP. 


[book  I. 


Partnerships  in  profits  only. —  It  is  not,  however,  essen- 
tial to  the  existence  of  a  partnership  that  there  shall  be 


mail  agreed  with  a  subcontractor 
thai  he  should  perform  one-half 
the  service  and  be  entitled  to  one- 
half  the  compensation.  Held,  that 
this  agreement  did  not  constitute  a 
partnership  between  the  parties. 
Wilkinson  v.  Jett,  7  Leigh,  115. 

B.  and  J.,  having  chartered  cer- 
tain vessels  to  proceed  to  the  Lobos 
Islands  for  guano,  agreed  by  con- 
tract, in  consideration  of  -valuable 
services  rendered  "them,"  in  re- 
spect to  the  obtaining  access  to  and 
procuring  said  guano,  by  K.,  "to 
pay  him  a  sum  or  sums  of  money 
equal  to  the  quarter  part  of  the  net 
profits  on  each  and  every  vessel  so 
chartered."  Held,  that  this  con- 
tract did  not  make  K.  a  partner  in 
this  enterprise.  Benson  v.  Ketchum, 
14  Md.  331. 

The  bankrupt  entered  into  a  con- 
tract with  one  S.,  by  which  he  un- 
dertook to  carry  on  the  butchering 
business  for  S.  as  his  agent  and 
salesman.  The  contract  provided 
that  the  "offal,  feet,  and  the  com- 
mission on  bides  and  the  usual 
slaughter-house  perquisites,"  were 
to  go  to  S. ,  and  the  bankrupt  was 
to  receive  in  lieu  of  wages  all  he 
could  make  over  and  above  the 
current  price  of  cattle  bought,  after 
deducting  all  expenses.  It  was 
provided  that  the  bankrupt  should 
account  daily  with  S.  and  pay  over 
to  him  all  moneys  received  until  S. 
wras  fully  reimbursed  for  the  stock 
and  expenses.  Held,  that  the  agree- 
ment did  not  create  a  partnership. 
In  re  Blu  men  thai,  18  Bk.  Reg.  555. 

An  agreement  between  two  per- 
sons, whereby  one  delivers  to  the 
other  certain  hay,  which  the  latter 


agrees  to  transport  to  another 
market,  and  there  sell  the  same  if 
he  can,  at  not  less  than  a  given 
price  per  ton,  of  which  he  is  to  re- 
ceive a  specified  sum  per  ton  for 
his  freight  and  trouble,  and  to  pay 
over  the  balance  to  the  other  party ; 
and  if  he  sells  at  a  higher  price- 
than  the  minimum  price  named, 
the  excess  is  to  be  divided  equally 
between  them ;  and  if  he  fails  to 
make  sale  he  is  to  store  the  hay  for 
the  other  party,  and  to  wait  for  his 
freight  till  the  hay  is  sold,  does  not 
constitute  the  parties  partners. 
Morrison  v.  Cole,  30  Mich.  102. 

Where  A.,  B.  and  C.  became 
partners  under  the  written  stipula- 
tion that  C.  might  elect  to  receive 
a  certain  sum  of  money,  as  salary, 
in  lieu  of  a  third  of  the  net  pro- 
ceeds of  the  business,  held,  that 
the  relation  between  A.  and  B.  was 
not  disturbed  bj*  the  election  of  C. 
to  receive  the  salary.  Bid  well  v. 
Madison,  10  Minn.  13. 

One  hiring  or  renting  property  — 
a  still,  tubs,  etc. ,  in  this  case  —  may 
contract  for  speculative  compensa- 
tion; and  this  will  not  constitute 
him  a  partner.  England  v.  Eng- 
land, 57  Tenn.  108. 

An  agreement  by  a  landlord  with 
his  tenant  to  take  a  share  of  the 
profits  of  the  demised  premises,  by 
way  of  rent,  does  not  constitute  a 
partnership  between  them,  so  as  to 
prevent  an  action  at  law  by  the 
landlord  against  the  tenant  for  the 
rent.  Perrine  v.  Hankinson,  UN. 
J.  L.  181. 

The  fact  that  a  negro  trader,  in 
whose  sales-house  slaves  are  ex- 
hibited for  sale  and  sold  by  the 


46 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


^13 


any  joint  capital  or  stock.  If  several  persons  labor  to- 
gether for  the  sake  of  gain,  and  of  dividing  that  gain,  they 
will  not  be  partners  the  less  on  account  of  their  laboring 
with  their  own  tools.1     Thus  in  Fromont  v.  Coiipland,  (t) 


owner,  charges  half  commission  for 
the  use  of  his  house,  does  not  con- 
stitute him  a  partner  with  the 
owner  in  the  sale.  Dillard  v. 
Scruggs,  36  Ala.  670. 

By  an  agreement  between  the 
parties,  dated  February  11,  1861, 
reciting  that  they  had  agreed  to 
continue  the  connection  between 
them  for  three  years  from  January 
1,  1861,  in  the  same  way  as  there- 
tofore, it  was  stipulated  that  the 
arrangement  made  with  the  plaint- 
iff was  to  share  the  profits  or  losses 
of  the  defendant's  business  in  the 
above  mentioned  time,  at  the 
rate  of  seventeen  and  one  half 
per  cent. ;  but  that  it  was  not 
to  convey  to  the  plaintiff  the  right 
of  partnership  in  the  defendants' 
firm,  of  signing  the  firm  name, 
etc.,  and  that  he  was  to  superintend 
as  salesman  the  department  of  gen- 
eral dry  goods;  that  the  plaintiff 
should  be  at  liberty  to  draw  $2,500 
a  year  in  monthly  instalments  for 
his  personal  and  other  expenses; 
that  the  capital  then  standing  to 
his  credit  on  the  books  of  the  firm, 
as  well  as  the  surplus  of  profits  for 
the  next  three  years,  if  any,  should 
remain  in  the  business,  to  his 
credit,  at  seven  per  cent,  interest, 
during  the  term  of  the  agreement ; 
that  in  case  of  the  death  of  either 
of  the  defendants  during  the  three 
years,  the  agreement  was  to  remain 
in  force  with  the  surviving  partner 
if  he  should  continue  the  business, 
and  that  in  case  of  the  death  of  the 


plaintiff,  the  books  of  the  firm 
might  be  balanced  either  on  the 
31st  of  December,  or  on  the  30th  of 
June,  whichever  date  might  follow 
after  his  death,  and  the  balance  due 
him  should  be  paid  to  his  represent- 
atives. Held,  not  to  constitute  a 
partnership  inter  sese,  however  it 
might  be  as  to  third  persons.  Osbey 
v.  Reiner,  49  Barb.  265. 

A.  and  B.  made  an  agreement  in 
writing,  by  which  B.  was  to  fur- 
nish a  vessel  and  cargo,  and  A.  was 
to  take  charge  of  the  same  and 
prosecute  a  certain  voyage  upon 
the  following  terms:  "Monthly 
wages,  $50,  and  one-fifth  interest  in 
the  voyage,  he  furnishing  $1,000 
towards  the  one-fifth."  A.  received 
and  acted  upon  a  letter  of  instruc- 
tions from  B.,  saying,  "Your  in- 
terest in  the  vessel  and  cargo  is 
one-fifth  part."'  Other  voyages  were 
made  with  the  same  and  another 
vessel,  and  A.  received  and  acted 
upon  another  letter  of  instructions 
from  B.,  saying:  "  For  your  serv- 
ices you  are  to  receive  $50  per 
month,  and  one-fifth  interest  in  all 
the  vessels  and  cargoes  I  may  send 
to  you."  The  accounts  of  all  the 
voyages  were  kept  as  partnership 
accounts,  which  A.  knew.  At  the 
end  of  the  transactions  A.  claimed 
one-fifth  of  the  property.  Held, 
that  A.  and  B.  were  partners.  Julio 
v.  Ingalls,  1  Allen,  41. 

1  A  partnership  in  profits  may 
exist  without  including  title  in  all 
the  partners  in  the  property  out  of 


(t)  2  Bing.  170.     See,  too,  Lovegrove  v.  Nelson,  3  M.  &  K.  1. 

47       - 


*u 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


two  persons  who  horsed  a  coach  and  divided  the  profits 

[-14]  *were  held  to  bo  partners,  although  each  found  his 

own  horses,  and  the  other  had  no  property  in  them. 


which  such  profits  are  made.  Moore 
v.  Huntington,  14  N.  Y.  Supreme 
Ct.  425 ;  McCrary  v.  Slaughter,  58 
Ala.  230;  ante,  p.  18,  note.  See, 
also,  Hankey  v.  Becht,  25  Minn. 
212.  See,  however,  Dwinel  v.  Stone, 
30  Me.  384;  Chase  v.  Barrett,  4 
Paige,  148,  infra. 

A  father  conveyed  to  his  three 
sons  all  his  estate,  in  consideration 
that  they  should  pay  his  debts  then 
existing,  and  give  him  and  his  wife 
a  life  support.  One  of  the  sons 
took  from  the  others  a  power  of 
attorney  to  hold  the  property,  man- 
age the  farm  and  fulfill  their  joint 
promise,  and  by  virtue  thereof  paid 
the  debts,  furnished  the  life  sup- 
port, and  carried  on  the  farm,  sup- 
posing that  if  it  should  yield  a 
profit  over  his  expenditures  they 
should  share  it  equally,  otherwise 
share  the  loss.  Held,  that  if  there 
was  a  partnership  created  between 
them,  it  was  at  most  only  in  the 
profits  and  losses  in  carrying  on  the 
farm.    Howe  v.  Howe,  99  Mass.  71. 

A  contract  provided  that  K. 
should  furnish  and  replenish  a 
stock  of  merchandise  which  N.  was 
to  take  charge  of  and  sell,  deduct- 
ing from  the  proceeds  the  expenses 
of  the  business  and  a  certain  fixed 
sum  for  himself,  the  profits  of  the 
business  to  be  divided  equally,  and 
N.  to  take  his  share  thereof,  at  the 
expiration  of  the  contract,  out  of 
the  merchandise  on  hand.  Held, 
that  the  contract  created  a  partner- 
ship, notwithstanding  a  stipulation 
that  the  goods  were  to  remain  the 
property  of  K.,  and  that  K.  could 
not  maintain  replevin  for  the  goods 


until  after  a  settlement.     Kuhn  v. 
Newman,  49  Iowa,  424. 

Equity  having  exclusive  juris- 
diction of  partnership  settlements, 
evidence  to  show  that  N.  had  no 
interest  in  the  merchandise,  be- 
cause no  profits  had  accrued,  was 
not  admissible  in  the  action  of  re- 
plevin.    Kuhn  v.  Newman,  supra. 

B.  and  H,  sole  managers  of  the 
business  of  a  brewing,  malting  and 
distilling  company,  received  for 
their  services  five  per  cent,  on  all 
sales,  which  commission,  by  an  ar- 
rangement between  themselves, 
they  divided,  three  per  cent,  to  H., 
and  two  per  cent,  to  B.  They  paid 
bills  rendered  to  them  in  the  firm 
name  of  B.  &  H. ,  and  in  order  to 
raise  money  to  pay  for  purchases 
made  in  the  name  of  B.  &  H.  they 
gave  their  joint  and  several  notes 
signed  in  their  individual  names. 
Held,  to  be  a  partnership.  Heise  v. 
Barth,  40  Md.  259. 

Where  A.  B.,  being  the  owner 
of  several  farms  in  1827,  entered 
into  articles  of  agreement  with 
three  of  his  sons  and  his  son-in-law, 
wherein  it  was  agreed  that  the 
three  sons  and  son-in-law  should 
work  and  carry  on  the  farms  owned 
by  A.  B.,  for  the  term  of  five  years, 
in  such  manner  as  might  be 
thought  by  A.  B.  most  discreet  and 
prudent,  and  should  put  on  the 
same  all  such  implements  of  hus- 
bandry as  they  owned,  and  A.  B. 
agreed  to  put  on  to  the  said  farms, 
for  the  use  thereof,  all  such  teams 
and  implements  of  husbandry  as 
he  owned;  and  it  was  further 
agreed  that  other  teams  and  imple- 


48 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT   DETERMINED. 


*u 


So,  in  French  v.  Sit/ring,  (u)  where  two  co-owners  of  a 
race-horse  agreed  to  share  its  winnings  and  the  expenses  of 
its  keep,  although  there  was  some  doubt  as  to  whether  they 
were  partners  or  not,  the  court  had  no  hesitation  in  ad- 
mitting that  they  might  have  been  partners  in  the  profits 
although  not  in  the  horse  itself,  (x) 

The  ordinary  agreement  between  publishers  and  authors, 
to  the  effect  that  the  author  shall  contribute  the  manuscript, 
and  the  publisher  shall,  in  the  first  instance,  defray  the 
expenses  of  publication,  and  repay  himself  out  of  the  pro- 
ceeds of  the  sale  of  the  work,  and  that  then  the  profits 
shall  be  divided,  furnishes  another  instance  of  a  partner- 
ship confined  to  profits  only,  (y) 

Again,  it  frequently  happens  that  one  person  has  prop- 
erty and  another  skill,  and  that  they  agree  that  the  latter 
shall  have  the  control  of  the  property  for  the  benefit  of 


ments  of  husbandry  which  might 
be  necessary  should  be  purchased 
from  the  products  of  the  farms, 
and  that  each  of  the  parties  should 
have  his  proper  living  and  expenses 
out  of  such  products;  and  A.  B. 
also  agreed  that  at  the  expiration 
of  said  term  of  five  years  his  said 
three  sons  and  his  son-in-law  should 
have  one-half  of  his  personal  prop- 
erty and  one-half  of  the  products 
of  the  farms ;  and  A.  B.  further 
agreed  that,  in  case  the  three  sons 
and  son-in-law  faithfully  per- 
formed the  agreement  on  their 
part,  he  would  convey  to  them  by 
deed,  in  fee-simple,  one-half  of  all 
such  farms;  and  at  the  time  of 
making  the  agreement  A.  B.  owned 
considerable  personal  property ; 
and  his  son-in-law  was  then  in  ill- 
health  and  unable  to  work  until  his 
death,  which  took  place  a  few 
weeks  thereafter, —  held,  the  agree- 
ment did  not  constitute  the  parties 
copartners,   so    as    to    entitle   the 


representatives  of  the  son-in-law  to 
a  share  of  the  property.  Chase  v. 
Barrett,  4  Paige,  147.  See,  also, 
Dwinel  v .  Stone,  30  Me.  384. 

(u)  2  C.  B.  N.  S.  357;  noticed 
again  infra,  p.  18. 

(x)  See,  also,  Steel  v.  Lester,  3  C. 
P.  D.  126.  The  dictum  in  Syers  v. 
Syers,  1  App.  Ca.  181,  to  the  effect 
that  a  partnership  in  profits  is  a 
partnership  in  the  assets  by  which 
they  are  made,  is  by  no  means 
universally  true.  See  infra,  note 
(&). 

(y)  See  Gardiner  v.  Childs,  8  C. 
&  P.  345 ;  Reade  v.  Bentley,  3  K.  & 
J.  271,  and  4  id.  656;  Wilson  v. 
Whitehead,  10  M.  &  W.  503;  Gale 
v.  Lackie,  2  Stark.  107;  Venables 
v.Wood,  3  Ross,  L.  C.  on  Com.  Law, 
529.  This  last  case  is  an  authority 
for  the  proposition  that  authors 
and  publishers  are  not  partners  at 
all,  and  qu.  whether  this  is  not  the. 
correct  doctrine. 


Vol.  1  —  4 


49 


*15  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

both,  and  that  the  profits  shall  be  divided.1     In  such  cases 
it  may  be  difficult  to  say  whether  a  partnership  is  or  is  not 
created.     In  Stocker  v.  Brocklebank,  (s)  it  is  clear  that  no 
partnership  was  intended  and  none   was  created.     In  the 
Irish  case  of  Oreenham  v.  Gray,  {a)  it  was  thought  that  the 
whole  agreement  could  only  receive  a  reasonable  construc- 
tion by  holding  a  partnership  to  exist,  and  a  partner- 
[*15J  ship  was  held  to  exist  accordingly,  although  the  *mills, 
and  machinery,  and  buildings,  by  means  of  which  the 
business  was  carried  on,  clearly  belonged  to  one  partner  only. 
Other  instances  of  partnership  in  profits,  although  there 
is  no  community  of  interest  in  the  capital  or  stock  produc- 
ing them,  will  be  noticed  when  the  subject  of  partnership 
property  is  examined,  (b) 

3. — Partnership  is  prima  facie  the  result  of  an  agreement  to 
share  profits,  although  community  of  loss  is  stipulated 
against. 

Sharing  profits  but  not  losses. —  Persons  who  agree  to 
share  the  profits  of  an  adventure  in  which  they  engage  are 
prima  facie  partners,  although  they  stipulate  that  the}' 
will  not  be  liable  for  losses  beyond  the  sums  they  engage 
to  subscribe,  (c) 

1  See  Holt  v.  Kernodle,  1  Ired.  L.  qucere  whether  he  was  entitled  to 

199 :  Simpson  v.  Feltz,  1   McCord,  all  he  got. 

Ch.  124 ;  Dob  v.  Halsey,  16  Johns.  (a)  4  Ir.  Com.  L.  Eep.  501.     The 

34;  Gregg  Township  v.  Half-Moon  real  truth  here  seems  to  have  been 

Township,  2  Watts,  342;   Potter  v.  that  the  plaintiff  intended  to  create 

Moses,  1 R.  I.  430 ;  Winship  v.  Bank  a  partnership,  whilst  the  defendant 

of  United  States,  5  Pet.  529 ;  Tib-  did  not. 

batts  v.  Tibbatts,  6  McLean,  80 ;  (b)  In  Meyer  v.  Sharpe,  5  Taunt. 
Bearce  v.  Washburn,  43  Me.  564;  74,  the  distinction  between  an  in- 
Wood  v.  Vallette,  7  Ohio  St.  173.  terest  in  profits  and  an  interest  in 

(z)  3  Mc.  &  G.  250.     The  servant  the  goods  by  the  sale    of   which 

claimed  a  right  to  take  an  active  those  profits  were  to  be  produced 

part  in  the    management  of   the  was  held  to  be  clear  and  manifest, 

business.     So  in  Walker  v.  Hirsch,  See,  too,  Smith  v.  Watson,  2  B.  & 

27  Ch.  D.  460.     In  Pawsey  v.  Arm-  C.  401. 

strong,    18  Ch.  D.    698,  the  clerk  (c)  Brown  v.  Tapscott,    6  M.  & 

shared  losses  a3  well  as  profits,  but  W.  119. 

50 


CH.  I,  SEC.  I.]       NATURE   OF    CONTRACT    DETERMINED.  *16 

Stipulations  against  community  of  loss. —  The  inference 
that  where  there  is  community  of  profit  there  is  a  partner- 
ship is  so  strong  that,  even  if  community  of  loss  be  ex- 
pressly stipulated  against,  partnership  may  nevertheless 
subsist.  In  Coope  v.  Eyre,  (d)  Lord  Loughborough  is  re- 
ported to  have  said:  "In  order  to  constitute  a  partnership 
communion  of  profits  and  loss  is  essential."  But  there  is 
nothing  to  prevent  one  or  more  partners  from  agreeing  to 
indemnify  the  others  against  loss,  or  to  prevent  full  effect 
from  being  given  to  a  contract  of  partnership  containing 
such  a  clause  of  indemnity,  (e)1 

Contracts  of  loan  compared  with  contracts  of  partner- 
ship without  community  of  loss.—  The  true  effect  of  such 
a  complex  agreement  would,  it  is  apprehended,  be  to  entitle 
each  of  the  partners  to  a  share  of  the  excess  of  the  returns 
over  the  advances,  while  some  of  the  partners  would  be  en- 
titled to  be  indemnified  by  the  others  for  all  losses  lieyond 
the  advances.  If  this  were  not  the  result  of  the  agreement, 
and  if  the  persons  indemnified  were  indemnified  not 
only  against  losses  beyond  the  advances,  but  *also  [*16] 
against  the  loss  of  the  advances  themselves,  the  con- 
tract  would  lose  its  character  of  a  contract  of  partnership 
and  become  a  contract  of  loan,  (f) 

Usurious  loans  confounded  with  partnerships. — Whilst 
the  laws  against  usur}^  were  in  force,  a  tendency  was  some- 

(d)  1  H.  Blacks.  48.  its  renders  one  liable  as  a  partner 

(e)  See  Bond  v.  Pittard,  3  M.  &  to  third  persons,  the  partners  may 
W.  357;  Geddesu.  Wallace,  2  Bligh,  stipulate,  as  between  themselves, 
270.  that  one  shall  not  be  liable  for  the 

1  An  agreement  whereby  one  debts  of  the  firm.  Pollard  v.  Stan- 
party  is  to  have  for  his  share  of  the  ton,  7  Ala.  761. 
profits  ten  per  cent,  per  annum  for  A  stipulation  exempting  a  part- 
advancements  of  capital  and  the  ner  from  losses,  for  a  fair  and  just 
use  of  his  name  as  partner,  and  is  equivalent,  is  valid  as  to  the  part- 
to  be  kept  harmless  from  all  losses  ners  inter  se.  Consolidated  Bank 
by  other  partner,  constitutes  a  part-  v.  State.  5  La.  Ann.  44. 
nership  between  parties.  Clift  v,  (/)  See  Pothier,  Contrat  de  So- 
Barrow  (N.  Y.),  10  Cent.  Rep.  715;  ciete.  g§  21,  22.  Compare  Pooley 
S.  C.  15  N.  E.  Rep.  327.  v.   Driver,   5  Ch.  D.    458,   noticed 

Although  the  perception  of  prof-  infra,  %  2. 

51 


*16  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

times  manifested  to  treat  what  was  in  truth  a  loan  at  usuri- 
ous interest,  and  therefore  illegal,  as  a  contract  of  partnership 
and  therefore  legal,  (g)  This  view  of  the  transaction  had 
the  merit  of  apparently  holding  the  parties  to  their  bar- 
gain; but  in  truth  the  bargain  to  which  they  were  held  was 
very  different  from  that  which  they  themselves  had  contem- 
plated; and  by  treating  such  transactions  as  partnerships 
and  not  as  loans,  an  amount  of  confusion  was  introduced 
into  this  branch  of  the  law  which  even  the  repeal  of  the 
usury  laws  failed  to  remove.  The  leading  cases  on  this  sub- 
ject are  Gilpin  v.  Enderby  {h)  and  Fereday  v.  Hordern.  (*) 
They  decided  that  a  loan  of  money  on  the  terms  that  the 
lender  should  share  the  profits  of  the  borrower  rendered 
the  lender  liable  to  third  persons,  as  if  he  were  a  partner 
with  the  borrower,  and  that,  by  reason  of  such  risk,  the 
loan  was  not  usurious.  The  judgments  in  these  cases  show 
that  the  borrower  and  lender  were  regarded  by  the  court 
as  partners  inter  se. 

These  cases,  however,  cannot  now  be  relied  upon ;  for,  as 
will  be  seen  hereafter,  the  mere  fact  that  a  lender  of  money 
shares  profits  with  the  borrower  will  not  make  the  lender 
liable  as  a  partner;  and  as  between  the  borrower  and  the 
lender  the  question  of  partnership  or  no  partnership  turns 
on  the  real  agreement  between  them,  (k)1 

(g)  See  Bloxham  v.  Pell,  cited  2  able,  they  to  return  to  him,  in  any 
Wm.  Blacks.  999 ;  and  compare  event,  his  advances,  and  if  the  ad- 
Morse  v.  Wilson,  4  T.  R.  353,  and  venture  proved  profitable  one-third 
9  Byth,  Conv.  p.  163,  edit.  2.  of  the  profits  in  lieu  of  interest  on 

'h)  5  B.  &  A.  954.  the  money  loaned,  but  no  provision 

(i)  Jac.  144.   See,  also,  Ex  parte  was  made  for  his  bearing  any  ex- 

Briggs  and  Ex  parte  Notley,  3  D.  pense  or  loss,  nor  was  any  time 

&  Ch.  3G7.  fixed  for  the  termination  of  the  ad- 

(fc)  See  the  cases  of  servants  shar-  venture.     Held,  that  this  did  not 

ing  profits,  ante,  pp.  12,  13.  constitute  a  partnership.     Lintner 

lAn    agreement   was    made   by  v.  Millikin,  47  111.  178.     See,  also, 

manufacturers      and     a    banker,  Emmons  V.  \Ve3tfield,  97  Mass.  230, 

whereby  the  latter  was  to  furnish  where  stock  and  materials  were  ad- 

the  former  money  wherewith  to  vanced  by  a  capitalist  to  the  manu- 

uianufacture  as  many  articles  as  facturer;  also  Gallop  v.  Newman, 

they  might  think  safe  and  prodt-  7  Pick.   282;  In  re  Ward,   U.  S. 

52 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED. 


•16 


Dist.  Ct.  W.  D.  Term.  8  Reporter, 
136;  Smith  v.  Garth,  32  Ala.  368; 
Richardson  v.  Hughitt,  Ct.  of  Ap. 
of  N.  Y.  8  Reporter,  177;  Cassidy 
v.  Hall,  97  N.  Y.  159;  Curry  v. 
Fowler,  87  N.  Y.  33 ;  S.  C.  41  Am. 
Rep.  343;  46  N.  Y.  Super.  Ct.  195; 
Magovern  v.  Robertson,  40  Hun, 
166 ;  Darling  v.  McLelland,  2  Rus. 
&  Ches.  (Nov.  S.)  164;  S.  C.  76  N. 
Y.  55 ;  Hart  v.  Kelly,  83  Pa.  St.  286 ; 
Everett  v.  Coe,  5  Den.  180.  See, 
also,  post. 

An  agreement  to  loan  money  or 
indorse  notes  for  a  certain  amount 
in  consideration  of  a  certain  per 
cent,  of  the  net  business  profits,  the 
borrower  agreeing  to  conduct  his 
business  to  the  best  advantage  and 
keep  accurate  accounts  thereof,  to 
be  at  all  times  open  to  the  exam- 
ination of  the  lender,  does  not  make 
the  parties  copartners  either  as  be- 
tween themselves  or  a  third  person. 
Boston,  etc.  Smelting  Co.  v.  Smith, 
13  R.  I.  27 ;  S.  C.  43  Am.  Rep.  3. 
See,  also,  Swann  v.  Sanborn,  4 
Woods,  C.  Ct.  625 ;  In  re  Ward,  2 
Flip.  C.  Ct.  462;  Eager  v.  Craw- 
ford, 76  N.  Y.  97. 

In  the  case  of  Rosen  field  v. 
Haight,  53  Wis.  260 ;  S.  C.  40  Am. 
Rep.  770,  on  the  other  hand,  an 
agreement,  by  which  one  loans  an 
advance  to  a  firm.  $5,000,  in  consid- 
eration of  which  the  firm  was  to 
devote  their  whole  time  and  skill 
to  the  business,  keep  accurate  ac- 
counts, which  were  to  be  open  at  all 
times  to  the  inspection  of  the  cred- 
itor, and  in  consideration  of  the 
use  of  the  money  the  firm  was  to 
pay  the  creditor  at  stated  intervals 
a  certain  proportion  of  the  profits 
of  the  business,  guarantying  that 
such  proportion  should  amount  at 
least  to  a  certain  sum,  and  as  se- 


curity for  the  money  advanced  the 
firm  gave  a  lien  upon  tue  assets  of 
the  firm,  and  the  firm  agreed  to 
contract  no  debts  outside  of  busi- 
ness during  the  term  of  the  agree- 
ment, and  to  use  no  funds  or  other 
property  of  the  firm  except  what 
might  be  necessary  for  their  sup- 
port, a  violation  of  the  contract  by 
said  firm,  to  be  regarded  as  an  end 
to  the  loan,  authorizing  the  cred- 
itor to  take  possession  of  the  prop- 
erty and  by  sale  satisfy  his  debt, 
was  held  to  constitute  the  creditor 
a  copartner  with  the  firm  and  make 
him  liable  upon  a  note  executed  by 
them. 

Where  N.  furnished  money  to 
P.  to  conduct  business,  the  latter 
to  let  him  have  goods  at  cost,  noth- 
ing being  said  as  to  interest,  or 
profits  and  losses,  this  constitutes  a 
loan  and  not  a  partnership.  Slade 
v.  Paschal,  67  Ga.  541. 

A  written  contract,  in  which 
party  of  the  first  part  did  not  par- 
ticipate in  profits  or  losses,  but  re- 
ceived interest  semi-annually  upon 
the  amount  loaned,  construed  to 
create  the  relation  of  creditor  and 
debtor  and  not  partnership.  New- 
lin  v.  Bailey,  15  Bradw.  199. 

A  loan  was  made  for  two  years, 
with  interest  payable  quarterly,  at 
a  rate  above  six  per  cent.,  and  to 
be  made  equal  to  one-fourth  of  the 
profits  of  the  borrower's  business 
at  the  end  of  the  term.  Held,  not 
to  constitute  the  lender  a  partner 
with  the  borrower.  Lord  v.  Proc- 
tor, 7  Phil.  630. 

A.  &  B.  of  the  one  part,  and  G, 
D.,  E.  &  F.  of  the  other,  made  an 
agreement  in  writing,  whereby  A. 
&  B.  sold  to  C.  the  exclusive  right 
to  manufacture  and  sell  a  certain 
article  secured  by  letters  patent,  to- 


53 


L1G 


CONTRACTS    OF    PARTNERSHIP. 


[BOOK    I. 


gether  with  all  the  stock  and  fixt- 
ures then  on  hand  pertaining  to 
the  business,  in  consideration  that 
thirty-seven  and  one-half  percent, 
of  the  net  profits  realized  should  be 
paid  to  them;  and  in  order  that 
profits  might  arise  out  of  it,  D.,  E. 
&  F.  were  to  furnish  $15,000  as  cap- 
ital for  carrying  on  the  same,  A.  & 
B.  agreeing  that  they  would  neither 
make  nor  sell  the  said  article,  nor 
in  anywise  interfere  with  the  man- 
agement of  the  business,  which 
was  agreed  should  be  left  exclu- 
sively with  C.  as  superintendent, 
who  was  to  receive  a  certain  stipu- 
lated salary  and  twenty-five  per 
cent,  of  the  net  profits  for  his  serv- 
ices, the  party  of  the  second  part 
guarantying  to  A.  &  B.  the  pay- 
ment of  said  thirty-seven  and  one- 
half  per  cent,  after  all  expenses 
should  be  paid,  such  expenses  to 
include  twenty  per  cent,  on  the 
capital  furnished  by  D.,  E.  &  F.,  to 
be  paid  to  them  for  the  use  of  the 
money,  and  which  capital  it  was 
agreed  they  might  at  any  time 
withdraw  with  the  consent  of  C. 
Held,  that  this  agreement  did  not 
constitute  a  partnership  between 
A.  &  B.  and  the  other  parties. 
Smith  v.  Vanderburg,  46  111.  34. 

Agreement  under  seal  between 
A.  and  B.,  by  which  B.  was  to  loan 
A.  $5,000  for  one  year,  or  indorse 
his  note  for  that  amount  for  that 
time,  and  also  indorse  his  notes  to 
an  additional  amount  not  exceed- 
ing $2,000,  if  B.  thought  such  sums 
required  for  A.'s  business.  For 
this  A.  was  to  pay  B.  ten  per  cent, 
of  his  net  business  profits  of  the 
year,  and  two  per  cent,  of  his  net 
profits  for  each  $1,000  indorsed  for 
him  over  said  sum  of  $5,000.  A. 
also  agreed  to  conduct  his  business 


to  the  best  advantage,  and  to  keep 
accurate  accounts  thereof,  to  be  at 
all  times  open  to  B.'s  examination. 
Held,  an  executory  agreement, 
which,  if  carried  into  effect,  would 
make  A.  and  B.  copartners  neither 
as  between  themselves  nor  as  to 
third  persons.  Held,  further,  that 
the  lenders,  having  no  voice  in  the 
management  of  the  business,  and 
no  interest  in  the  capital,  the  agree- 
ment was  for  a  loan  of  money  or 
credit,  in  which  a  percentage  of 
profits  took  the  place  Of  interest. 
Held,  further,  that  such  contract 
did  not,  according  to  the  later  Eng- 
lish cases,  create  a  partnership  at 
common  law.  Boston  &  Col.  S. 
Co.  v.  Smith,  23  Alb.  Law  Jour. 
232;  13    R.  I.  27. 

Where  money  is  loaned  for  the 
benefit  of  a  business,  and  is  to  be 
refunded  absolutely,  without  re- 
gard to  the  profits,  the  fact  that 
the  lender  is  to  receive  a  share  of 
the  profits,  to  apply  on  the  indebt- 
edness, does  not  make  him  liable 
to  creditors  as  a  partner ;  to  have 
that  effect  the  payment  of  the  ad- 
vancement must  depend  upon  the 
profits.  Eager  v.  Crawford,  7G 
N.  Y.  97.  See,  also,  cases  next 
above  cited. 

Defendant  C.  advanced  to  de- 
fendant G.  money  to  purchase  the 
stock  and  fixtures  of  a  business, 
which  G.  stated  he  could  pay  soon. 
C.  was  secured  by  chattel  mortgage 
upon  the  property,  conditioned  that 
the  sum  loaned  should  be  paid  on 
demand,  and  G.  agreed  to  pay  over 
to  him  one-half  of  the  net  receipts 
of  the  business.  In  an  action  by  a 
creditor  of  G. ,  who  sought  to  chax-ge 
C.  as  a  partner,  held,  that  C.  could 
not  be  held  liable;  that  the  legal 
presumption  was  that  the  share  of 


54 


CH.  I,  SEC.  I.]   NATURE  OF  CONTRACT  DETERMINED. 


*16 


Dormant  partners. —  At  the  same  time  even  now  a  per- 
son who  is  really  a  partner,  although  dormant  (*,  e.,  a  part- 
ner taking  no  part  in  the  management  of  the  partnership),1 


receipts  so  paid  over  was  to  be  ap- 
plied in  payment  of  the  loan.  Eager 
v.  Crawford,  76  N.  Y.  97. 

When  a  party  advances  money 
to  another,  and  for  the  use  of  the 
money  he  is  to  share  in  the  profits 
of  the  transaction,  besides  the  in- 
terest upon  the  sum  loaned,  he 
cannot  be  held  liable  as  a  partner 
to  third  persons  who  deal  with  the 
borrower  of  the  money.  Curry  v. 
Fowler,  10  N.  Y.  Weekly  Dig.  105. 

B.  L.  &  L.,  by  an  instrument 
dated  July  1,  1860,  reciting  that 
they  composed  the  firm  of  S.  &  Co., 
agreed  that  as  II.  A.  S.  had  loaned 
them  $100,000,  to  be  used  as  capital 
for  the  term  of  two  years,  and  sub- 
ject to  all  the  risks  of  their  busi- 
ness, so  far  as  creditors  of  the  firm 
were  concerned,  they  would  pay 
him  interest  at  the  rate  of  seven 
per  cent.,  and  that  as  a  bonus  for 
the  good-will  of  the  business  (in 
which  he  had  formerly  been  a 
partner)  they  would  allow  him 
half-yearly  one  per  cent,  of  the 
gross  sales  of  the  firm,  "  he  having 
no  interest  in  the  commission, 
guaranty,  or  profit  and  loss,  and  in 
nowise  a  partner,  or  to  be  allowed 
to  have  any  part  or  control  in  the 
business  of  the  house."  Held,  that 
H.  A.  S.  was  not  a  partner  with  S. 
&  Co.,  nor  liable  as  such  to  their 
creditors.  Gibson  v.  Stone,  43 
Barb.  286. 

Participation  in  the  profits  is, 
however,  prima  facie  strong  evi- 
dence of  a  partnership  in  it.  In  re 
Ward,  8  Reporter,  136. 

On  the  other  hand,  where  de- 
fendant H.  loaned  to  the  firm  of 


P.  &  Co.  $2,000,  to  be  used  in  the 
business  for  one  year,  under  an 
agreement  that  he  was  to  receive 
one-third  of  the  profits,  which  were 
to  be  settled  half-yearly,  and  at  the 
end  of  the  year,  if  he  did  not  con- 
clude to  become  a  partner,  he  was 
to  be  repaid  his  $2,000  out  of  the 
concern,  held,  that  the  money  so 
invested  was  used  by  the  firm  for 
the  benefit  of  H. ;  that  he  had  an 
interest  in  the  profits  as  such,  not 
as  a  measure  of  compensation,  but 
as  a  result  of  the  capital  and  in- 
dustry ;  and  that  as  to  the  creditors 
of  the  firm  he  was  a  partner,  and 
jointly  liable  with  the  others  for 
the  partnership  debts.  Leggett  v. 
Hyde,  58  N.  Y.  272. 

1 A  dormant  partner  is  one  whose 
name  is  not  mentioned  in  the  title 
of  the  firm,  or  embraced  in  some 
general  term,  as  company,  sons, 
etc.  Jones  v.  Fegely,  4  Phil.  1. 
See,  also,  Waite  v.  Dodge,  34  Vt. 
181 ;  Oppenheimer  v.  Clemmons, 
18  Fed.  Rep.  886. 

Where  two  or  more  persons  pur- 
chase one  or  more  specific  lots  or 
parcels  of  property  on  joint  ac- 
count, for  the  purpose  alone  of  sale 
and  profit,  and  there  is  no  fraud 
or  concealment  as  to  the  manner 
of  purchase,  the  mere  fact  that  one 
of  the  partners  or  joint  owners  is 
intrusted  with  the  possession  does 
not  constitute  the  others  dormant 
partners.  Cochran  v.  Anderson 
County  National  Bank,  83  Ky.  36. 

A  secret  partnership  exists  where 
one  is  really  participating  in  the 
profits  and  loss  of  an  enterprise 
carried  on  by  another,  and  with- 


55 


M6 


CONTEACTS  OF  PARTNERSHIP. 


[BOOK  I. 


will  be  treated  as  such,  although  he  may  have  endeavored 
to  conceal  his  true  character  under  the  cloak  of  being  a 


holds  a  knowledge  of  the  fact  from 
the  public.  An  ostensible  partner- 
ship exists  where  one  who  lias  no 
actual  interest  in  the  firm  says  he 
is  a  partner,  or  knowingly  permits 
the  firm  to  use  his  name  in  any 
manner  in  order  to  obtain  credit. 
Harris  v.  Sessler,  3  S.  W.  R.  316. 

A  partner  is  not  to  be  deemed 
dormant  because  his  name  does  not 
appear  in  the  firm  style,  nor  is  it 
necessary  to  constitute  one  a  dor- 
mant partner  that  his  membership 
is  universally  unknown.  It  is  suf- 
ficient if  he  is  not  an  ostensible 
partner.  Metcalf  v.  Officer,  2  Fed. 
Eep.  640. 

A  dormant  partner  is  liable  for 
all  the  partnership  debts  contracted 
during  his  connections  with  the 
firm.  Lee  v.  Guice,  21  Miss.  656; 
Lindsey  v.  Edmiston,  25  111.  359; 
Bigelow  v.  Elliott,  1  Cliff.  28; 
Gavin  v.  Walker,  14  Lea,  643;  Op- 
penheimer  v.  Clemmons,  18  Fed. 
Rep.  886. 

So,  whether  credit  is  given  exclu- 
sively to  the  ostensible  partner  or 
not.    Lea  v.  Guice,  supra. 

This  liability  is  founded  on  his 
participation  in  the  profits.  Lea  v. 
Guice,  supra. 

The  active  members  of  a  firm 
have  authority  without  the  knowl- 
edge of  a  dormant  partner  to  create 
a  lien  on  the  firm  property  for  the 
benefit  of  the  firm  to  relieve  the 
firm  property  from  attachment. 
Arnold  v.  Morris,  7  Daly,  498. 

"Where  there  are  two  firms  in  the 
same  community  of  the  same  name, 
and  each  consisting  of  the  same 
persons,  though  engaged  in  differ- 
ent kinds  of  business,  one  of  which 


contains  a  dormant  partner,  and 
the  other  not,  and  a  suit  is  brought 
on  a  promissory  note  bearing  the 
signature  of  the  common  firm 
name,  the  presumption  is  that  it  is 
the  note  of  the  firm  not  containing 
the  dormant  partner.  To  recover 
against  the  dormant  partner  the 
plaintiff  must  prove  either  that  the 
money  for  which  the  note  was 
given  was  borrowed  on  the  credit 
of  the  firm  in  which  the  dormant 
partner  was  interested,  or  that  it 
was  used  in  the  business  or  for  the 
benefit  of  that  firm ;  and  the  fact 
that  the  money  was  borrowed  on 
the  credit  of  that  firm  may  be 
proved  by  representations  by  the 
ostensible  partners  at  the  time  of 
the  transaction,  or  by  circum- 
stances. Fosdick  v.  Van  Horn,  40 
Ohio  St.  459. 

The  fact  that  plaintiff  sold  goods 
to  a  partnership  in  ignorance  of  the 
existence  of  a  secret  partner  will 
not  prevent  a  recovery  against 
such  secret  partner  for  goods  sold. 
McDonald  v.  Clough,  14  Pac.  Rep. 
(Colo.)  121. 

A  secret  partner  who  was  inter- 
ested in  some  transactions  of  his 
copartner,  and  not  in  others,  is  re- 
sponsible for  a  transaction  at  which 
he  is  shown  to  have  been  present, 
and  in  which  he  participated. 
Lindsey  v.  Edmiston,  25  111.  359. 

A  secret  partner  is  liable  upon  a 
note  of  the  partnership,  independ- 
ent of  any  charge  or  proof  of  a 
fraudulent  collusion  between  the 
partners  to  conceal  his  liability. 
Bradshaw  v.  Apperson,  36  Tex.  133 ; 
St.  Armand  v.  Long,  25  La.  Ann. 
167. 


56 


CH.  I,  SEC.  I.]      NATURE   OF   CONTRACT   DETERMINED. 


*16 


mere  lender  of  money.  (/)     "Whether  a  person  advancing 
money  and  sharing  profits  is  a  creditor  or  a  dormant  ptartner 


In  a  suit  against  G.  for  goods  al- 
leged to  have  been  sold  and  deliv- 
ered by  the  plaintiff  to  said  G.  and 
his  partners,  the  following  facts 
were  established :  B.  and  C. ,  prior 
to  1875,  bad  been  engaged  as  part- 
ners under  the  firm  name  of  B.  & 
C.,  ostensibly  in  carrying  on  a  re- 
tail store  in  Baltimore.  Upon  a 
credit  wbich  they  bad  established 
in  this  manner,  they  purchased 
goods  during  certain  months  of 
said  year,  from  wholesale  dealers 
in  different  cities,  and  among  them 
the  plaintiff,  upon  credit  and  osten- 
sibly for  their  said  retail  business. 
These  goods  were  shipped  to  Balti- 
more and  deposited  in  warehouses, 
whence  B.  &  C.  secretly,  and  under 
cover  of  a  number  -of  fictitious 
names,  shipped  them,  in  the  orig- 
inal packages,  to  the  defendant  G. , 
who  used  said  fictitious  names  in 
receiving,  reshipping  and  selling 
said  goods.  Held,  that  at  the  time 
the  plaintiff  sold  the  goods  to  the 
firm  of  B.  &  C.  the  defendant  G. 
was  a  member  of  said  firm,  and 
therefore  liable,  ex  contractu,  as  a 
member  of  said  firm,  to  the  plaint- 
iff for  goods  by  him  sold  to  said 
firm,  though  he  may  not  then  have 
known  that  said  G.  was  a  member 
of  it :  as  a  dormant  partner,  when 
discovered,  is  liable  for  the  debts  of 
the  firm  the  same  as  an  ostensible 
one.  Gilmore  v.  Merrell,  62  Ind. 
526. 

A  written  acknowledgment, 
signed  and  given  to  the  complain- 
ant by  the  respondent,  that  they 
had    on    that  day  purchased   the 


quantity  of  land  described  in  it,  the 
complainant  paying  for  the  same 
the  sum  of  $3,000,  for  which  the 
respondent  received  the  deed,  but 
acknowledging  and  agreeing  that 
the  complainant  was  to  be  paid 
back  his  $3,000  with  interest,  and 
receive  as  his  share  of  the  profits,  if 
any  there  should  be,  two-thirds,  and 
he  one-third,  and,  if  a  loss  should  be 
sustained,  they  were  to  bear  it  in 
the  said  proportion ;  and  in  con- 
sideration of  his  receiving  the  deed 
he  executed  that  day  a  judgment 
bond  for  $3,000,  for  which  he  held 
himself  accountable  until  the  prop- 
erty should  be  sold,  when  the  pro- 
ceeds of  such  sale  should  go  to  pay 
off  said  bond.  And  it  was  also  at 
the  same  time  agreed  between 
them,  though  not  stated  in  the  ac- 
knowledgment, that  in  the  mean- 
time judgment  should  not  be  en- 
tered on  the  bond,  and  which  was 
not  done  until  five  years  and  three 
months  thereafter,  nor  until  after 
most  of  the  land  had  been  sold,  and 
the  agreement  had  been  denied  and 
repudiated  by  the  respondent.  The 
land  referred  to  lay  in  the  city  of 
Wilmington,  and  the  latter  pro- 
ceeded, soon  after  the  purchase  of 
it,  to  have  it  surveyed  and  laid  off 
into  city  lots,  and  to  erect  houses 
and  make  other  improvements 
upon  them  at  his  sole  expense,  and 
from  time  to  time  to  sell  and  con- 
vey the  same  as  his  own  property. 
Held,  in  the  absence  of  any  direct 
and  positive  evidence  to  the  con- 
trary, that  the  agreement  consti- 
tuted a  valid  and  bona  fide  contract 


(Z)  See  Pooley  v.  Driver,  5  Ch.  D.  458,  noticed  infra,  §  2. 

57 


*17 


CONTRACTS   OF   PARTNERSHIP. 


[BOOK   I. 


[*17]  *is  often  a  very  difficult  matter  to  determine,  and  can 
only  be  decided  by  a  careful  study  of  the  whole  agree- 
ment between  the  borrower  and  the  lender,  and  especially 
by  examining  what  rights  are  conferred  on  or  taken  from  the 
person  making  the  advance.1  The  right  of  a  lender  is  to 
be  repaid  his  money  with  such  interest  or  share  of  profits 
as  he  may  have  stipulated  for;  and  his  right  to  a  share  of 
profits  involves  a  right  to  an  account  and  to  see  the  books 
of  the  borrower,  unless  such  right  is  expressly  excluded  by 
agreement.  If,  however,  a  lender  stipulates  for  more  than 
this  (e.  g.,  for  a  right  to  control  the  business  or  the  em- 
ployment of  the  assets,  or  to  wind  up  the  business),  or  if 
his  advance  is  risked  in  the  business,  or  forms  part  of  his 
capital  in  it,  he  ceases  to  be  a  mere  lender  and  becomes  in 
effect  a  dormant  partner.  In  illustration  of  these  remarks 
reference  may  be  made  to  Jlollwo,  March  <&  Co.  v.  Court 
of  Wards  (m)  on  the  one  hand,  and  Pooley  v.  Driver  (n)  on 
the  other,  (o)     In  both  there  was  an  advance  of  money 


of  partnership  of  a  special  character 
between  them,  and  that  the  $3,000 
paid  by  the  complainant  for  the 
land  was  an  advance  of  capital  by 
him  on  account  of  the  partnership, 
and  was  not  a  usurious  loan  of  that 
amount  of  money  to  the  respond- 
ent, under  a  false  and  fraudulent 
pretense  of  such  a  partnership  con- 
tract, for  the  purpose  of  evading 
the  prohibition  of  the  statute 
against  usury,  without  adequate 
hazard  or  risk  of  the  principal,  or 
any  part  of  it,  in  the  undertaking; 
nor  a  grossly  inequitable,  hard  or 
unconscionable  contract  for  exorbi- 
tant profits  on  the  amount  of  mqney 
embarked  by  him  in  it,  without 
adequate  risk  or  hazard  of  incur- 
ring any  loss  by  it ;  and  that  there- 
fore the  complainant  was  entitled 
to  receive,  not  only  the  amount  of 
the  bond  with  interest,  but  the 
respondent  was  bound  to  account 


to  him  for  two-thirds  of  the  net 
profits  realized  from  the  sale  of 
the  lots,  independent  of  the  im- 
provements made  upon  them  by 
him,  and  of  the  increased  value  of 
the  land  still  retained  and  held  by 
him.  Plunkett  v.  Dillon,  4  Houst. 
338. 

1  Where  A.  gave  B.  money  to 
purchase  sheep  with,  and  stated 
that  he  was  to  have  half  the  profits, 
but  to  have  no  interest  on  his 
money  if  there  were  losses,  and  de- 
clared to  a  witness  that  he  and  B. 
were  partners,  such  transactions 
do  not  constitute  a  loan,  but  the 
parties  thereto  are  partners  as  to  the 
whole  subject  in  controversy.  New- 
brau  v.  Snieder,  1  W.  Va.  153. 

(to)  L.  R.  4  P.  C.  419.  See  below, 
p.  38,  note  (d). 

(n)  5  Ch.  D.  458. 

(o)  They  are  referred  to  more  at 
length  hereafter,  in  §  2. 


58 


CU.  I,  SEC.  I.]       NATURE   OF   CONTRACT   DETERMINED.  *18 

and  a  stipulation  for  a  share  of  profits;  and  in  both  the 
lender  had  unusual  powers;  but  in  the  former  case  the  court 
came  to  the  conclusion  that  a  loan  on  security  was  all  that 
was  really  intended;  whilst  in  the  latter  the  court  consid- 
ered that  the  lender  was  really  a  dormant  partner,  although 
he  had  done  his  best  to  avoid  the  liabilities  incident  to  that 
position. 

4. —  Partnership  is  not  the  result  of  an  agreement  to  share 
g?*oss  returns. 

Sharing  gross  returns. —  Although,  as  has  been  already 
pointed  out,  those  who  share  gross  returns  share  profits,  if 
any  there  be,  for  gross  returns  include  profits,  and  although 
at  common  law  an  agreement  to  share  profits  is  prima  facie 
an  agreement  for  a  partnership,  yet  it  has  long  been  held 
that  a  partnership  is  not  the  result  of  an  agreement  to  share 
gross  returns,  (p) 

Co-owners  sharing  gross  returns. —  If  several  persons 
make  advances  for  a  common  object  and  agree  to  share 
the  gross  returns  in  proportion  to  their  advances,  *this  [*18] 
does  not  create  such  a  community  of  interest  in  profit 
or  loss  as  to  make  such  persons  partners.1  Thus,  in  Gibson  v. 
Lupton,  (q)  where  two  persons  joined  in  the  purchase  of  wheat 
with  the  intention  of  paying  for  it  and  dividing  it  equally, 
it  was  held  that  they  were  not  partners.  So,  if  two  work- 
men agree  to  divide  their  wages,  that,  per  se,  does  not  make 
them  partners,  (r)  But  the  strongest  illustrations  of  this 
doctrine  are  afforded  by  those  cases  in  which  co-owners  of 
chattels  divided  the  earnings  of  the  chattel.  The  distinc- 
tion between  co-owners  and  copartners  will  be  noticed 
hereafter,  but  as  an  instance  in  which  co-owners  have  been 

(p)  Seethe  preliminary  remarks,  to  joint  purchasers,  Coope  v.  Eyre, 

ante,  pp.  8,  9.  1    H.   Blacks.    37;    and  Hoare  v. 

»  See  Day  v.  Stevens,  88  N.  C.  Dawes,  1  Doug.  371,  and  post,  §  6. 
83;  S.  C.  43  Am.  Rep.  732;  Curtis        (r)  See  Finkle  v.  Stacey,  Select 

v.  Cash,  84  id.  41.  Ca.  in  Ch.  9. 

(q)  9  Bing.  397.     See  further,  as 

59 


*19  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

held  not  to  be  partners,  although  they  agreed  to  divide  the 
returns  obtained  by  the  use  or  employment  of  the  thing 
owned,  reference  ma}7-  be  made  to  French  v.  Styring.  (s) 
There  the  plaintiff  and  defendant  were  entitled  in  common 
to  a  race-horse.  It  was  agreed  that  the  plaintiff  should 
keep,  train  and  have  the  management  of  the  horse,  that 
thirty-five  shillings  a  week  should  be  allowed  for  the  ex- 
penses of  his  keeping,  that  the  plaintiff  should  pay  the 
expenses  of  entering  the  horse  and  conveying  him  to  the 
different  races,  and  that  one-half  of  the  horse's  keep  and 
other  expenses  and  his  winnings  should  be  equally  divided 
between  the  plaintiff  and  the  defendant.  This  agreement 
was  held  not  to  create  a  partnership.  It  was  no  more  a 
partnership  than  if  two  tenants  in  common  of  a  house  had 
agreed  that  one  of  them  should  have  the  general  manage- 
ment and  provide  funds  for  necessary  repairs,  so  as  to  ren- 
der the  house  fit  for  the  habitation  of  a  tenant,  and  that 
the  net  rent  should  be  divided  amongst  them  equally,  (t) 

So  where  two  persons  were  respectively  lessee  and  man- 
ager of  a  theater,  and  they  shared  the  gross  receipts  equally, 
the  manager  paying  the  expenses  out  of  his  share,  it  was 
held  that  no  partnership  subsisted  between  them,  {it) 

Wages  payable  by  a  share  of  produce. —  Again,  in 
[-19]  whaling  voyages  the  sailors  are  usually  paid  a  *certain 
proportion  of  the  produce  of  the  oil  obtained,  but  even 
before  the  act  of  28  and  29  Victoria,  chapter  86,  they  were 
not  therefore  partners,  either  with  each  other  or  with 
their  employers,  (x)    In  such  cases  as  this  partnership  was 

(s)  2  C.  B.  N.  S.  357.  equal  to  twelve  per  cent,  on  the  net 

(t)  See  the  judgment  of  Willes,  proceeds,  after  deductiug  certain 

J.,  2  C.  B.  N.  S.  366.  expenses.     He  brought  an  action 

(u)  Lyon  v.  Knowles,  3  B.  &  S.  for  what  was  due  to  him,  and  re- 

556.  covered,  but  no  question  of  part- 

(x)  Mair  v.  Glennie,  4  M.  &   S.  nership  arose.    Some  of  the  customs 

240;  Wilkinson  v.  Frazier,  4  Esp.  established  amongst  whalers  will 

182 ;  and  see  Perrott  v.  Bryant,  2  be  found  in  Fennings  v.  Grenville, 

Y.  &C.  Ex.  61.     See  also  Stavers  v.  1   Taunt.   241,    where  it  was  held 

Curling,  3  Bing.  N.  C.   355,  where  that  one  of  two  tenants  in  common 

the  captain  was  to  be  paid  a  sum  of   a  whale  could    not    maintain 

60 


CH.  I,  SEC.  I.]   NATURE  OF  CONTRACT  DETERMINED. 


*19 


clearly  not  intended ;  and  even  when  persons  who  shared 
profits  were  held  to  incur  liabilities  as  if  they  were  part- 
ners, it  was  held  that  persons  who  merely  divided  gross 
returns  did  not  incur  an}'  such  liabilities,  (y)  A  fortiori  it 
was  impossible  to  regard  them  as  partners  inter  se.  The 
act  of  2S  &  29  Vict.,  c.  86,  which  will  be  noticed  hereafter, 
renders  this  even  clearer  than  before. 

5, —  Partnership  is  not  the  result  of  an  agreement  which  is 
not  concluded. 

Unconcluded  agreements. —  In  order  that  partnership 
may  result  from  any  agreement,  it  is  necessary  that  the 
parties  to  the  agreement  shall  have  mutually  assented  to 
the  same  propositions;  otherwise  there  is  no  contract  at  all, 
but  merely  a  treaty  from  which  each  party  is  at  liberty  to 
retire.1      If,  therefore,  A.  proposes  to  B.  that  a  partnership 


trover  against  his  co-tenant  for  half 
of  the  blubber,  etc.,  yielded  by  the 
whale. 
(y)  Post,§2. 

1  An  agreement  by  the  members 
of  a  firm  to  admit  a  person  into 
their  business  on  condition  that 
the  firm  shall  become  incorporated, 
and  that  he  shall  pay  into  the  firm 
for  its  use  a  certain  sum  of  money 
to  be  paid  into  the  corporation,  it 
being  understood  that  no  change 
shall  be  made  in  the  name  or  char- 
acter of  the  firm  until  the  forma- 
tion of  the  corporation,  and  the 
subsequent  payment  of  the  agreed 
sum,  do  not  make  such  person  a 
member  of  the  firm  or  give  him  an 
interest  in  the  partnership  property 
in  advance  of  the  creation  of  the 
corporation.  Drennen  v.  London 
Assurance  Co.  113  U.  S.  51 ;  S.  C. 
20  Fed.  Rep.  657. 

Where  a  complaint  for  a  dissolu- 
tion of  a  partnership  alleges  that 
on  a  certain  day  the  parties  were 


partners  doing  a  certain  business 
and  entitled  to  share  the  profits 
and  losses  in  a  certain  ratio,  but 
there  was  no  allegation  of  any  exe- 
cuted partnership  agreement  be- 
tween them,  held,  on  demurrer, 
that  the  allegation  that  the  parties 
were  partners  was  an  allegation  of 
a  conclusion  of  law,  and  that  such 
complaint  did  not  state  facts  suffi- 
cient to  constitute  a  cause  of  ac- 
tion. As  between  the  partners,  the 
ultimate  facts  whence  a  partner- 
ship is  deduced  are,  first,  the  agree- 
ment, and  second,  its  execution. 
Summed  up  as  the  executed  agree- 
ment, there  can  be  no  partnership 
between  parties,  so  far  as  they 
solely  are  concerned,  without  a 
consent  thereto  and  fulfillment 
thereof.  Grooves  v.  Tollman,  8 
Nev.  178. 

M. ,  a  sutler  in  Virginia,  said  to 
E.  as  E.  was  about  starting  for 
Vermont:  "If  you  will  come 
back  I  will  take  you  and  S.  in, 


61 


*20 


CONTRACTS    OF   PARTNERSHIP. 


[book 


shall  be  formed  between  them  on  certain  terms,  and  B. 
either  does  not  accept  the  proposal  or  accepts  it  on  other 
terms  than  those  offered,  A.  and  B.  are  not  yet  agreed  and 
no  partnership  subsists  between  them.  ]STor  is  B.  bound  by 
his  qualified  acceptance;  for  that  is  merely  a  counter  offer 
on  his  part  which  he  is  at  liberty  to  retract  until  A.  has  as- 
sented to  all  its  terms  without  qualification. 

There  are  many  decisions  illustrating  these  principles, 
but  they  relate  more  particularly  to  agreements  to  take 
shares  in  companies,  and  it  is  unnecessary  to  consider  them 

here,  (s) 
[*20]  *Cases  in  which  there  is  no  contract,  because  there 
has  never  been  a  mutual  assent  to  the  same  terms,  must 
not  be  confounded  with  cases  in  which  a  valid  contract  has 
been  entered  into,  but  which,  being  conditional,  and  not 
having  been  performed  on  the  one  part,  is  not  binding  on 
the  other.     These  will  be  considered  hereafter. 


and  give  each  of  you  one-fourth 
and  take  one-half  myself,  and  I 
will  furnish  all  the  capital."  E. 
replied  that  he  would  come  back, 
but  S.  was  not  present  and  knew 
nothing  about  the  matter.  Upon 
arriving  in  Vermont  E.  purchased 
the  boots  in  question  of  the  plaint- 
iff upon  his  own  credit,  as  he  sup- 
posed, directing  the  plaintiff  to 
send  them  to  "  F.  Evans,  George- 
town, D.  C,"  and  at  the  same  time 
told  the  plaintiff  that  he  was  going 
into  business  with  M.  and  S.  The 
plaintiff  charged  the  boots  to  F. 
Evans  &  Co.  Soon  after  E.  re- 
turned to  Georgetown  he  took  the 
boots,  sold  one  case  of  them,  and 
took  the  remainder  to  his  sutler's 
tent,  where  E.  and  S.  worked  for 
eight  weeks,  nothing  being  agreed 
upon  as  to  how  they  were  at  work 
there.     At  the  expiration  of  this 


period,  and  when  the  boots,  except 
six  pairs,  had  been  sold,  and  the 
money  received  for  them  put  into 
his  drawer,  M.,  E.  &  S.  formed  a 
copartnership  from  that  date, 
with  no  reference  back,  M.  fur- 
nishing the  whole  capital.  Held, 
that  they  were  not  jointly  liable 
for  the  boots  purchased  by  E.  If, 
when  the  copartnership  was 
formed,  M.  then  became  liable  to 
pay  for  those  on  hand,  or  to  ac- 
count for  the  avails  of  those  pre- 
viously sold,  his  liability  was  to  E. 
and  not  to  the  plaintiff.  Davis  v. 
Evans,  39  Vt.  182. 

(z)  See  the  next  page.  In  Mc- 
Clean  v.  Kennard,  9  Ch.  336,  an 
agreement  to  become  partners  with 
executors  was  held  to  create  a 
partnership  with  those  only  who 
proved. 


02 


Cn.  I,  SEC.  I.]       NATURE    OF   CONTRACT   DETERMINED. 


*20 


6. —  Partnership  is  not  the  result  of  an  agreement  to  share 
profits  so  long  as  anything  remains  to  he  done  before  the 
right  to  share  them  accrues. 

Contemplated  partnerships.— It  is  important  to  distin- 
guish between  actual  and  contemplated  partnerships.  Per- 
sons who  are  only  contemplating  a  future  partnership,  or 
who  have  only  entered  into  an  agreement  that  they  will  at 
some  future  time  become  partners,  cannot  be  considered  as 
partners  before  the  arrival  of  the  time  agreed  upon,  (a) l  It 
is  not  always   easy  to   determine   whether  an   agreement 


(a)  Per  Parke,  J. ,  in  Dickinson  v. 
Valpy,  10  B.  &  C.  141,  2. 

1  See  Moody  v.  Ratkburn,  7  Minn. 
89;  Ckapman  v.  Watson,  1  Rob. 
(Va.)  267;  Adams  Bank  v.  Rice,  2 
Allen,  480;  Cook  v.  Carpenter,  34 
Vt.  121,  and  the  cases  below  cited. 

An  inchoate  partnership  must 
become  complete  before  liability  to 
creditors  can  attach.  Irwin  v.  Bid- 
well,  72  Pa.  St.  244. 

In  order  to  render  partners  liable 
as  such  to  third  parties  there  must 
be  not  only  an  agreement  to  share 
the  profits  and  losses,  but  an  en- 
tering upon  some  business  there- 
under.    Lucas  v.  Cole,  57  Mo.  143. 

A  mere  promise  to  "go  halves" 
in  a  purchase  of  land,  if  not  car- 
ried into  effect,  does  not  make  the 
promisor  a  partner  so  as  to  bind 
him  to  pay  a  note  executed  by  the 
grantee  in  both  of  their  names  for 
improvements  thereon.  Huckabee 
v.  Nelson,  54  Ala.  12. 

Evidence  of  an  agreement  be- 
tween a  surviving  partner  and  a 
deceased  partner,  that,  upon  the 
death  of  the  deceased  partner,  his 
brother  should  become  a  partner  in 
the  concern,  and  be  entitled  to  a 
share  of  the  profits,  is  not  sufficient 
to  establish  a  partnership.     Brink 


v.  New  Amsterdam  Fire  Ins.  Co. 
5  Robt.  104. 

A  partnership  maybe  contracted 
to  take  effect  at  a  future  time  or 
on  certain  conditions.  Avery  v. 
Lauve,  1  La.  Ann.  457. 

Unless  the  condition  on  which  a 
partnership  is  formed  is  a  condi- 
tion precedent  its  non-fulfillment 
does  not  annul  the  contract.  Mur- 
ray v.  Johnson,  1  Head,  353. 

A.  and  B.  executed  a  contract  on 
the  17th  day  of  April,  1855,  which 
they  entitled  "articles  of  copart- 
nership," by  which  they  declared 
their  intention  to  form  a  copart- 
nership for  the  purpose  of  trade, 
which  should  continue  for  three 
years  from  the  1st  day  of  May, 
1855.  The  contract  declared  the 
parties  to  be  equal  owners  of  a  cer- 
tain stock  of  goods,  of  which  a 
schedule  was  annexed,  and  that 
they  were  to  continue  to  be  owners 
of  the  same  in  the  same  propor- 
tions, and  contained  various  pro- 
visions with  regard  to  the  mode  of 
conducting  the  partnership  busi- 
ness. Held,  that  the  term  of  the 
copartnership  was  not  to  com- 
mence until  the  1st  day  of  May, 
1855,  and  until  then  the  contract 
was    merely   an    executory    one, 


63 


*20 


CONTRACTS   OF   PARTNERSHIP. 


[book  I. 


amounts  to  a  contract  of  partnership  or  only  to  an  agree- 
ment for  a  future  partnership.     The  test,  however,  is  to  as- 


which  either  party  had  the  power 
to  refuse  to  perform,  such  refusal 
constituting  only  an  ordinary 
breach  of  contract,  for  which  the 
party  was  liable  in  damages,  and 
not  a  dissolution  of  an  existing 
copartnership.  Reboul  v.  Chalker, 
27  Conn.  114. 

Where  a  proposed  partnership, 
evidenced  by  a  letter,  contemplates 
in  its  terms  but  one  transaction,  at 
the  conclusion  of  which  the  profits 
are  to  be  divided,  and  the  same 
letter  which  makes  the  offer  to 
enter  into  the  transaction  on  the 
joint  account  sets  a  limit  on  the 
quantity  of  stock  to  be  purchased 
for  it,  prescribes  that  it  be  bought 
on  a  joint  credit,  and  requires  that 
the  stock  when  purchased  shall  be 
sent  by  particular  persons  to  be 
sold  in  a  particular  market  under 
the  supervision  of  the  party  mak- 
ing the  offer,  and  the  party  re- 
ceiving the  letter  so  acts  as  to  fulfill 
no  one  of  the  requirements  con- 
tained in  it,  there  is  no  partnership, 
and,  in  the  event  of  loss,  the  party 
receiving  the  offer  cannot  main- 
tain a  bill  for  an  accounting  as 
partners  and  contribution.  Met- 
calf  r.  Redman,  43  111.  264. 

An  agreement  was  entered  into 
by  which  the  plaintiff,  for  a  fixed 
annual  compensation,  was  to  ren- 
der service  for  the  defendant  in  a 
factory  of  which  he  had  recently 
become  owner.  If  certain  incum- 
brances on  the  property  were  paid 
as  they  became  due  from  the  prof- 
its of  the  business,  and  if  the 
plaintiff's  notes  on  demand  were 
paid,  then  the  defendant  was  to 
convey  to  the  plaintiff  one-half  of 


the  property  and  business,  and  not 
otherwise.  Held,  not  a  partner- 
ship, on  the  ground  that  the  agree- 
ment was  executory.  Haskins  v. 
Burr,  106  Mass.  48. 

Where  an  existing  partnership 
takes  in  a  new  partner  by  a  writ- 
ten instrument  signed  by  the  old 
members  and  the  new,  which  writ- 
ten instrument  recites  the  payment 
of  a  certain  sum  by  the  incoming 
partner,  and  conveys  to  him  one- 
third  interest  in  the  assets,  and 
consents  that  he  shall  have  a  third 
interest  in  the  profits,  the  new 
partnership  is  complete  on  the  ex- 
ecution of  the  instrument,  not- 
withstanding it  may  be  agreed  that 
an  account  of  the  stock  shall  be 
taken,  and  if  it  exceeds  a  certain 
sum  the  new  partner  shall  pay  one- 
half  of  that  sum.  Phillips  v.  Nash, 
47  Ga.  218. 

The  existence  of  a  partnership 
does  not  depend  upon  the  fact  that 
each  partner  has  in  all  things  com- 
plied with  his  agreement.  If  the 
contract  has  been  made,  property 
and  labor  contributed,  and  the  part- 
nership business  commenced,  there 
is  a  partnership  until  legally  dis- 
solved. Hartman  v.  Woehr,  18 
N.  J.  Eq.  383. 

Where  it  is  clear  from  the  arti- 
cles that  the  parties  contemplate 
an  immediate  commencement  of 
business  as  a  firm,  a  failure  of  one 
of  them  to  pay  in  his  part  of  the 
capital  as  agreed  does  not  render 
him  any  the  less  a  partner  as  of 
the  date  of  the  execution  of  the 
articles.  Southern  White  Lead  Co. 
v.  Haas,  35  N.  West.  Rep.  (la.)  494; 
S.  C.  33  N.  West.  Rep.  657. 


64 


CH.  I,  SEC.  I.]       NATURE   OF   CONTRACT   DETERMINED. 


f20 


certain  from  the  terms  of  the  agreement  itself  whether  any 
time  has  to  elapse  or  any  act  remains  to  be  clone  before  the 
right  to  share  profits  accrues ;  for  if  there  is,  the  parties 
will  not  be  partners  until  such  time  has  elapsed  or  act  has 
been  performed,  (b) 

The  general  principle,  that  so  long  as  an  agreement  to 
form  a  partnership  is  executory,  no  partnership  is  formed, 
applies  as  well  to  ordinary  partnerships  as  to  projected 
companies,  and  it  will  be  useful  to  consider  it  with  reference 
to  each  in  turn. 


A  contract  for  constituting  a 
partnership,  assigning  the  perform- 
ance of  certain  things  to  put  the 
business  to  be  carried  on  into  opera- 
tion, constitutes  a  partnership  at 
the  signing  of  the  contract,  not 
from  the  commencement  of  the 
business  itself.  Aspinwall  v.  Will- 
iams, 1  Ohio,  38;  Austin  v.  Will- 
iams, 2  id.  282 ;  Crary  v.  Williams, 
2  id.  284. 

An  advance  of  money  to  a  per- 
son engaged  in  business,  and  which 
was  used  by  him  for  the  purchase 
of  goods,  does  not  create  a  partner- 
ship, although  it  may  be  made  in 
anticipation  of  a  future  partner- 
ship, which  is  never  consummated. 
Hulbell  v.  Woolf,  15  Ind.  204. 

Under  an  agreement  that  Y. 
should  furnish  a  certain  sum  to  be 
used  by  H.  in  buying  and  selling 
certain  kinds  of  goods  until  a  speci- 
fied day,  and  that  each  should 
have  one-half  of  the  profits,  and 
that  Y.  was  then  to  be  "received 
into  full  partnership"  in  the  busi- 
ness on  contributing  a  certain  fur- 
ther sum,  held,  1.  That  this  did 
not  constitute  them  partners  inter 
sese  during  the  period  first  men- 
tioned. 2.  That  it  was  H.'s  duty, 
at  the  end  of  that  period,  to  render 
Vol.  1  —  5  65 


a  statement  of  the  purchases  and 
sales,  with  a  view  to  a  division  of 
the  profits.  3.  That  his  refusal  to 
do  so  excused  Y.  from  entering 
into  the  partnership  which  was 
then  to  be  formed.  Haile  v.  York, 
27  Wis.  209. 

Articles  of  partnership  purport- 
ing to  be  between  the  complainant 
on  the  one  part,  and  the  defendant 
and  a  minor  brother  on  the  other, 
but  which  were  executed  only  by 
the  two,  held,  not  to  have  made  the 
minor  brother  a  partner.  McGunn 
v.  Hamlin,  29  Mich.  476. 

Where  goods  are  purchased  by 
several  parties,  under  an  agree- 
ment to  hold  them  in  aliquot  shares, 
and  with  no  arrangement  for  a 
joint  sale,  but  with  the  intention  of 
subsequently  forming  a  copartner- 
ship in  regard  to  the  goods,  until 
the  partnership  agreement  is  actu- 
ally made  the  purchasers  are  not 
copartners,  but  only  tenants  in  com- 
mon. Baldwin  v.  Burrows,  47  N. 
Y.  199. 

(6)  See,  in  addition  to  the  cases 
cited  below,  Drennen  v.  London 
Ass.  Co.  6  Davis,  Sup.  Ct.  Rep.  25; 
Osborne  v.  Julian,  3  Brew,  596, 
where  the  partnership  (?)  depended 
on  the  result  of  experiments.. 


*21  CONTRACTS    OF    PARTNERSHIP.  [BOOK   I. 

(a)  Application  of  the  principle  to  ordinary  partnerships. 

Option  to  become  a  partner. —  It  is  not  unusual  for  a 
person  who  contemplates  joining  another  in  business  to  agree 
that  such  business  shall  be  carried  on  upon  certain 
[""21]  terras  not  themselves  creating  a  partnership,  '-and  to 
stipulate  for  an  option  to  become  a  partner  either 
at  a  specified  time,  or  at  any  time  the  person  having  the 
option  may  choose.  Such  agreements,  if  bona  fide,  and  not 
mere  colorable  schemes  for  creating  a  partnership,  and  at 
the  same  time  concealing  it,  (c)  do  not  create  a  partnership 
until  the  person  having  the  option  has  exercised  it,  and 
elected  to  become  a  partner.1 

A  strong  illustration  of  this  is  afforded  by  Ex  parte 
Davis,  (d)  where  a  creditor  had  a  right  to  nominate  himself 
as  a  partner  with  his  debtor  but  had  not  exercised  the 
right. 

Again,  in  Gabriel  v.  Euill,  (e)  it  was  agreed  between  the 
defendant  and  two  others  that  the  defendant  should  enter 

(c)  See  Courtenay  v.   Wagstaff ,  money  paid  in  cash  is  furnished  by 

16  C.  B.  N.  S.  110.  another  under  an  agreement  that 

1  An   agreement   by  A.  with  B.  he  shall  become  a  partner  if  the 

that  on  the  payment  of  a  settled  lessee  acquires  possession,  this  does 

eum   B.   shall  participate    in    the  not  constitute    a    partnership  be- 

profits  of  A.'s  business  gives  B.  no  tween  them,  possession  never  hav- 

interest  as  between  themselves  in  ing  been  obtained.     Snodgrass  v. 

A.'s  stock  in  trade,  when  it  appears  Reynolds,  79  Ala.  452. 

that  it  is  the  intention  that  he  shall  (d)  4  De  G.  J.  &  Sm.  523.     The 

have  no    such  interest.      London  agreement  was  in  the  form  of  a 

Ass.  Co.  v.  Drennen,  116  U.  S.  461.  bond,  and  was,  as  Lord  Westhury 

Where  an  agreement  is  made  be-  remarked,  "an  ingenious  piece  of 

tween  several  persons    to  form  a  mechanism."     Such  an  agreement, 

partnership,    and  one    reserves    a  however,  cannot  be  relied  upon  as 

right  for  a  fixed  time  to  decide  affording  protection  against  third 

whether  or  not  he  will  be  a  part-  parties. 

ner,   although  not  meanwhile  an  (e)  9  M.   &  W.  297,  and  Car.   & 

actual  partner,  he  has  the  right  to  Marsh.    358.      See,   too,  Ex  parte 

become  one  within  the  time  speci-  Turquand,  2  M.  D.  &  D,  339,  which 

fied.     Handlin  v.  Davis,  81  Ky.  34.  turned  on  the    same    agreement. 

Where  a  lessee  of  land  contracts  See,  also,  Re  Hall,  15  Ir.  Ch.  287,  a 

in  his  own  name,  but  one-half  the  similar  case. 

66 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED.  *22 

into  partnership  with  them,  and  bring  in  1,000/.  in  cash,  and 
1,000Z.  in  goods,  and  that  the  partnership  should  date  retro- 
spectively from  the  1st  of  January ;  but  the  defendant  re- 
served to  himself  the  option  of  determining  at  any  time 
within  twelve  months  from  that  day  whether  he  would  be- 
come a  partner  or  not.  The  defendant  advanced  the  2,0001., 
and  several  other  acts  were  done  in  execution  of  the  agree- 
ment; but  within  the  twelve  months  the  defendant  declared 
his  option  not  to  become  a  partner,  and  it  was  held  that  he 
never  did  in  fact  become  one,  and  that  he  had  not  incurred 
any  liability  as  if  he  had.  (./) 

In  Price  v.  Groom,  (g)  a  debtor's  business  was  carried  on 
by  him  under  an  inspectorship  deed,  which  authorized  the 
trustees  to  carry  on  the  business  themselves,  and  to  take  the 
profits,  if  they  chose.  Their  interest  in  the  profits,  however, 
did  not  commence  until  the  debtor's  interest  determined ;  and 
it  was  held  that  whilst  he  carried  on  the  business  there 
was  no  partnership  between  him  and  them,  they  and  [*22] 
he  not  being  entitled  to  the  profits  at  the  same  time. 

Share  not  yet  taken. —  In  Howell  v.  Brodie,  (A)  the  de- 
fendant, intending  to  become  a  partner  in  a  scheme  for 
making  and  letting  out  a  market-place,  advanced  consider- 
able sums  of  money,  and  ultimately,  on  the  completion  of 
the  market,  took  one-seventh  share  in  it.  It  was  sought  to 
make  him  liable  for  the  expense  of  erecting  the  market,  on 
the  ground  that  he  was  a  partner  with  those  by  whom  the 
plaintiff  had  been  employed;  but  the  court  held  that  there 
was  no  partnership  between  them  and  the  defendant  until 
the  share  was  taken  by  him.1 

(/)  Compare  this  case  with  Jef-  (g)  2  Ex.  542. 
ferys  v.  Smith,  3  Russ.  158.  There  (h)  6  Bing.  N.  C.  44. 
A.  agreed  to  purchase  B.'s  share  in  i  On  the  formation  of  a  partner- 
afirin;  A.  acted  and  was  treated  ship  for  the  purpose  of  speculating 
as  a  partner  by  the  other  members,  in  Indian  lands,  certain  rules  and 
but  afterwards  i-escinded  the  con-  regulations  were  adopted  at  a  meet- 
tract  with  B.  :  it  was  held  that  a  ing  of  the  company,  by  which  the 
partnership  nevertheless  subsisted  number  of  shares  was  fixed,  and 
between  A.  and  B.'s  copartners.  his  interest  assigned  to  each  part- 

67 


*22  CONTKACTS  OF  PARTNERSHIP.         [BOOK  I. 

Share  of  profits  expected  in  lieu  of  salary.— In  Burnell 
v.  Hunt,  (?)  an  agreement  was  come  to  between  A.  and  B. 
that  A.  should  take  premises  and  purchase  machinery  and 
materials  to  carry  on  the  business  of  a  silk  lacemaker,  and 
that  B.  should  manage  the  business  and  receive  half  the 
protits  as  soon  as  any  accrued,  and  should,  in  the  meantime, 
be  paid  2Z.  a  week.  It  was  held  that  so  long  as  the  21.  per 
week  continued  payable  there  was  no  partnership,  (k) 

Partnership  articles  to  he  drawn  up.— Persons  who 
agree  to  be  partners  may  be  partners  although  they  con- 
template signing  a  formal  partnership  deed  and  never  sign 
it.  (I)  But  if  they  are  not  to  be  partners  until  they  sign 
formal  articles  of  partnership,  and  if  they  do  not  so  act 
as  to  waive  the  performance  of  such  condition,  they  will 
not  be  partners  until  it  has  been  performed.  Where,  how- 
ever, two  persons  agreed  to  become  partners  from  a  subse- 
quent day,  upon  certain  terms  to  be  embodied  in  a  deed  to 
be  executed  on  that  day,  it  was  held  that  the  partnership 
began  on  the  day  mentioned,  although  the  deed  was  not  exe- 
cuted until  afterwards,  and  although  alterations  were  made 


ner;  and  by  which  it  was  required  it,  was  liable  as  a  partner,  at  least 
that  a  specified  sum  should  be  paid  as  to  third  persons  who  afterwards 
on  each  share;  that  relinquish-  dealt  with  the  company,  although 
ments  should  be  executed  to  the  he  was  not  present  at  the  meeting, 
company  of  all  interests  in  any  of  did  not  pay  the  instalment  on  the 
the  lands  embraced  in  their  con-  share  assigned  to  him,  did  not  exe- 
tract;  that  any  service  should  be  cute  the  relinquishments,  and  did 
performed  for  the  company  in  not  perform  any  of  the  services  re- 
furtherance  of  its  business  when  quired  by  the  rules  and  regulations, 
called  upon  by  a  resolution  of  the  Grady  v.  Robinson,  28  Ala.  289. 
company ;  and  that  a  failure  to  (i)  5  Jur.  650,  Q.  B.  The  real 
comply  with  any  of  these  requisi-  point  here  was  whether  B.  had  any 
tions,  or  any  violation  of  good  faith  interest  in  the  goods,  which  he 
to  the  interest  of  the  company,  clearly  had  not,  and  would  not 
should  forfeit  to  it  the  interest  of  have  had  even  if  there  had  been 
the  person  so  offending.  Held,  that  profits  to  divide. 
a  person  to  whom  an  interest  in  the  (7c)  See,  too,  Ex  parte  Hickin,  3 
company  was  assigned  at  this  meet-  De  G.  &  S.  662. 
ing,  and  who  assented  within  a  (1)  As  in  Syers  v.  Syers,  1  App. 
reasonable  time  afterwards  to  take  Ca.  174. 

63 


CH.  I,  SEC.  I.]       NATURE    OF    CONTRACT    DETERMINED.  "*23 

in  it  immediately  before  its  execution,  (m)     In  this 
case,  however,  the  ^parties  did   in  fact  commence  [*23] 
business  as  partners  on  the  day  named,  and  it  was 
wholly  immaterial   (as  regarded   the   question  before  the 
court)  what  the  terms  of  the  partnership  were. 

(b)  Application  of  the  principle  to  promoters  of  companies. 

Promoters  of  companies  not  partners. —  Promoters  of 
companies  are  not  partners;  they  are,  it  is  true,  engaged  in 
a  common  object,  and  that  object  is  ultimately  to  share 
profits;  but  their  immediate  object  is  the  formation  of  a 
company,  and  they  are  only  in.  the  position  of  persons  who 
intend  to  become  partners  after  the  company  is  formed.  It 
Avas  indeed  said,  in  Holmes  v.  Higgins,  (n)  that  the  project- 
ors of  a  railway  were  partners,  they  being  associated  for  the 
purpose  of  procuring  the  act  of  parliament  necessary  to  form 
the  company  and  subscribing  mone}7'for  that  purpose;  and, 
in  Lucas  v.  Beach,  (o)  the  court  held  that  persons  associated 
for  the  purpose  of  passing  a  turnpike  act,  and  who  had  sub- 
scribed for  shares  in  the  proposed  road,  were  partners.  But 
in  each  of  these  cases  the  real  question  was  whether  the 
plaintiff  was  entitled  to  recover  from  the  defendants,  by 
virtue  of  any  implied  contract,  any  remuneration  for  serv- 
ices rendered  by  him  for  the  joint  benefit  of  himself  and 
them.  It  was  held  that  he  was  not ;  and  if  the  court  had 
likened  the  case  to  one  of  partnership,  instead  of  saying  that 
the  plaintiff  and  the  defendants  were  partners,  there  would 
be  no  room  for  criticism.  As  it  is,  however,  the  cases  are 
apt  to  be  considered,  and  are  sometimes  cited,  as  authorities 
for  the  proposition  that  persons  engaged  in  passing  through 
parliament  bills  to  authorize  the  establishment  of  a  com- 
pany are  partners.     In  Lucas  v.  Beach  it  was  asked  in  argu- 

(m)  Battley  v.  Lewis,  1  Man.  &        (n)  1  B.  &  C.  74. 
Gr.  155 ;   and  see  Wilson  v.  Lewis,        (o)  1  Man.  &  Gr.  417.    Barnett  v. 
2  id.  197.     Compare  Ellis  v.  Ward,     Lambert,  15  M.  &  W.  489,  was  a 
21  W.  R.  100,  where    the  intended    similar  case, 
partners    quarreled     before    they 
signed  the  deed. 

63 


*21  CONTRACTS  OF  PARTNEHSHIP.         [BOOK  I. 

ment,  "What  is  there  to  prevent  a  number  of  individuals 
from  entering  into  a  partnership  with  the  limited  object, 
in  the  first  instance,  of  procuring  an  act  of  parliament, 
and  with  an  ulterior  object  in  view  when  the  act  has 
passed?"  (p)  The  answer  is,  that  to  call  persons  so  asso- 
ciated partners  is  to  ignore  the  difference  between  a  contract 
of  partnership  and  an  agreement  to  enter  into  such  a  con- 
tract, to  confound  an  agreement  with  its  result,  and 
[*24r]  to  hold  persons  to  be  partners  ^although  they  have 
not  yet  acquired  any  right  to  share  profits.  It  cannot 
be  contended  that  the  right  to  share  profits  would,  under 
such  an  agreament  as  is  supposed,  accrue  before  the  passing 
of  the  act;  and  if  not,  how  can  the  parties  to  such  an  agree- 
ment be  partners  at  an  earlier  period? 

Later  authorities. —  For  these  reasons  it  is  conceived  that 
Holmes  v.  Higgins  and  Lucas  v.  Beach  cannot  be  relied 
upon  as  authorities  on  the  question  of  partnership  or  no 
partnership,  (q)  Nor  are  they  on  this  point  reconcilable 
with  later  decisions.  In  Eei/nell  v.  Lewis,  {r)  and  Wyld  v. 
Hopkins,  (r)  in  which  the  question  was  much  discussed,  it 
was  held  that  no  partnership  subsisted  between  persons  who 
had  subscribed  for  the  purposes  of  forming  a  railway  com- 
pany and  of  procuring  the  necessary  act  of  parliament;  and 
this,  which  is  the  correct  doctrine,  was  also  distinctly  stated 
by  Lord  Cranworth,  in  Capper's  Case,  (s)  and  has  been  rec- 
ognized on  many  other  occasions,  (t) 

Subscribers  to  inchoate  companies  not  partners. —  It  is 
a  necessary  result  of  the  principles  established  above  that 

(p)  See,  too,  per  Lord  Brougham  (t)  e.  g.,  Batard   v.  Hawes,    and 

in  Hutton  v.  Upfill,  2  H.  L.  C.  G91.  Batard  v.  Douglas,  2  E.  &  B.  287; 

(q)  They  are  authorities  for  the  Walstab  v.  Spottiswoode,  15  M.  & 

point  actually  decided,  viz.,  that  a  W.    501;   Forresters.  Bell,   10   Ir. 

person    doing  work    for    the  joint  Law  R.  555;  Hutton  v.  Thompson, 

benefit  of  himself  and  others  can-  3  H.  L.  C.  161;  Bright  v.  Hutton, 

r.ot    recover     compensate  n    from  3  H.  L.  C.  368;  Hamilton  v.  Smith, 

them    by  virtue    of    any   implied  5  Jur.  N.  S.  32;  Norris  v.  Cottle, 

promise  to  pay  him.  2  H.  L.    C.  647;  Besley's  Case,  3 

(r)  15  M.  &  VV.  517.  Mac.  &  G.  287;  Tanner's   Case,  5 

(,s)  1  Sim.  N.  S.  178.  De  G.  &  S.  182. 

70 


CH.  I,  SEC.  II.]       NATURE   OF   CONTRACT   DETERMINED.  *25 

persons  associated  for  the  purpose  of  forming  a  joint  stock 
company  are  not  partners,  (u)  They  clearly  are  not  part- 
ners in  the  company  to  be  formed ;  and  for  reasons  already 
given  they  cannot  be  considered  as  members  of  a  partner- 
ship formed  to  start  the  compan}'. 

Conditional  contract.— It  also  follows  from  the  same 
principles,  that  if  persons  enter  into  an  agreement  to  take 
shares  in  a  company  formed  for  certain  purposes  and  upon 
certain  conditions,  those  persons  are  not  bound  to  take  shares 
in  a  company  formed  for  different  purposes  or  upon  other 
conditions ;  and  are  not  partners  in  such  a  company, 
unless  they  have  accepted  shares  therein  and  *pre-  [*25] 
eluded  themselves  from  objecting  to  the  variation  of 
their  agreement.  A  leading  case  on  this  subject  is  Fox  v. 
Clifton,  (x)  which,  with  other  cases  of  the  same  class,  will 
be  found  in  the  volume  relating  to  companies  and  contribu- 

tories. 

Section  II. —  Of  Quasi-partnerships. 

Quasi-partnerships. —  Having  now  examined  the  nature 
of  those  agreements  which  are,  properly  speaking,  contracts 
of  partnership,  it  is  necessary  to  advert  to  the  doctrines  by 
virtue  of  which  persons  who  are  not  partners  at  all  are, 
nevertheless,  made  subject  to  liabilities  as  if  they  were 
partners.  In  other  words,  it  is  necessary  to  explain  what 
it  is  that  creates  a  #wasi-partnership,  or,  as  it  is  usually 
called,  a  partnership  as  regards  third  persons.1  This  will 
involve  an  examination  of  the  liability  which  a  person 
incurs: 

1.  By  sharing  profits. 

2.  By  holding  himself  out  as  a  partner. 

(u)  Wood    v.   Argyll,  6    Man.  &  either  he  must  have  permitted  his 

Gr.  928;  Hamilton  v.  Smith,  5  Jur.  name  to  be  used  as  one  of  the  firm, 

N.  S.  32 ;  Hutton   v.  Thompson.  3  thereby  holding  it  out  as  a  security 

H.  L.  C.  161 ;  Bright  v.  Hutton,  id.  to  the  community,  or  he  must  have 

568.  participated  in  the  profit  or  loss. 

(x<  6  Bing.  776.  Osborne  v.  Brennan,  2  Nott  &  M. 

1  To  charge  a  defendant  as  a  part-  427. 
ner  one  of  two  things  s  necessary: 

71 


*25 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK   I. 


1.  By  sharing  profits. 

In  the  year  1775,  De  Grey,  C.  J.,  laid  down  the  proposi- 
tion in  Grace  v.  Smith,  {y)  that  "  every  man  who  has  a 
share  of  the  profits  of  a  trade  ought  also  to  bear  his  share 
of  the  loss."  Eighteen  years  afterwards,  viz.,  in  1793,  this 
doctrine  was  discussed  and  approved  in  the  celebrated  case 
of  Waugh  v.  Carver ;  (s)  and  ever  since  that  time  until  1860 
it  was  considered  as  clearly  established,  that,  by  the  law  of 
England,  all  persons  who  shared  the  profits  of  a  business 
incurred  the  liabilities  of  partners  therein,  although  no  part- 
nership between  themselves  might  have  been  contemplated.1 


<jj)  2  Win.  Blacks.  998. 

(z)  2  H.  Blacks.  285. 

xSee  Rowland  v.  Long,  45  Md. 
439,  where  the  evidence  showed 
that  there  was  to  be  a  division  of 
profits,  but  did  not  disclose  in  what 
proportion.  Manhattan  Brass,  etc. 
Co.  v.  Sears,  45  N.  Y.  797,  where 
the  business  was  to  be  carried  on 
in  the  name  of  one  party,  and  the 
agreement  was  expressed  not  to  be 
for  any  purpose  of  business  or 
manufacture  or  partnership.  Pratt 
V.  Langdon,  12  Allen,  544,  where  L. 
bought  a  stock  of  goods  with  fixt- 
ures and  furniture,  hired  the 
building,  and  agreed  with  W.  that 
W.  should  conduct  the  business  in 
bis  own  name,  pay  all  the  bills  and 
a  certain  portion  of  the  purchase 
money,  keep  the  stock  good  by  new 
purchases,  and,  if  anything  was 
left  after  such  disbursements,  the 
iKmlue  of  the  proceeds  was  to  be 
equalij'  divided  between  them,  L. 
to  have  the  right  to  take  possession 
at  any  time ;  and  it  was  hel'l  that  L. 
was  liable  as  a  partner  for  debts 
contracted  by  W.  in  conducting  tho 
business.  Everett  v.  Chapman,  6 
Conn.  347.  where  a  stipulated  divis- 
ion of  the  manufactured   articles 


was  considered  equivalent  to  a  par- 
ticipation in  the  profit  and  loss. 

Persons  who  jointly  participate 
in  the  profits  of  trade  or  business, 
ostensibly  carried  on  by  another 
for  his  sole  use  and  benefit,  are 
equally  liable,  when  discovered, 
with  the  ostensible  and  active 
owner  to  all  creditors  of  the  con- 
cern whose  debts  were  contracted 
during  the  time  of  such  participa- 
tion, without  knowledge  of  the 
same,  or  of  the  actual  relations  be- 
tween the  parties  at  the  time  the 
credit  was  given ;  and  that  liability 
exists  notwithstanding  the  parties 
may  have  privately  stipulated  that 
they  shall  not  be  partners,  and  in 
contemplation  of  law  really  are  not 
sucn  as  between  themselves.  Bige- 
low  v.  Elliott,  1  Cliff.  28. 

An  oral  contract  between  S.  (an 
army  sutler)  and  D.  was  subse- 
quently reduced  to  writing,  which 
stated  that  "D.  agreed  to  furnish 
the  capital  and  procure  a  stock  of 
goods  necessary  to  commence  and 
carry  on  the  business  of  sutler  as 
contemplated,  which  he  is  hereby 
acknowledged  to  have  done."  8. 
was  to  give  his  personal  attention 
and  time  to  the  business;  and  the 


72 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT   DETERMINED. 


:25 


Subtle  distinctions  were  drawn  between  sharing  net  profits 
and  gross  returns;  and  between  sharing  net   profits  and 


profits,  after  repaying  D.'s  ad- 
vances, were  to  be  divided  between 
the  parties.  Held,  that  D.  was 
merely  to  advance  sufficient  capital 
to  procure  the  original  stock,  and 
purchases  subsequent  to  the  date 
of  said  written  instrument  were  to 
be  made  from  the  proceeds  of  goods 
already  sold;  that  S.  having  car- 
ried on  the  business  in  his  own 
name  and  not  as  agent  or  employee 
of  D.,  and  being  interested  in  the 
profits  as  such,  was  liable  as  a 
partner  to  persons  of  whom  goods 
were  subsequently  purchased.  Ap- 
pleton  v.  Smith,  24  Wis.  331. 

See,  also,  to  the  point  that  partic- 
ipation in  profits  constitutes  part- 
nership as  to  third  parties,  Sheri- 
dan v.  Medara,  10  N.  J.  Eq.  469 ; 
Bromley  v.  Elliot,  38  N.  H.  287; 
Cushman  v.  Bailey,  1  Hill,  5'2G; 
Oakley  v.  Aspinwall,  2  Sandf.  7; 
Catskill  Bank  v.  Gray,  14  Barb. 
471:  Motley  v.  Jones,  3  Ired.  Eq. 
144;  Wood  v.  Vallette,  7  Ohio  St. 
172 ;  Lengle  v.  Smith,  48  Mo.  276 ; 
Williams  v.  Gillies,  53  How.  Pr. 
429;  Sager  v.  Tupper,  38  Mich. 
258 ;  Strader  v.  White,  2  Neb.  348 ; 
Taylor  v.  Terme,  3  H.  &  J.  505; 
Noyes  v.  Cushman,  25  Vt.  390; 
Craig  v.  Alverson,  6  J.  J.  Marsh. 
609;  Everett  v.  Coe,  5  Den.  180; 
Morbut  v.  Moore,  4  So.  East.  Rep. 
(Ga.)  383.  See,  also,  Manegold  v. 
Grange,  38  N.  W.  Rep.  (Wis.)  263. 

See,  however,  post. 

In  the  absence  of  a  partnership 
in  fact,  merely  sharing  in  profits 
does  not  create  one  as  to  third  par- 
ties who  have  not  been  legitimately 
led  to  believe  that  such  relation  ex- 
isted.    Colwell  v.  Britton,  59  Mich. 


350,  following  Beecher  v.  Bush,  45 
Mich.  188 ;  S.  C.  26  N.  West.  Rep. 
538. 

An  agreement  between  one  part- 
ner and  a  third  person  that  the  lat- 
ter shall  participate  in  such  part- 
ner's share  of  the  profits  of  the 
firm,  as  profits,  renders  him  liable 
as  a  partner  to  the  creditors  of  the 
firm,  although,  as  regards  the  other 
members  of  the  firm,  he  is  not 
their  copartner.  Fitch  v.  Harring- 
ton, 13  Gray,  468. 

An  agreement  was  made  between 
several  that  certain  of  their  num- 
ber should  be  named  as  copartners 
in  partnership  articles,  and  that 
the  other  should  have  a  certain 
proportion  of  the  interest  of  certain 
of  those  so  named,  which  agree- 
ment was  carried  into  effect.  Held, 
it  appearing  that  it  was  the  mutual 
desire  of  all  that  those  not  named 
in  the  articles  should  be  interested 
as  partners,  and  that  it  was  their 
common  opinion  that  the  interest 
of  the  firm  would  be  best  subserved 
by  those  not  to  be  named  in  the 
articles  not  appearing  to  the  world 
as  partners;  and  it  also  appealing 
that  the  above  mode  was  adopted 
to  accomplish  the  desired  result; 
that  it  was  the  intent  of  all  the 
parties,  including  Snyder,  that  be 
should,  as  between  themselves, 
have  the  interest  of  a  partner,  and 
that  the  form  of  the  written  con- 
tracts, drawn  and  executed,  could 
not  prevent  the  liability  of  a  part- 
ner attaching  to  Snyder,  as  be- 
tween him  and  third  persons  deal- 
ing with  the  firm,  while  this  rela- 
tion existed.  Burnett  v.  Snyder, 
13  Jones  &  Sp.  577. 


73 


*26 


CONTRACTS    OF    PARTNERSHIP. 


[BOOK    I. 


pajnnents  varying  with  them;  but  it  was  taken  for 
[*26]  granted,  both  b}r  judges  and  text-* writers,  that,  where 


But,  although  participation  in 
the  profits  of  a  firm  is  enough,  in 
most  cases,  to  render  a  man  a  part- 
ner, j'et  it  gives  him  no  title  to  the 
capital  stock  if  his  interest  be 
merely  in  the  profits.  Bartlett  v. 
Jones,  2  Strobh.  471. 

Where  one  who  held  a  contract 
for  the  construction  of  a  railway 
assigned  it  to  trustees  to  execute  it 
and  divide  the  profits  among  cer- 
tain persons,  held,  that  the  as- 
signor, the  trustees,  and  the  per- 
sons receiving  the  profits  with 
notice  of  the  trust,  were  personally 
liable  as  partners.  It  was  not  ma- 
terial that  the  cestuis  que  trust  were 
described  as  the  stockholders  in  a 
corporation ;  nor  that  the  corpora- 
tion guarantied  all  persons  from 
liability  in  the  execution  of  the 
contract ;  nor  that  the  corporation 
agreed  to  advance  funds  and  re- 
ceive a  commission;  nor  that  part 
of  the  work  had  been  done  by  the 
corporation  in  the  expectation  that 
the  contract  would  be  transferred 
to  it,  and  the  contractor  agreed 
with  the  railway  company  to  pay 
the  corporation  for  the  work  that 
had  been  done.  These  circumstan- 
ces could  not  make  the  contract  the 
property  of  the  corporation  nor  ren- 
der the  profits  corporate  property. 
Credit  Mobilier  v.  Commonwealth, 
67  Pa.  St.  233. 

A  contract  for  one  to  furnish 
factory  and  materials,  and  another 
to  manufacture,  and  either  to  sell 
the  product,  and  the  proceeds  to 
be  divided,  constitutes  a  partner- 
ship. The  owner  of  the  factory 
may  be  held  liable  for  money  ad- 
vanced to  the  manufacturer  on  a 


contract  to  deliver  the  manufact- 
ured product,  which  he  has  failed 
to  perform.  Farmers'  Ins.  Co.  v. 
Ross,  29  Ohio  St.  429. 

Where  C.  furnished  money  to  D. 
to  be  employed  in  trade,  either  by 
D.  alone  or  in  partnership  with  a 
third  person,  the  net  profits  to  be 
equally  divided  between  C.  and  D., 
and  D.  entered  into  partnership 
with  B.,  Jield,  that,  as  between  C. 
and  D. ,  this  was  only  a  loan,  but, 
as  to  creditors  dealing  with  D., 
they  would  have  been  considered 
partners;  but  that  B.,  who,  before 
he  entered  into  partnership,  knew 
the  nature  of  the  transaction  be- 
tween C.  and  D.,  was  not  entitled 
to  claim  against  C.  as  a  partner 
of  D.  Bailey  v.  Clark,  0  Pick. 
372. 

The  defendant  Roat  advanced 
$700  to  defendant  Maar,  a  travel- 
ing showman,  upon  the  agreement 
that,  after  payment  of  all  expenses, 
Roat  was  to  receive  back  the  $700 
and  one-half  of  the  net  profits. 
Held,  that  the  defendants  were 
partners  as  to  third  persons,  irre- 
spective of  any  agreement  to  the 
contrary  between  themselves. 
Haas  v.  Roat,  16  Hun,  526. 

A  contract  by  which  the  owners 
of  certain  vessels  unite  in  an  asso- 
ciation to  carry  passengers  and 
freight  for  hire,  each  furnishing  a 
certain  capital  to  the  association, 
and  each  receiving  a  certain  pro- 
portion of  the  profits,  constitutes 
the  owners,  as  to  third  persons, 
commercial  partners,  and,  as  such, 
liable  in  solido  for  the  debts  of 
the  association,  no  matter  what  re- 
strictive clauses  the  contract  may 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT    DETERMINED. 


*26 


there  was  no  statutory  enactment  to  the  contrary,  if  net 
profits   were   shared,   it   necessarily   followed  that   liabili- 

Cooley  v.  Broad,  29  La 


contain. 
Ann.  345. 

The  owner  of  a  tug  agreed  with 
the  owner  of  a  barge  that  both 
vessels  should  be  employed  in  a 
freighting  business,  the  wages  of 
the  servants  of  the  association, 
and  expenses,  except  repairs,  to  be 
paid  out  of  the  earnings,  and  the 
balance  or  profits  to  be  divided  be- 
tween them  in  proportion  to  the 
stipulated  value  of  the  vessels. 
Held,  that  this  agreement  consti- 
tuted a  partner-ship,  and  that 
either  partner  was  liable  in  an  ac- 
tion of  tort  for  damages  caused  by 
the  negligence  of  the  servants  and 
agents  of  the  partnership  while 
conducting  its  business.  Bowas  v. 
Pioneer  Tow  Line,  2  Sawyer,  21. 

Upon  an  agreement  between  A. 
and  B.  that  A.  should  take  certain 
negroes  of  B.  and  work  them  in  a 
blacksmith  shop,  furnish  all  sup- 
plies, pay  all  expenses  and  give  B. 
one-half  of  the  net  proceeds  of  the 
shop  for  the  use  of  the  negroes, 
held,  that,  as  to  third  persons,  A. 
and  B.  were  partners.  Buckner  v. 
Lee,  8  Ga.  285. 

A  lease  of  a  steam-mill  and  ap- 
purtenances reserved  as  rent  one- 
half  of  the  net  profits  of  the  busi- 
ness, and  also  provided  that  the 
lease  should  not  be  assignable  and 
should  cease  on  the  death  of  the 
lessee,  or  in  case  he  should  be  un- 
able, from  any  cause,  to  give  his 
personal  attention  thereto.  Held, 
that  the  lease  constituted  a  part- 
nership as  to  third  parties.  Dalton 
City  Co.  v.  Hawes,  37  Ga.  115. 

L.  agreed  to  lease  to  W.  and  T. 
for  eleven  months  a  steam   saw- 


mill, in  which  the  latter  were  to 
make  certain  improvements  and 
repairs,  and  to  run  the  mill  with 
due  diligence,  and  L.  was  to  ad- 
vance $1,000  for  making  such  im- 
provements and  repairs,  and  to  bear 
one-third  of  the  expenses  of  the 
same  above  that  sum.  The  lumber, 
when  manufactured,  was  to  be 
shipped  to  Chicago,  to  some  one 
whom  L.  should  designate,  to  be 
sold,  and  the  proceeds,  after  pay- 
ing freight,  to  be  applied  as  fol- 
lows: Seventy-five  cents  per  M. 
feet  to  be  paid  to  L.  on  account  of 
rent  of  the  mill;  $1.75  per  M.  to 
be  paid  to  W.  and  T.  as  expenses 
of  manufacturing  the  dumber; 
from  the  residue  L.  was  to  be  paid 
any  advances  made  by  him  for 
logs  to  stock  the  mill,  with  inter- 
est. After  all  expenses  for  logs 
and  for  manufacturing,  selling  and 
shipping  the  lumber  were  paid,  W. 
and  T.  were  to  pay  L.  one-fourth 
of  the  net  proceeds  of  the  business. 
Held,  that  under  this  contract  L., 
W.  and  T.  were  partners,  and 
jointly  liable  as  such  for  repairs  to 
the  mill.  Whitney  v.  Ludington, 
17  Wis.  140.  See,  also,  Upham  v. 
Hewitt,  42  Wis.  85. 

A.  being  the  lessee  of  a  farm,  B. 
furnished  laborers  thereon  under 
him,  with  the  agreement  between 
them  to  share  the  net  profits 
equally.  Held,  that  this  was  a 
partnership,  and  that  B.  was  liable 
for  debts  contracted  for  A.  on  ac- 
count of  the  concern.  Brown  v. 
Higginbotharn,  5  Leigh,  583. 

An  agreement  between  the 
owner  of  a  vessel  and  the  captain 
that  each  should  pay  certain  ex- 


75 


*26 


CONTRACTS    OF   PARTNERSHIP. 


[book 


ties  were  incurred.     Moreover,  there  were  many  persons  of 
ability  who  maintained  that  this  rule  was  based  upon  pre- 


penses and  divide  the  freight, 
with  a  power  to  the  captain  to  in- 
vest it  on  joint  account,  consti- 
tutes a  copartnership.  Cox  v.  De- 
lano, 3  Dev.  L.  89. 

An  association  of  separate  own- 
ers of  several  steamboats  into  a 
joint  concern,  to  run  their  vessels 
upon  the  Hudson  river,  and  to  col- 
lect and  receive  the  earnings  of 
the  boats  in  a  common  fund,  out 
of  which  the  expenses  of  all  the 
boats  are  to  be  paid,  is  no  more 
than  a  private  copartnership  in  a 
particular  business  or  transaction. 
The  Swallow,  Olcott,  Adm.  334. 

Where  A.,  B.  and  C.  ran  a  hue 
of  stage-coaches  from  Utica  to 
Rochester,  and  the  route  was  di- 
vided between  them  into  sections, 
the  occupant  of  each  section  fur- 
nishing his  own  carriages  and 
horses,  hiring  drivers,  and  paying 
the  expenses  of  his  own  section ; 
and  the  money  received  as  the  fare 
of  passengers,  deducting  therefrom 
only  the  tolls  paid  at  turnpike 
gates,  was  divided  among  the  par- 
ties in  proportion  to  the  number  of 
miles  of  the  route  run  by  each ;  and 
an  injury  happened  to  a  third  per- 
son through  the  negligence  of  the 
driver  of  the  coach  of  A.,  held, 
that  a  joint  action  on  the  case  at 
the  suit  of  the  party  injured  lay 
against  B.  and  C.  as  well  as  A. 
Bostwick  v.  Bissell,  11  Wend.  571. 

Where  A.  agrees  with  B.  that  B. 
shall  buy  such  lands  as  they  please 
in  B.'s  name  and  on  his  responsi- 
bility, and  that  A.  shall  not  be  re- 
sponsible for  any  liabilities  or  acts 
of  B.,  except  that  so  far  as  cash 
capital  shall  be  placed  in  the  hands 


of  B.,  that  capital  shall  be  subject 
to  its  proportion  of  the  losses,  A. 
is  liable  for  services  rendered  by 
another  as  clerk  and  book-keeper 
in  conducting  the  joint  business  of 
the  associates.  Benners  v.  Harri- 
son, 19  Barb.  53. 

Where  a  father  and  a  son,  both 
living  on  the  place,  farm  together 
under  an  agreement  that  the  father 
is  to  furnish  the  land,  and  the  stock 
and  provisions  for  the  stock,  and 
the  son  to  furnish  the  hands  and 
to  superintend  the  work,  and  the 
crop  to  be  equally  divided  between 
them,  and  nothing  more  appears, 
they  are,  as  to  third  persons,  part- 
ners in  the  enterprise.  Adams  v. 
Carter,  53  Ga.  160;  S.  P.  Pettee  v. 
Appleton,  114  Mass.  114. 

On  the  other  hand,  where  a  non- 
resident commercial  firm  make  an 
agreement  with  two  resident  firms, 
by  virtue  of  which  agreement  one 
of  the  resident  firms  is  to  purchase 
certain  merchandise  and  ship  it  in 
the  name  of  the  other,  and  the 
other  resident  firm,  with  the 
money  of  the  non-resident  firm,  is 
to  pay  for  the  merchandise,  and 
each  of  the  resident  firms  agree  to 
receive,  instead  of  fixed  sums  in 
payment  of  their  services,  certain 
proportions  of  the  profits  to  arise 
from  the  subsequent  sales  of  the 
merchandise,  and  also  agreed  to 
share  in  any  losses  resulting  from 
said  sales,  held,  that  such  an 
agreement  will  not  make  the  said 
firms  commercial  partners  even  as 
to  third  persons,  when  it  appears 
that  they  did  not  intend  to  form  a 
partnership,  and  that  they  have 
not    held  themselves    out  to  the 


76 


CH.  I,  SEC.  II. J       NATURE    OF    CONTRACT   DETERMINED. 


*2G 


ciples  which  were   satisfactor}"  and  morally  just.     Other 
persons,  however,  took  a  different  view  of  the  propriety  of 


world  as  partners.     Chaffraix  v. 
Lafitte,  30  La.  Ann.  631. 

Two  mercantile  firms  mutually 
agreed  each  to  put  out  contracts 
for  sale  and  delivery  of  produce  at 
future  days,  all  profits  of  such  ad- 
ventures, and  all  losses,  to  be 
equally  divided  between  the  firms. 
Held,  that  the  members  of  one 
firm  were  liable  with  the  other,  as 
partners,  upon  a  contract  which 
the  other  firm  made  and  signed  in 
their  own  name  pursuant  to  this 
agreement.  Smith  v.  Wright,  4 
Abb.  App.  Dec.  274. 

See  ante. 

Under  articles  of  agreement 
signed  by  a  married  woman,  her 
husband  and  several  other  per- 
sons, reciting  that  she  and  one  of 
the  others  have  taken  a  lease  of 
certain  manufacturing  works,  and 
providing  that  she  shall  furnish  a 
certain  amount  of  capital  at  eight 
per  cent.,  and  that  her  husband 
shall  devote  his  whole  time  to  the 
business  of  manufacturing  and 
selling  the  articles,  and  making 
special  provisions  as  to  the  duties 
and  rights  of  the  others ;  and  fur- 
ther providing  that  "she  or  her 
husband,  as  they  two  may  decide 
or  agree,  shall  receive  one-half  of 
the  net  profits  of  the  concern,"  her 
husband  is  a  partner  in  the  firm; 
and  she,  therefore,  is  not  a  part- 
ner, and  is  not  liable  upon  a  prom- 
issory note  given  in  the  name  of 
the  firm.  Plumerv.  Lord,  7  Allen, 
481. 

A.,  B.  and  C.  entered  into  ar- 
ticles of  agreement  with  each 
other  to  fit  out  an  adventure  to 
Texas    for  the  mutual  benefit  of 


all.  A.  and  B.  were  to  furnish  all 
the  capital  and  make  the  pur- 
chases here  in  their  own  names. 

B.  and  C.  were  to  go  out  to  Texas 
with  the  goods.  C.  was  to  travel 
about  the  country  there,  dispose 
of  the  goods  and  procure  remit- 
tances. B.  was  to  receive  a  certain 
sum  per  month  for  his  services. 

C.  was  to  receive  one-fifth  part  of 
the  net  profits  of  the  adventure, 
and  the  remaining  four-fifths  were 
to  be  divided  equally  between  A. 
and  B.  Held,  that  A.  and  B.  were 
liable  as  partners  with  C,  especially 
as  between  them  and  third  per- 
sons, who  found  them  carrying  on 
such  joint  adventure  for  their 
mutual  benefit.  Bucknam  v.  Bar- 
num,  15  Conn.  67. 

A.  and  H.  entered  into  an  agree- 
ment, whereby  A.  leased  to  H.  a 
certain  lot  of  land,  on  which  the 
former  was  to  make  improvements 
at  once,  and  the  latter  might  add 
others  from  the  profits  of  the  con- 
cern if  both  parties  agreed  thereto. 
H.  was  to  manage  the  concern  and 
give  A.  half  the  net  profits,  and  to 
render  A.  liable  for  no  sum  over 
$100,  without  his  consent.  H.  pur- 
chased materials  to  fit  up  the  build- 
ings. Held,  that  A.  was  liable 
therefor  as  partner.  Brownlee  v. 
Allen,  21  Mo.  123:  Morgan  v.  Allen, 
id.  127. 

A.  and  B.  entered  into  an  agree- 
ment by  which  A.  was  to  manu- 
facture bagging  at  so  much  a  yard, 
and  B.  was  to  sell  the  bagging,  and 
after  paying  to  A.  the  price  agreed 
for  manufacturing,  and  to  B.  the 
cost  of  the  raw  material  and  of 
transportation,  the  net  profits  were 


77 


*20 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


the  rule,  (a)  and  were  unable  to  understand  why  a  person 
lending  money  at  a  fixed  rate  of  interest  should  be  treated 
as  a  creditor,  and  be  exposed  to  no  risk  beyond  the  loss  of 
his  advance;  whilst  a  person  lending  mone}7  at  a  rate  of  in- 
terest fluctuating  with  and  payable  out  of  the  profits  of 
the  borrower  should  be  treated  as  a  partner,  and  be  ex- 
posed, not  only  to  the  loss  of  his  money,  but  also  to  the 
loss  of  whatever  else  he  might  have  in  the  world.  In  the 
first  edition  of  this  work  the  writer  expressed  a  hope  that 
the  rule  in  question  would  ere  long  cease  to  exist;  and  he 
ventured  to  characterize  it  as  arbitrary,  unjust,  arid  as  pro- 
ductive of  the  greatest  confusion.  Since  those  words  were 
written  the  whole  subject  has  been  thoroughly  discussed, 
both  in  the  highest  court  of  appeal,  (b)  and  in  parliament; 
and  the  result  has  been  that  the  rule,  so  far  as  it  affords  a 
conclusive  test  of  liability,  (c)  has  ceased  to  exist;1  for  the 


to  be  divided  between  them.  Held, 
that  B.  was  not  liable  for  the  hire 
of  a  slave  by  A.  to  assist  in  the 
manufacture  of  the  bagging,  and 
that  A.  was  alone  liable  therefor, 
the  contract  of  hiring  having  been 
made  by  A.  as  an  individual,  and 
not  on  behalf  of  the  firm.  Lafon 
v.  Chinn,  6  B.  Mon.  305. 

(a)  See  the  report  on  the  Law  of 
Partnership,  printed  by  order  of 
the  house  of  commons  in  1851,  and 
particularly  the  evidence  of  the 
Kite  Commissioner  Fane. 

(o)  Cox  v.  Hickman,  8  H.  L.  C. 
268. 

(c)  That  participation  in  profits  is 
still  a  prima  facie  test  of  partner- 
ship has  been  seen  already,  ante, 
p,  12  et  seq. 

1  A  right  to  a  share  of  the  profits, 
as  such,  is  essential  to  constitute  a 
person  a  partner.  Heimstreet  V. 
Howland,  5  Den.  G8. 

But  one  who  is  interested  in  the 
profits  of  a  business  as  profits,  and 


not  as  a  means  of  compensation  for 
services,  is  a  partner  as  to  third 
persons,  and  is  liable  as  such  for 
the  debts.  Leggett  v.  Hyde,  58 
N.  Y.  272. 

The  rule  that  actual  participation 
in  the  profits,  as  principals  in  gen- 
eral, creates  a  partnership  as  be- 
tween the  participant  and  third 
persons,  whatever  may  have  been 
the  real  relation  of  the  former  to 
the  firm,  has  no  application  to  a 
case  of  mere  service  or  special 
agency,  where  the  employee  has 
no  power  in  the  firm,  and  no  such 
interest  in  the  profits  as  will  enable 
him  to  go  into  a  court  of  equity  to 
enforce  a  lien  for  the  same  or  to 
compel  an  account.  Unless  an  em- 
ployee is  in  some  way  interested  in 
the  profits  of  the  business  as  prin- 
cipal, he  cannot  be  regarded  as 
falling  within  the  general  rule,  be- 
cause, when  not  so  interested,  his 
condition  is  not  different  from  that 
of  an  ordinary  creditor.     Berthold 


78 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT   DETERMINED. 


f2fl 


house  of  lords,  and  subsequently  other  courts,  have  repudi- 
ated it,  and  parliament  has  excluded  its  application  from 


v.  Goldsmith,  24  How.  536;  Parker 
v.  Fergus,  43  111.  437;  Hallet  v. 
Desbau,  14  La.  Ann.  535;  Conklin 
v.  Barton,  43  Barb.  435:  Chapline 
v.  Conant,  3  W.  Va.  507 ;  Bendel 
v.  Hettrick,  45  How.  Pr.  198; 
Lewis  v.  Greider,  51  N.  Y.  231. 
See  ante. 

See,  however,  Taylor  v.  Terme, 
3  H.  &  J.  505 ;  Strader  v.  White,  2 
Neb.  348. 

An  agreement  by  which  a  per- 
son is  to  have  a  share  of  the  profits 
of  a  business  is,  however,  compe- 
tent evidence  on  the  question  of 
his  liability  as  a  partner  in  that 
business;  but  sharing  profits  in  any 
other  sense  than  sharing  them  as  a 
principal  is  not  an  absolute  legal 
test  of  his  liability.  The  ground 
of  liability  should  be  either  that 
defendant  is  a  principal,  bound  by 
a  contract  made  by  himself,  or  his 
agent  acting  by  his  authority,  or 
that  he  is  estopped  to  deny  that  he 
is  a  principal  under  the  general  doc- 
trine of  estoppel.  Eastman  v.  Clark, 
53  N.  H.  276. 

C.  and  D.  agree  in  writing  that 
D.  should  furnish  a  stock  of  goods 
and  shop  fixtures  valued  at  $4,000; 
that  C.  should  pay  rent  for  the 
shop,  manage  the  shop  and  pay  D. 
interest  on  half  the  $4,000;  and 
that  they  should  divide  the  profits 
equally.  Held,  that  they  were 
partners  as  to  third  persons,  not- 
withstanding an  oral  agreement 
between  themselves  that  C.  should 
receive  the  moiety  of  the  profits  in- 
stead of  a  salary.  Brigham  v.  Clark, 
100  Mass.  430. 

An  employee  whose  compensa- 
tion depends  on  the  profits  of  the 


business,  and  who,  if  nothing  be 
made,  is  to  receive  nothing,  and 
who  on  several  occasions  has  held 
himself  out  as  a  partner,  will  be 
responsible  as  such  to  third  persons, 
though  inter  se  the  parties  never 
intended  a  partnership.  Lee  v. 
Bullard,  3  La.  Ann.  462. 

A  person  who  receives  profits  in 
consideration  of  furnishing  capital 
is  clearly  a  partner,  and  is  a  part- 
ner as  to  third  persons,  even  though 
it  should  be  stipulated  that  the 
capital  so  furnished  should  be  re- 
garded as  a  loan,  and  the  party  fur- 
nishing it  a  mere  creditor.  Parker 
v.  Canfield,  37  Conn.  250.  See  ante, 
p.  23,  note. 

In  a  suit  to  charge  defendant  as 
a  partner  with  K.  for  debts  in- 
curred by  K.,  evidence  that  the  de- 
fendant had  procured  for  K.  a  loan 
of  money  to  be  used  in  a  purchase 
of  cotton,  and  that  K.  had  volun- 
tarily promised  to  give  the  defend- 
ant a  part  of  the  profits,  if  any 
were  made,  for  his  assistance  in 
procuring  the  loan,  when  no  sum 
or  proportion  of  profits  was  named, 
is  wholly  insufficient  to  establish 
partnership.  Pleasants  v.  Fant,  22 
"Wall.  116. 

Where  a  firm  entered  into  a  writ- 
ten agreement  with  another  to  ad- 
vance him  a  certain  sum  to  enable 
him  to  carry  on  business,  for  which 
he  was  to  pay  interest  on  the  aver- 
age balance,  and,  after  deducting 
office  expenses,  the  profits  were  to 
be  equally  divided  between  such 
party  and  the  firm  making  the  ad- 
vances, but  the  firm  was  not  to  be 
responsible  for  losses,  held,  that 
such  agreement  did  not  constitute 


79 


*26 


CONTRACTS    OF    PARTNERSHIP. 


[book 


many  cases  in  which  it  has  been  found  by  experience  to 
produce  inconvenience  and  injustice.     Some  notice,  how- 

lated  price  to  a  firm,  with  which 
they  carry  on  their  business,  does 
not  become  thereby  a  member  of 
the  firm  or  responsible  for  their 
debts.  Jones  v.  O'Farrel,  1  Nev. 
354. 

By  a  written  contract  between 
B.  and  R.,  B.  agrees  to  furnish  R. 
for  one  year  with  wool,  to  be 
worked  into  satinets,  and  R.  is  to 
deliver  to  B.  all  the  satinets  which 
the  wool  will  make,  and  is  to  find 
and  pay  for  warps  for  the  same. 
For  working  the  wool,  finding 
warps,  etc.,  B.  is  to  pay  R.  forty 
per  cent,  on  the  sales  of  the  satinets. 
Each  is  to  pay  half  the  charges. 
B.  is  to  have  the  whole  direction  of 
the  sales,  and,  should  he  make 
sales  himself,  he  is  to  have  one  and 
a  half  per  cent,  on  forty  per  cent, 
of  the  sales.  In  an  action  against 
B.  and  R.  for  the  price  of  the  warps 
furnished  by  the  plaintiff  to  R., 
held,  that  B.  was  not  a  partner  of 
R.  and  consequently  was  not  liable 
to  the  action.  Turner  v.  Bissell,  14 
Pick.  192. 

An  agreement  between  two 
houses  to  share  commissions  on 
sales  of  goods  forwarded  by  one  to 
the  other  does  not  constitute  a 
partnership.  Pomeroy  v.  Sigerson, 
22  Mo.  177. 

A  ship-master,  having  agreed  to 
take  the  defendant's  schooner  for 
the  purpose  of  getting  employ  in 
the  freighting  business,  engaged  to 
victual  and  man  her,  and  pay  half 
the  port  charges,  pilotage,  etc. ; 
and  the  defendant  engaged  to  pay 
the  other  half,  together  with  $8  per 
month  for  one  man's  wages,  and 
to  put  the  schooner  in  sufficient 


a  partnership.     Smith  v.  Knight, 
71  111.  148. 

A  railroad  corporation  who  lease 
to  an  individual  a  house  owned  by 
them,  he  paying  them  a  certain 
sum  annually,  and  "  half  the  net 
proceeds  arising  from  keeping  said 
house  as  a  hotel,"  and  keeping  an 
account  open  to  their  inspection, 
and  giving  his  own  time  and  atten- 
tion, and  having  free  passage  over 
their  railroad  for  himself  and  all 
persons  employed  and  all  articles 
used  by  him  in  carrying  on  the 
house,  do  not  thereby  become  part- 
ners, even  as  to  third  persons,  in 
the  business  of  keeping  the  house. 
Holmes  v.  Old  Colony  Railroad,  5 
Gray,  58. 

If  three  enter  into  an  agreement, 
by  the  terms  of  which  one  is  to  do 
certain  things  and  the  other  two 
certain  other  things,  each  at  their 
own  expense,  and  each  to  be  en- 
titled to  an  equal  share  of  the 
profits  arising  out  of  the  subject- 
matter  of  the  contract,  this  does 
not  constitute  them  all  partners, 
and  make  them  all  liable  for  ex- 
penses incurred  by  either  in  the 
performance  of  their  part  of  the 
contract.  Heckert  v.  Fegely,  6 
Watts  &  S.  139. 

The  mere  fact  that  one  is  to  re- 
ceive a  certain  portion  of  the  net 
profits  of  a  firm  in  consideration 
of  his  acceptance  of  certain  drafts 
will  not  make  him  liable  as  part- 
ner if  there  was  no  holding  out  as 
such  and  his  name  has  not  been 
used  as  partner.  Polk  v.  Buchanan, 
5  Sneed,  721. 

A  landlord  who  rents  property 
and  furnishes  materials  at  a  stipu- 


80 


CH.  I,  SEC.  II.]      NATURE   OF   CONTRACT   DETERMINED. 


*26 


ever,  of  the  old  law  is  necessary  in  order  to  understand  tho 
modifications  thus  introduced. 


order  for  the  business;  and  all 
money  so  stocked  in  the  schooner, 
whether  for  freight  or  passage,  or 
whatever,  was  to  be  equally  di- 
vided between  the  master  and  the 
defendant,  each  party  accounting 
for  the  above.  Held,  that  the  mas- 
ter was  owner  pro  hac  vice;  and 
that  the  contract  did  not  make  him 
and  the  defendant  partners.  Cut- 
ler v.  Winsor,  6  Pick.  335. 

Where  one  owning  lands  makes 
an  arrangement  with  another  to 
cut  and  run  the  cedar  posts  on  the 
lands  at  his  own  expense  on  shares, 
the  latter  receiving  half  the  posts 
and  paying  all  the  cutting  ex- 
penses, these  expenses  cannot  be 
regarded  as  partnership  expenses, 
nor  is  the  business  such  as  to  au- 
thorize any  necessary  inference  of 
partnership.  Denis  v.  Saunders, 
36  Mich.  369. 

An  administrator  advanced 
money  to  enable  the  persons  re- 
ceiving it  to  cut  and  remove  from 
the  estate  certain  logs,  under  an 
agreement  that  the  party  should, 
after  selling  them,  pay  the  money 
advanced  and  pay  the  stumpage, 
and  then  divide  with  the  estate  the 
balance  of  the  money  realized. 
Held,  that  this  transaction  did  not 
amount  to  a  partnership.  Ford  v. 
Smith,  27  Wis.  261. 

B.,  owner  of  a  public  ferry, 
leases  it  to  F.  for  two  years  in  con- 
sideration of  $1,000  paid  to  him  by 
F.  in  cash ;  and  it  is  agreed  between 
the  parties  that,  if  the  net  profits 
of  the  ferry  do  not  yield  F.  $2,000 
within  the  two  years,  F.  shall  hold 
over  the  term  until  the  profits  yield 
the  $2,000,  and  if  the  profits  give 


more  than  $2,000  within  the  two 
years  the  surplus  shall  be  equally 
divided  between  them.  Held,  this 
contract  does  not  constitute  a  part- 
nership between  B.  and  F.  in  the 
ferry,  and  B.  is  not  liable  for  losses 
by  negligence  at  the  ferry  during 
the  term  of  F.'s  tenancy  thereof. 
Bowyer  v.  Anderson,  2  Leigh,  550. 

D.  bought  cattle  through  N., 
who  was  his  agent,  in  the  name  of 
N.,  the  agreement  being  that  N. 
should  butcher  and  sell  the  meat, 
and  out  of  the  proceeds  return  to 
D.  the  cost  and  one-fourth  of  a 
cent  per  pound  of  dressed  meat 
additional,  and  that  N.  should  have 
the  balance.  Held,  that  this  did 
not  constitute  a  partnership.  Dale 
v.  Pierce,  85  Pa.  St.  474. 

A  testator  provided  in  his  will 
that  A.  B.  should  have,  hold  and 
carry  on,  in  a  husbandlike  man- 
ner, free  of  rent,  a  certain  house, 
store  and  other  real  estate,  until 
the  time  when  the  eldest  son  of  the 
testator  should  be  of  age ;  and  di- 
rected that  he  should  be  trustee  of 
the  testator's  two  sons  for  the  fol- 
lowing purposes,  to  wit :  That  he 
should  retain  in  his  hands,  for  their 
use,  all  the  goods,  securities,  money 
and  other  stock  in  trade  belonging 
to  said  store  during  said  term; 
should  trade  upon  the  same,  in  his 
own  name,  as  such  trustee,  and  at 
the  end  of  the  time  deliver  over  to 
said  sons  all  the  original  stock  then 
remaining,  and  one  full  half  of  all 
the  profits,  and  also  interest  upon 
a  certain  portion  of  such  stock. 
A.  B.  accepted  the  trust  and  car- 
ried on  the  business;  and  on  the 
arrival  of  the  eldest  son  at  the  age 


Vol.  I  — 6 


81 


*27  CONTRACTS    OF   PARTNERSHIP.  [BOOK   I. 

1.  State  of  the  law  anterior  to  Cox  v.  Hickman. 

Origin  of  the  rule  that  those  who  share  profits  are  liable  to 
losses. —  As  already  stated,  the  rule  that  persons  who  share  profits  incur 
liabilities  as  if  they  were  partners  was  laid  down  for  the  first  time  in 
Grace  v.  Smith,  (d)  The  question  there  was  whether  the  defendant  was 
liable  to  a  creditor  of  a  firm ;  and  the  material  facts  were  that 
*[*27]  the  defendant  (who  had  *been  a  partner,  but  who  had  notoriously 
retired  before  the  creditor's  demand  arose)  had  advanced  to  the 
firm  4,000?.  upon  the  terms  of  being  repaid  the  principal  and  of  receiv- 
ing, so  long  as  it  remained  unpaid,  interest  at  51.  per  cent,  and  an  an- 
nuity of  3,000?.  a  year.  The  verdict  was  for  the  defendant,  and  the 
court  refused  a  new  trial.  De  Grey,  C.  J.,  gave  his  judgment  as  fol- 
lows: 

"  The  only  question  is,  What  constitutes  a  secret  partner?  Every  man 
who  has  a  share  of  the  profits  of  a  trade  ought  also  to  bear  his  share  of 
the  loss.  And  if  any  one  takes  part  of  the  profit  he  takes  a  part  of 
that  fund  on  which  the  creditor  of  the  trader  relies  for  his  payment.  If 
any  one  advances  or  lends  money  to  a  trader  it  is  only  lent  on  his  gen- 
eral personal  security.  It  is  no  specific  lien  upon  the  profits  of  the 
trade,  and  yet  the  lender  is  generally  interested  in  those  profits ;  he  relies 
on  them  for  repayment.  And  there  is  no  difference  whether  that  money 
be  lent  de  novo,  or  left  behind  in  trade  by  one  of  the  partners  who  re- 
tires ;  and  whether  the  terms  of  that  loan  be  kind  or  harsh  makes  also 
no  manner  of  difference.  I  think  the  true  criterion  is  to  inquire  whether 
Smith  (the  defendant)  agreed  to  share  the  profits  of  the  trade  with  Rob- 
inson (the  continuing  partner),  or  whether  he  only  relied  on  those  prof- 
its as  a  fund  of  payment,  a  distinction  not  more  nice  than  usually  occurs 
in  questions  of  trade  or  usury.  The  jury  have  said  this  is  not  payable  out 
of  the  profits,  and  I  think  there  is  no  foundation  for  granting  a  new 
trial." 

This  judgment,  and  not  the  decision  in  the  case,  has  always  been  re- 
garded as  the  great  authority  for  the  proposition  that  a  person  who 
shares  profits  is  liable  to  third  parties  as  if  he  were  in  fact  a  partner. 
The  judgment  itself  appears  to  have  been  based  upon  a  prior  case  of 
Bloxham  v.  Pell,  (e)  before  Lord  Mansfield,  and  in  substance  uudistin- 
guishable  from  Grace  v.  Smith.  In  Bloxham  v.  Pell,  an  outgoing  part- 
ner became  entitled  to  be  paid  by  the  continuing  partner  a  certain  sum 
of  money  with  interest  at  five  per  cent.,  and  also  an  annuity  of  200?.  a 

of  twenty-one  he  executed  to  said  son    became    twenty-one.      Held, 

A.  B.  a  power  of  attorney,  author-  that  this  did  not  constitute  a  part- 

izing  him  to  continue  the  business  nership.  Gibson  v.  Stevens,  7  N.  H. 

of  the  store,  etc.,  as  he  had  done  352. 
under  the  will,  and  it  was  there-        (d)  2  Wm,  Blacks.  998. 
upon  continued  until  the  youngest        (e)  Cited  in  2  Wm.  Blacks.  999. 

82 


CH.  I.  SEC.  II.]       NATURE   OF   CONTRACT   DETERMINED.  *28 

year  for  six  years,  in  lieu  of  the  profits  of  the  trade.  The  plaintiff  sued 
him  for  a  debt  contracted  after  the  dissolution,  and  Lord  Mansfield  held 
the  defendant  liable,  on  the  ground  that  the  agreement  was  a  device  to 
make  more  than  legal  interest  of  money,  and  if  it  was  not  a  partner- 
ship it  was  a  crime;  and  it  should  not  lie  in  the  defendant  Pell's  mouth 
to  say  it  was  usury  and  not  a  partnership.  Lord  Mansfield  did  not  say 
a  word  in  favor  of  the  doctrine  laid  down  in  Grace  v.  Smith;  but  see- 
ing a  contract  which  on  the  ground  of  usury  was  invalid  as  a  contract 
of  loan,  he  nevertheless  upheld  it  as  a  contract  of  partnership,  which 
it  plainly  was  not,  but  which  was  the  only  alternative  if  the  agreement 
was  to  be  upheld  at  all.  (/) 

Such  was  the  origin  of  the  rule  in  question,  which  was  approved 
and  applied  in  the  well-known  case  of  Waugh  v.  Carver,  the  leading 
old  authority  on  this  subject.  In  Waugh  v.  Carver,  (g)  two  ship-agents, 
carrying  on  business  at  different  ports,  agreed  to  allow  each  other  cer- 
tain portions  of  each  other's  commissions  and  profits,  but  it  was  ex- 
pressly agreed  that  neither  of  them  should  be  prejudiced  or  affected 
by  the  losses  of  the  other,  *or  be  answerable  for  the  acts  of  the  [*28] 
other,  but  that  each  should  be  answerable  and  accountable  for 
his  own  losses  and  acts.  It  was  admitted  by  the  court  that  this  agree- 
ment created  no  partnership  as  between  the  parties  to  it;  but  it  was 
nevertheless  held,  on  the  principle  enunciated  in  Grace  v.  Smith,  that 
both  parties  to  the  agreement  were  answerable  for  the  business  debts 
of  each,  and  a  creditor  who  sued  both  for  goods  supplied  to  one,  ob- 
tained judgment  against  both  accordingly. 

Other  cases,  in  which  the  same  principle  was  applied,  need  only  be 
shortly  referred  to.  It  was  held  that  a  guasi-partnership  subsisted  be- 
tween merchants  who  divided  the  commissions  received  by  each  other 
on  the  sale  of  goods  recommended  or  "influenced"  by  the  one  to  the 
other ;  (h)  so  between  persons  who  agree  to  share  the  profits  of  a  single 
isolated  adventure;  (i)  and  between  persons,  one  of  whom  was  in  the 
position  of  a  servant  to  the  others,  but  was  paid  a  share  of  the  profits 
instead  of  a  salary;  (k)  and  between  persons,  one  of  whom  was  paid  an 
annuity  out  of  the  profits  made  by  the  others;  (Z)  or  an  annuity  in  lieu 
of  any  share  in  those  profits,  (to)    So  between  the  vendor  and  purchaser 

(/)  See  Jestons  v.  Brooke,  Cowp.  (k)  Ex  parte  Digby,  1  Deac.  341 ; 

793,  and  ante,  p.  16.  Ex  parte  Rowlandson,  1  Rose,  92. 

(g)  2  H.  Blacks.  235,  and  1  Smith's  And  see  Withington  v.  Herring,  3 

Lead.  Ca.  Moo.  &  P.  30. 

(h)  Cheap  v.  Cramond,  4  B.  &  A.  (Z)  Re  Colbeck,    Buck.   48;    Ex 

663.  parte  Hamper,   17   Ves.  412;   Ex 

(i)  Hey  hoe  v.  Burge,  9  C.  B.  431 ;  parte  Chuck,  8  Bing.  469. 

Ex  parte  Gellar,  1  Rose,  297;  Hes-  (to)  Bloxham   v.    Pell,    2    Wm. 

keth  v.  Blanchard,  4  East,  144.  Blacks.  999,  ante,  p.  27. 

83 


*29  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

of  a  business,  if  the  former  guarantied  a  clear  profit  of  so  much  a  year 
and  was  to  have  all  profits  beyond  the  amount  guarantied,  (n) 

Moreover,  the  character  in  which  a  portion  of  the  profits  was  received 
did  not  affect  the  result.  For  a  person  who,  as  executor  or  trustee, 
merely  employed  money  in  trade  or  business,  and  shared  the  profits  aris- 
ing from  it,  incurred  all  the  liabilities  of  a  partner,  although  he  in  fact 
had  personally  no  interest  whatever  in  the  matter,  (o)  On  the  other 
hand,  the  cestuis  que  trustent  were  also  liable ;  the  creditors  having  an 
option  against  which  of  the  two  they  would  proceed,  (p) 

Again,  persons  who  shared  profits  were  guasi-partners,  although  their 
community  of  interest  was  confined  to  the  profits.  In  Smith  v.  Wat' 
son,  (q)  a  broker,  who  was  paid  by  a  share  of  the  profits  arising  from  the 
sales  made  by  him,  and  who  was  therefore  a  quasi-partner  with  the 
person  employing  him,  was  nevertheless  held  to  have  no  interest  in 
tha  goods  sold. 

Distinction  between  sharing  profits  and  gross  returns. —  But  not- 
withstanding the  extent  to  which  the  doctrine  laid  down  in  Grace 
[*29]  *v.  Smith  was  carried,  it  was  long  ago  established  that  persons  who 
shared  only  gross  returns  were  not  gwasz-partners ;  and  subtle  dis- 
tinctions were  taken  between  a  payment  out  of  profits  and  a  payment 
varying  with  them,  and  between  an  agreement  to  share  profits  as  such 
aud  an  agreement  to  share  profits  not  as  profits,  but  as  something  else. 
These  subtleties  were  attributable  on  the  one  hand  to  the  establishment 
of  the  rule  that  persons  who  shared  profits  should  be  answerable  for 
losses,  and  on  the  other  to  a  disinclination  to  apply  that  principle  to 
cases  in  which  it  was  clear  that  those  who  shared  the  profits  never  in- 
tended to  become  partners  inter  se. 

First,  as  to  gross  returns.  In  Benjamin  v.  Porteus,  (r)  an  agreement 
was  made  between  the  plaintiff  and  a  broker,  by  which  the  broker,  in- 
stead of  a  commission  on  the  sales  effected  by  him  for  the  plaintiff,  was 
to  have  the  whole  proceeds  of  the  sales  less  2s.  6c/.  per  lb.,  which  was  to 
be  paid  to  the  plaintiff.  This  was  held  not  to  give  the  broker  such  an 
interest  in  the  goods  sold  by  him  as  to  render  him  an  incompetent  wit- 

(n)  Barry  v.  Nesham,  3  C.  B.  641.  fore  he  could  not  sue  the  copart- 

Compare    Pott    v.    Eyton,   id.    32,  ners  of  his  own  trustee.  But  surely 

infra,  p.  30.  this  was   wrong.     There  was   no 

(o)  Wightman  v.  Townroe,  1  M.  partnership   between  the  plaintiff 

&  S.   412;  Ex  parte  Garland,    10  and    defendants,   no  contract  be- 

Ves.  119;  Labouchere  v.  Tupper,  11  tween  them. 

Moore,  P.  C.  198.  (q)  2  B.  &  C.  401.     And  see  Bur- 

(p)  See  Goddard  v.  Hodges,  1  Cr.  nell  v.  Hunt,  5  Jur.  650,  Q.  B.,  and 

&  M.  33.     In  this  case  the  court  Cheap  v.  Cramond,  4  B.  &  A.  663. 

held  that  the  cestui  que  trust  was  (r)  2  H.   Blacks.   590.     See,  too, 

liable  to  creditors,  and  that  there-  Dixon  v.  Cooper,  3  Wils.  40. 

84 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT    DETERMINED.  *30 

ness  for  the  plaintiff,  his  principal,  in  an  action  for  their  price.  This 
decision  seems  to  have  paved  the  way  to  others  which  went  far  beyond 
it.  In  Dry  v.  Boswell.  (s)  Lord  Ellenborough  held  that  no  guasi-part- 
nership  subsisted  between  the  owner  of  a  barge  and  the  man  who  worked 
it,  and  who  received  for  his  wages  half  the  gross  earnings ;  and  in  Mair 
v.  Glennie,  (t)  where  the  captain  of  a  ship  was  to  be  paid  one-fifth  of 
the  profit  or  loss  on  an  intended  voyage,  it  was  held  that  he  and  the 
owners  of  the  ship  were  not  quasi-partners.  It  had  previously  been  de- 
cided, in  Wilkinson  v.  Frctzier,  {u)  that  the  crew  of  a  whaling-ship,  who 
were  to  be  paid  by  the  owners  a  certain  share  of  the  oil  brought  home, 
were  not  partners  with  them. 

The  distinction  between  gross  returns  and  profits  (or,  as  they  are 
sometimes  called,  gross  profits  and  net  profits)  was  acted  upon  by  Sir. 
Baron  Parke  in  Herjhoe  v.  Burge,  (a?)  when  he  told  the  jury  "a  person 
who  shares  gross  profits  is  not  a  partner ;  but  a  person  who  shares  net 
profits  is  prima  facie  to  be  considered  as  a  partner."  (x) 

Distinction  between  sharing  profits  and  payments  varying  with 
them.—  Next,  as  to  the  distinction  between  payments  out  of  profits  aa 
such  and  payments  not  out  of  them  as  such.  The  great  enforcer  of  the 
distinction  in  question  was  Lord  Eldon,  who  seems  to  have  been  led  to 
make  it  by  the  impossibility  of  otherwise  reconciling  Grace  v.  Smith, 
and  Bloxham  v.  Pell.  In  Ex  parte  Hamper  (y)  his  lordship  is  reported 
to  have  said : 

"  It  is  clearly  settled,  though  I  regret  it,  that  if  a  man  stipulates  that 
as  the  reward  of  his  labor  he  shall  not  have  a  specific  interest  in  the 
business,  but  a  given  sum  of  money  even  in  proportion  to  a  given 
quantum  of  the  profits,  that  will  not  make  him  a  partner ;  but  if  he 
agrees  for  a  part  of  the  profits  as  such,  giving  him  a  right  to  an  account, 
though  having  no  property  in  the  capital,  he  is  as  to  third  persons  a 
partner,  and  in  a  question  with  third  persons  no  stipulation  can  protect 
him  from  loss." 

*Other  cases  decided  by  his  lordship  contain  dicta  to  the  same  [*30] 
effect,  (a)  and  the  distinction  must  be  considered  as  settled  in  point 
of  law.    The  latest  case  upon  this  subject  is  Pott  v.  Eyton.  (6)    The  de- 
fendant Eyton  was  concerned  in  a  colliery,  and  the  defendant  Jonea 
kept  a  shop  for  supplying  the  workmen  at  the  colliery.    Eyton  built  the 

(s)  1  Camp.  330.    And  see  Wish  (x)  Heyhoe  v.  Burge,  9  C.  B.  431. 

v.  Small  in  the  note  there.  See  id.  440,  444. 

(t)  4  M.  &  S.  240.     The  expres-  (y)  17  Ves.  412. 

sion  profit  or  loss  in  this  case  must  (a)  See  Ex  parte  Rowlandson,  1 

have  been  held  equivalent  to  gross  Rose,  89;  Ex  parte  Langdale,   18 

returns.  Ves.  300 ;  Ex  parte  Watson,  19  id. 

(u)  4  Esp.  182.    See  ante,  p.  19,  461. 

note  (a;).  (b)  3  C.  B.  32.    See  f  urther  as  to 

this  case  infra,  §  2  (2). 


*31  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

shop;  licenses  to  sell  tea,  etc.,  were  taken  in  his  name,  and  he  paid  for 
the  goods  supplied  to  the  shop.  Jones  managed  the  shop  business. 
Eyton  received  first  seven  and  afterwards  five  per  cent,  on  the  amount 
of  all  sales  to  the  workmen,  and  Jones  had  all  the  rest  of  the  profits  of 
the  shop  from  whatever  source  derived.  The  question  was  whether 
Eyton  and  Jones  were  partners  or  qua  si-partners.  The  jury  found  that 
there  was  no  agreement  to  share  profit  and  loss,  and  the  court  of  com- 
mon pleas  acted  on  the  distinction  taken  in  Ex  parte  Hamper,  and  on 
the  distinction  between  profits  and  gross  returns,  and  held  that  no  part- 
nership or  guasi-partnership  existed. 

Loans. —  A  loan  of  money  to  be  repaid  with  interest,  however  exorbi- 
tant, did  not  constitute  a  guasz-partnership  between  the  borrower  and 
the  lender  (c)  unless  profits  were  expressly  pointed  at  as  the  fund  for 
payment,  (d) 

2.  Modifications  introduced  by  the  house  of  lords  in  Cox  v.  Hickman. 

Such  was  the  state  of  the  law  when  the  case  of  Cox  v. 
Hickman  came  before  the  house  of  lords;  and  that  tribunal, 
in  effect,  decided  that  persons  who  share  the  profits  of  a 
business  do  not  incur  the  liabilities  of  partners  unless  that 
business  is  carried  on  by  themselves  personally  or  by  others 
as  their  real  or  ostensible  agents,  (e) 

The  question  in  Cox  v.  Hickman  (f)  was  substantially 
whether  the  scheduled  creditors  to  a  deed  of  arrangement, 
who  were  to  be  paid  their  debts  out  of  the  profits  of  their 
debtors'  business,  were  liable  to  debts  contracted  by 
[*31]  the  trust*ees  in  carrying  on  that  business  pursuant  to 
the  deed ;  (g)  and  it  was  ultimately  decided  that  they 
were  not. 

(c)  Grace  v.  Smith,  2  Wm.  Blacks,  p.  21.  Owen  v.  Body,  5  A.  &  E.  28, 
998.  and  Janes  v.  Whitbread,  11  C.  B. 

(d)  Gilpin  v.  Enderby,  5  B.  &  A.  406,  may  also  be  referred  to  on  the 
954;  Fereday  v.  Hordern,  Jac.  144;  subject  of  partnership  created  by 
Bloxam  v.  Pell,  ante,  p.  27.  See  creditors'  deeds ;  and  as  to  the  non- 
as  to  the;two  first  cases,  ante,  p.  16.  liability  of  inspectors  for  debts  not 

(e)  Cox  v.  Hickman,  8  H.  L.  C.  contracted  by  them  as  principals, 
268.  see  Redpath  v.  Wigg,  L.   R.  1  Ex. 

(/)  Hickman  v.  Cox,  18  C.  B.  617,  335 ;  Easterbrook  v.  Barker,  L.  R.  6 

and  3  C.  B.  N.  S.  523;  Cox  v.  Hick-  C.  P.  1. 

man,  8  H.    L.    C.   268.     See,  also,        (g)  The  defendants  actually  sued 

The  Stanton  Iron  Co.  21  Beav.  164;  were  two  trustees,  who  were  also 

Price  v.  Groom,  2  Ex.  542,  and  ante,  scheduled  creditors ;  one  of  them 


CH.  I,  SEC.  II.]       NATURE   OF   CONTRACT   DETERMINED.  *31 

The  lords  were  unanimous  in  treating  the  matter  before 
them  as  a  mere  question  of  agency,  and  in  holding  that  the 
circumstance  that  the  profits  of  the  business  were  to  be 
shared  by  the  scheduled  creditors  was  by  no  means  suffi- 
cient to  show  that  the  trustees  were  their  agents  and  au- 
thorized to  act  as  such  on  their  behalf,  (h) 

Observations  on  the  decision  of  the  house  of  lords. — 
In  Cox  v.  Hickman  the  persons  whose  liability  was  in  ques- 
tion were  only  entitled  to  share  profits  to  the  amount  of 
their  respective  debts,  and  this  circumstance  was  greatly 
relied  upon  as  distinguishing  the  case  from  Waugh  v.  Carver, 
and  others  of  that  class,  in  which  the  profits  were  shared  to 
an  indefinite  extent.  But  it  is  plainly  not  consistent  with 
the  reasoning  in  Cox  v.  Hickman  to  hold  that  the  mere  fact 
that  profits  are  shared  indefinitely  raises  an  irrebuttable 
presumption  that  those  who  share  them  are  the  principals 
of  those  who  make  them.  The  circumstance  that  one  per- 
son shares  all  the  profits  made  by  another  is  no  doubt  an 
important  element  to  be  considered  in  determining  the  true 
relation  in  which  those  persons  stand  to  each  other;  but  it 
no  more  conclusively  shows  such  relation  to  be  one  of 
agency  than  it  conclusively  shows  that  the  persons  in  ques- 
tion are  truly  partners  inter  se.  In  fact,  although  the 
house  of  lords,  in  deciding  Cox  v.  Hickman,  professed  to 
overrule  no  previous  authority,  the  effect  of  that  decision 
has  unquestionably  been  to  put  a  great  branch  of  partner- 
ship law  on  a  substantially  new  footing.  The  following 
more  recent  decisions  conclusively  show  this. 

More  recent  decisions. —  In  Kilshaw  v.  Jukes,  (i)  it  was 
held  that  a  person  who  advanced  money  and  supplied  goods 
to  two  others  on  the  terms  of  being  repaid  the  advances 

never   acted  as  trustee,   and    the  the    defendants   and   that  of  the 

other  had  retired  from  the  trustee-  other  scheduled  creditors, 
ship  before  the  debts  in  question        (h)  Baron  Bramwell  had  taken 

were     contracted.      But    all    the  the  same  ground.    See  3  C.  B.  N. 

judges  agreed  that  there  was  no  S.  552. 
difference  between  the  liability  of       (9  3  Best  &  Sm.  847. 

87 


*32  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

and  price  of  the  goods  out  of  the  profits  of  a  building  specu- 
lation, if  such  profits  should  be  sufficient  for  the  purpose, 
was  not  liable  to  debts  contracted  by  them  for  the  pur- 
poses of  the  speculation. 
[*32]       *In  The  English  and  Irish  Church  and  University 
Insurance  Society,  (k)  it  was  held  that  the  holders  of 
\  policies  of  insurance  who  were  entitled  to  be  paid  out  of  the 
{(funds  of  an  insurance  society  not  only  the  sums  originally  in- 
sured, but  also  such  bonuses  as  by  the  rules  of  the  society 
might  be  added  thereto  out  of  the  profits  of  the  society,  were 
not  liable  as  partners  with  the  members  of  the  society  either 
to  the  holders  of  other  policies  issued  by  it,  or  to  its  other 
creditors. 

In  Bullen  v.  Sharp,  (I)  the  whole  profits  of  a  son's  busi- 
ness were  assigned  over  to  his  father  and  another  person 
upon  trust,  first  to  pay  the  father  5001.  a  year,  to  be  in- 
creased to  a  sum  equal  to  one-fourth  of  the  profits  when 
one-fourth  thereof  amounted  to  more  than  500/.  a  year; 
secondly,  to  pay  an  annuity  to  the  son;  thirdly,  to  form  a 
reserve  fund  for  the  benefit  of  the  son ;  and  fourthly,  to 
pay  the  residue  of  the  profits  to  the  son.  The  court  of 
common  pleas  held  the  father  liable  for  the  engagements 
of  the  son  upon  the  ground  that,  the  profits  having  been  as- 
signed to  him,  he  had  a  direct  interest  in  the  business.  On 
appeal,  however,  this  decision  was  reversed,  on  the  ground 
that  the  business  was  really  the  son's,  and  that  the  father's 
interest  in  it  was  not  such  as  to  render  the  son  his  asrent 
for  carrying  it  on. 

In  Shaw  v.  Gait,  (m)  it  was  held  that  a  clerk,  entitled  to 

a  fixed  salary,  and  in  addition  thereto  to  one-third  of  the 

net  profits  of  the  business  of  his  employers,  was  not  liable 

,,to  their  creditors.     The  salary  and  share  of  profits  were 

'  only  intended  as  a  remuneration  for  his  services,  and  the 

(k)  1  Hem.  &  M.  85.    Compare        (t)  L.  R.  1  C.  P.  86,  reversing  18 
Be  Albion  Life  Assur.  Soc.  16  Ch.    C.  B.  N.  S.  614. 
D.  83.  (m)  16  It.  Com.  Law  Rep.  867. 

88 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT    DETERMINED.  *33 

profits  were  to  be  ascertained  from  balance-sheets  prepared 
by  the  employers  upon  the  principle  theretofore  adopted 
by  them. 

In  Holme  v.  Hammond,  (n)  five  persons  agreed  to  become 
partners  for  seven  years,  and  to  share  profits  and  losses 
equally,  and  they  further  agreed  that  if  any  partner  died 
within  the  seven  years,  the  survivors  should  continue  the 
business  and  pay  to  the  executors  of  the  deceased  partner 
the  same  share  of  profits  which  he  would  have  had  if  liv- 
ing. One  of  the  partners  died;  he  had  no  capital 
in  the  firm,  but  on  his  *death  the  firm  was  indebted  to  [*33] 
him  in  respect  of  undrawn  profits  and  other  matters. 
After  his  death  the  business  was  carried  on  by  the  survivors ; 
his  executors  took  no  part  in  the  management  of  the  busi- 
ness, but  they  claimed  one-fifth  of  the  profits  made  since 
his  death,  and  they  were  furnished  with  accounts  in  which 
they  were  credited  with  such  profits.  The  plaintiff  sued 
the  executors  in  respect  of  a  contract  made  by  the  surviv- 
ing partners  after  the  death  of  the  deceased  partner,  but  it 
was  held  that  the  executors  were  not  liable;  for  the  surviv- 
ing partners  were  not  their  agents,  and  although  the  case 
did  not  fall  within  the  provisions  of  28  and  29  Victoria, 
chapter  86,  it  was  governed  by  the  principles  laid  down  in 
Cox  v.  Hickman. 

Again,  in  Mollwo,  March  c&  Co.  v.  Court  of  Wards,  (o) 
a  person  advanced  large  sums  of  money  to  merchants,  and 
took  as  a  security  a  charge  on  their  business,  with  exten- 
sive powers  of  control,  and  stipulated  for  a  large  commis- 
sion on  their  profits  whilst  anything  remained  due  to  him, 
and  for  payment  of  his  principal  and  twelve  per  cent,  in- 
terest. The  lender  had  not,  in  fact,  taken  any  profits,  and 
the  above  arrangement  was  afterward  varied  by  his  taking 
a  mortgage  for  his  principal  and  interest.  He  was  held 
not  liable  for  debts  contracted  by  them  whilst  the  above 
agreement  was  in  force.  The  court  held  that  the  transac- 
ts L.  R.  7  Ex.  218.  Pooley  v.  Driver,  5  Ch.  Div.  458, 
(o)  L.  R.  4  P.  C.  419.    Compare    noticed  infra,  p.  38. 

89 


*34:  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

tion  was  really  a  loan.  It  was  urged  in  vain  that  even  if 
there  was  no  partnership  the  debtors  were  the  agents  of 
the  creditor  to  earn  the  principal,  interest  and  commission 
to  which  he  was  entitled.  But  this  contention  very  prop- 
erly failed ;  there  being  no  more  reason  for  inferring  agency 
than  partnership  from  an  agreement  to  share  profits. 

Observations  on  these  cases. —  There  can  be  no  doubt 
that  in  all  these  cases  the  decisions  would  have  been  the 
other  way  had  they  occurred  before  Cox  v.  Hickman;  and 
they  are  particularly  valuable  as  showing  that  the  prin- 
ciples on  which  that  case  was  decided  by  the  house  of 
lords  may  now  be  safely  relied  upon,  in  opposition  to  the 
old  rule,  which,  before  that  important  decision,  was  consid- 
ered too  firmly  settled  to  be  questioned.  In  fact,  the  strong 
tendency  of  the  above  decisions  is  to  establish  the 
[*34]  doctrine  that  no  ^person  who  does  not  hold  himself 
out  as  a  partner  is  liable  to  third  persons  for  the  acts 
of  persons  whose  profits  he  shares,  unless  he  and  they  are 
really  partners  inter  se,  or  unless  they  are  his  agents;  (p) 
and,  in  the  author's  opinion,  this  is  now  the  law.  (q)  At 
the  same  time,  persons  may  find  that  they  are  partners  for 
all  purposes,  although  they  only  intended  to  be  so  for  pur- 
poses beneficial  to  themselves,  (r) 

For  the  guidance,  however,  of  those  who  may  think 
that  the  writer  has  gone  too  far  in  representing  the  old  law 
as  completely  superseded,  the  following  more  limited  prop- 
ositions are  submitted  as  at  least  conclusively  established, 
and  as  applicable  even  in  cases  not  within  28  and  29  Vic- 
toria, chapter  86. 

Effect  of  Cox  v.  Hickman. —  1.  That  persons  who  share 
the  profits  of  a  business  are,  like  other  persons,  only  liable  for 
the  acts  of  themselves  and  of  their  real  or  ostensible  agents. 

(p)  As  in  Steel  v.  Lester,  3  C.  P.  Co.  v.  Court  of  Wards,  L.  R.  4  P. 

D.  121.     See  below,  p.  38,  note  (d).  C.  419.     See,  also,  Ex  parte  Ten- 
fa)  See  Baron  Bram well's  judg-  nant,  6  Ch.  D.  303. 

ment  in  Bullen  v.   Sharp,  L.  R.    1        (r)  See  Pooley  v.  Driver,  5  Ch.  D. 

C.  P.  86;  Holme  v.  Hammond,  L.  458,  noticed  infra,  p.  38. 

R.  7    Ex.   218;  Mollwo,    March  & 

90 


CH.  I,  SEC.  II.]      NATURE    OF   CONTRACT   DETERMINED.  *35 

2.  That  whether  in  any  particular  case  the  relation  of 
principal  and  agent  does  or  does  not  exist  between  one  per- 
son who  carries  on  a  business  and  another  person  who 
shares  its  profits  depends  not  upon  the  mere  fact  that  the 
business  is  carried  on,  more  or  less,  for  the  benefit  of  the 
latter,  but  upon  all  the  circumstances  of  the  case. 

3.  That  the  relation  of  principal  and  agent  is  not  con- 
stituted merely  by  an  agreement  which  entitles  one  person 
to  share  the  gross  returns  of  a  business  or  adventure  con- 
ducted by  another. 

4.  That  the  relation  of  principal  and  agent  is  not  consti- 
tuted merely  by  an  agreement  which  entitles  one  person  to 
be  paid  definite  sums  out  of  the  profits  made  by  another. 

5.  That  the  relation  of  principal  arid  agent  is  not  consti- 
tuted merely  by  an  agreement  which  entitles  one  person  to 
be  paid  sums  varying  with  the  profits  made  by  another. 

6.  That  the  relation  of  principal  and  agent  is  not  con- 
stituted merely  by  the  existence  of  a  trust,  entitling  one 
person  to  profits  made  by  another. 

*7.  That  prima  facie  the  relation  of  principal  and  [*35] 
agent  is  constituted  by  an  agreement  entitling  one 
person  to  share  the  profits  made  by  another  to  an  indefinite 
extent;  but  that  this  inference  is  displaced  if  it  appears  from 
the  whole  agreement  that  no  partnership  or  agency  was 
really  intended. 

8.  That  in  these  as  in  all  other  cases  the  courts  will  be 
astute  to  defeat  fraud,  and  to  hold  partnerships  to  be  created 
if  they  are  intended,  although  the  intention  may  be  care- 
fully concealed. 

The  first,  second,  fourth  and  sixth  of  these  rules  appear 
to  be  warranted  by  Cox  v.  Hickman  and  Mollioo,  March,  & 
Co.  v.  Court  of  Wards;  the  third  and  fifth  by  older  author- 
ities not  touched  by  those  decisions;  the  seventh  is  proba- 
bly the  most  correct  mode  of  expressing  the  effect  of  Cox  v. 
Hickman  and  Mollwo,  March  &  Co.  v.  Court  of  Wards  on 
Waugh  v.  Carver,  and  other  cases  of  that  class ;  the  eighth 

91 


*36  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

speaks  for  itself,  and  is  illustrated  by  Pooler/  v.  Driver  and 
Ex  parte  Delhasse,  which  will  be  noticed  presently. 

3.  The  act  of  28  and  29  Victoria,  chapter  86. 

In  order  to  amend  the  law  by  which  persons  sharing 
profits  were  held  liable  to  losses,  the  act  of  28  and  29  Vic- 
toria, chapter  86,  was  passed.  This  act  (commonly  called 
Bovill's  act)  is  entitled  "  An  act  to  amend  the  law  of  part- 
nership." It  received  the  royal  assent  on  the  5th  of  July, 
1865,  and  enacts  as  follows: 

1.  The  advance  of  money  by  way  of  loan  to  a  person  engaged  or  about 
to  engage  in  any  trade  or  undertaking  upon  a  contract  in  writing  with 
such  person  that  the  lender  shall  receive  a  rate  of  interest  varying  with 
the  profits,  or  shall  receive  a  share  of  the  profits  arising  from  carrying 
on  such  trade  or  undertaking,  shall  not,  of  itself,  constitute  the  lender 
a  partner  with  the  person  or  the  persons  carrying  on  such  trade  or  under- 
taking, or  render  him  responsible  as  such. 

2.  No  contract  for  the  remuneration  of  a  servant  or  agent  of  any  per- 
son engaged  in  any  trade  or  undertaking  by  a  share  of  the  profits  of 
such  trade  or  undertaking  shall,  of  itself,  render  such  servant  or  agent 
responsible  as  a  partner  therein,  nor  give  him  the  rights  of  a   part- 
ner, (s) 

[*36]  *3.  No  person  being  the  widow  or  child  of  the  deceased  partner 
or  trader,  and  receiving  by  way  of  annuity  a  portion  of  the  profits 
made  by  such  trader  in  his  business,  shall,  by  reason  only  of  such  receipt, 
be  deemed  to  be  a  partner  of  or  to  be  subject  to  any  liabilities  incurred 
by  such  trader. 

4.  No  person  receiving  by  way  of  annuity  or  otherwise  a  portion  of 
the  profits  of  any  business,  in  consideration  of  the  sale  by  him  of  the 
good-will  of  such  business,  shall,  by  reason  only  of  such  receipt,  be  deemed 
to  be  a  partner  of  or  be  subject  to  the  liabilities  of  the  person  carrying 
on  such  business. 

5.  In  the  event  of  any  such  trader  as  aforesaid  being  adjudged  a  bank- 
rupt, or  taking  the  benefit  of  any  act  for  the  relief  of  insolvent  debtors, 
or  entering  into  an  arrangement  to  pay  his  creditors  less  than  twenty 
shillings  in  the  pound,  or  dying  in  insolvent  circumstances,  the  lender 
of  any  such  loan  as  aforesaid  shall  not  be  entitled  to  recover  any  portion 

(s)  Quozre,  if  this  deprives  him  of    against  his  master,  but  to  protect 
a  right  to  an  account?    See  Har-    each  from  liability  to  third   par- 
rington  v.  Churchward,  6  Jur.  N.  S.    ties  by  reason  of  the  acts  of  the 
576.     The  object  of  the  act  was  not    other. 
to  deprive  the  servant  of  his  rights 

93 


CH.  I,  SEC.  II.]       NATURE    OF   CONTRACT   DETERMINED.  *37 

of  his  principal,  or  of  the  profits  or  interests  payable  in  respect  of  such 
loan ;  nor  shall  any  such  vendor  of  a  good-will  as  aforesaid  be  entitled  to 
recover  any  such  profits  as  aforesaid  until  the  claims  of  the  other  credit- 
ors of  the  said  trader  for  valuable  consideration  in  money  or  money's 
worth  have  been  satisfied,  (t) 

Interpretation  of  "  person." —  In  the  construction  of  this  act  the 
word  "  person  "  shall  include  a  partnership  firm,  a  joint-stock  company 
and  a  corporation. 

Effect  of  the  statute. —  Upon  the  foregoing  enactment  it 
is  to  be  observed : 

1.  That  it  applies  to  an  extremely  limited  number  of 
cases,  and  leaves  wholly  untouched  a  large  number  of 
agreements  of  common  occurrence,  e.  </.,  all  such  as  had  to 
be  dealt  with  in  Waugh  v.  Carver,  Smith  v.  Watson,  Cheap 
v.  Cramond  and  Cox  v.  Hickman.  All  such  cases,  however, 
must  now  be  dealt  with  on  the  principles  laid  down  by  the 
house  of  lords  in  the  last-named  case,  (u) 

2.  That  it  in  no  way  modifies  the  doctrine  by  which  per- 
sons who  hold  themselves  out  as  partners  incur  the  liabili- 
ties of  partners. 

3.  That  to  entitle  a  person  lending  money  to  the  benefit 
of  the  act  there  must  be  a  contract  in  writing;  and  it  seems 
that  such  contract  must  be  signed,  (a?) 

4.  That  in  the  case  of  servants,  agents,   widows 

and  children,  *and  of  persons  selling  a  good-will,  [*37] 
there  is  no  necessity  for  any  contract  in  writing. 

5.  That  unless  a  retiring  partner  is  brought  within  the 
first,  second  or  third  section  he  is  in  no  better  position  than 
other  persons. 

6.  That  the  persons  within  the  second  and  third  sections 
are  not  within  the  fifth. 

7.  That  persons  who  lend  money  or  sell  a  good-will  in 

(f)  See  Ex  parte  Mills,  8  Ch.  569;  (u)  See  Holme  v.  Hammond,  L. 

and  Re  Stone,  33  Ch.  D.  541.     But  R.  7  .Ex.  218;  Moll  wo,  March  &Co. 

a  secured  creditor  can  sell  or  fore-  v.  Court  of  Wards,  L.  R.  4  P.  C. 

close,  as  the  case  may  be,  even  to  419. 

the  prejudice  of  other   creditors.  (x)  Pooley  v.    Driver,  5   Ch.    D. 

Baddeley  v.  Consolidated  Bank,  34  458,   where,    however,   there  was 

Ch.  D.   536.     See  below,  page  38,  only  a  draft  contract, 
note  (d). 

93 


*38  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

consideration  of  a  share  of  profits  cannot,  in  respect  of 
such  loan  or  profits,  compete  with  any  other  creditors  upon 
a  distribution  of  their  debtors'  assets,  (y) 

8.  That  the  third  section  only  applies  to  widows  and  chil- 
dren of  deceased  partners  of  traders :  i.  e.,  it  is  presumed, 
of  persons  formerly  liable  to  be  adjudicated  bankrupt  as 
traders. 

9.  That  the  fifth  section  does  not  deprive  the  lender  of  his 
right  to  retain  any  security  he  may  take  for  his  money;  (2) 
nor  to  foreclose  such  security,  {a) 

10.  That  the  act  may  be  made  an  instrument  of  fraud,  if 
a  person  is  allowed  to  lend  to  the  same  person  a  small  sum 
in  consideration  of  a  large  share  of  profits,  and  a  large  sum 
in  consideration  of  fixed  interest.  In  such  a  case,  if  a  fraud 
were  intended,  it  would  probably  be  defeated  by  holding  the 
lender  liable  as  a  partner,  or  at  least  by  holding  him  to  be 
within  the  fifth  section  as  to  both  loans.  But  where  there 
is  no  fraud,  a  person  who  has  advanced  money  under  the 
act,  and  has  also  bona  fide  made  other  advances  not  under 
it,  can,  on  the  bankruptcy  of  the  borrower,  prove  for  the 
latter  advances,  although  not  for  the  former,  (b)  A  person, 
however,  who  lends  money  on  the  terms  of  sharing  profits, 
and  then  agrees  to  take  a  fixed  rate  of  interest  instead  of 
them,  is  within  the  fifth  section  of  the  act,  and  cannot  prove 
in  competition  with  other  creditors,  (p) 

11.  That  it  is  apparent  from  the  words  "of  itself"  and 
"  by  reason  only"  in  the  first  four  sections  of  the  statute, 
that  it  was  not  intended  to  relieve  persons  who  are  really 

partners  (although  dormant)  from  the  liabilities  in- 
[*38]  cident  to  that  position.     *  Agreements  intended  to 

secure  the  benefit  of  the  act  to  lenders  of  money  are 
constantly  framed  with  all  sorts  of  clauses  which  expose 
them  to  the  risks  they  are  so  anxious  to  avoid. 

(2/)  #*  parte  Taylor,  12  Ch.  D.  366;    Bank,  34  Ch.  D.  536.    See  below, 
Ex  parte  Corbridge,  4  Ch.  D.  246.     p.  38,  note(d). 
(2)  Ex  parte  Sheil,  4  Ch.  D.  789.        (&)  See  Ex  parte  Mills,  8  Ch.  569. 
(a)  Baddeley     v.      Consolidated        (c)  Re  Stone,  33  Ch.  D.  541. 

94 


CH.  I,  SEC.  II.]      NATURE   OF   CONTRACT   DETERMINED. 


*38 


In  Baddeley  v.  Consolidated  Bank,  (d)  a  lender  of  money 
to  a  railway  contractor  on  the  security  of  his  plant,  and 
on  the  terms  of  receiving  interest  and  a  share  of  his  profits, 
was  held  to  be  liable  to  his  debts ;  the  formal  contract  be- 
tween the  parties  being  in  truth  a  device  to  conceal  the 
fact  that  they  were  really  partners. 

In  Ex  parte  Delhasse,  (e)  it  was  held  that  a  loan  to  a  firm 
on  the  security  of  the  business  of  the  borrowers  and  to  be 
repaid  out  of  it,  coupled  with  a  power  to  dissolve  their 
partnership,  was  not  within  the  act. 


(d)  34  Ch.  D.  536.  The  corre- 
spondence was  relied  upon  to  show 
the  real  truth. 

Baddeley  v.  Consolidated  Bank, 
34  Ch.  D.  536,  was  reversed  on  ap- 
peal (9th  Feb.,  1888),  W.  N.  1888, 
p.  30,  so  far  as  the  court  below  de- 
cided that  the  lender  was  liable  for 
the  debts  of  the  borrower.  The 
advances  were  made  to  enable  the 
borrower,  a  railway  contractor,  to 
perform  a  contract  to  make  a  rail- 
way ;  the  advances  were  to  be  em- 
ployed for  this  purpose ;  the  benefit 
of  the  contract  and  the  borrower's 
plant,  etc.,  were  assigned  to  the 
lender  as  a  security  for  the  loan ; 
and  the  lender  was  empowered  to 
take  possession  of  the  plant,  etc., 
and  himself  to  complete  the  con- 
tract if  necessary.  The  borrower 
agreed  to  repay  the  advances  with 
interest  at  the  end  of  six  months 
after  they  were  made,  and  there 
was  a  proviso  for  redemption  on 
such  repayment.  The  borrower 
also  agreed  to  pay  the  lender  a 
share  of  the  profits  arising  from 
the  contract  with  the  railway  com- 
pany when  that  contract  should  be 
completed,  and  it  was  stipulated 
that  in  ascertaining  those  profits 
the  borrower  should  be  allowed 
certain  sums  for  himself.     There 


was  a  mass  of  correspondence  re- 
lied upon  for  the  purpose  of  show- 
ing that  the  borrower  and  lender 
were  really  partners,  and  Mr.  Jus- 
tice Stirling  decided  that  the  corre- 
spondence showed  that  this  really 
was  the  case.  The  court  of  appeal 
differed  from  him  on  this  point, 
and  held  that  the  correspondence 
was  consistent  with  the  formal  se- 
curity, and  that  the  contract  be- 
tween the  parties  was  really  what 
it  purported  to  be,  viz.,  a  contract 
of  loan  upon  security.  The  court 
of  appeal  decided  that,  although 
the  case  was  not  within  section  1 
of  BovilTs  Act,  it  came  within  the 
principles  laid  down  in  Cox  v. 
Hickman  and  Mollwo,  March  &  Co. 
v.  Court  of  Wards.  The  statement 
in  the  text  on  page  34,  lines  1  to  7, 
may,  it  is  apprehended,  be  now 
safely  relied  upon.  The  court  of 
appeal  confirmed  the  decision  in 
Baddeley  v.  Consolidated  Bank  on 
the  construction  put  on  section  5 
of  Bovill's  Act.  See  p.  36,  note(Q, 
and  p.  37,  note  (a). 

Compare  the  last  case  with 
Frowde  v.  Williams,  56  L.  J.  Q.  B. 
62,  in  which  a  would-be  lender  was 
held  to  be  a  partner  with  the  bor- 
rower. 

(e)  7  Ch.  D.  511. 


95 


*39  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

In  Syers  v.  Syers,  (/)  the  plaintiff  lent  the  defendants 
money  on  the  terms  that  they  should  execute  a  deed  of 
partnership,  giving  the  plaintiff  a  share  of  the  profits  in  the 
business  of  the  defendants,  to  be  drawn  up  under  the  stat- 
ute in  question;  and  it  was  held  that  this  agreement  con- 
stituted the  parties  to  it  partners  in  the  business. 

In  Pooley  v.  Driver,  {g)  a  carefully  drawn  agreement  in- 
tended to  secure  to  the  lender  the  benefit  of  the  statute 
signally  failed  to  do  so.  In  that  case  A.  and  B.  entered 
into  partnership  for  fourteen  years  with  a  capital  of  30,000/., 
of  which  10,000/.  was  to  be  raised  by  way  of  loan  under 
the  above  act.  The  capital  was  to  be  divided  into  sixty 
shares  of  500/.  each,  of  which  twenty  were  to  belong  to  the 
persons  advancing  the  10,000/.  in  proportion  to  their  ad- 
vances. The  net  profits  were  to  be  also  divided  into  sixty 
shares,  of  which  twenty  were  to  belong  to  the  same  persons 
in  the  same  proportion.  At  the  end  of  the  partnership  an 
account  was  to  be  taken  in  the  usual  way :  the  moneys  ad- 
vanced were  to  be  returned;  but  if  it  appeared  that  the 
persons  advancing  the  10,000/.  had  received  more  than  their 
shares  of  profits,  the  excess  was  to  be  refunded,  but 
[*39]  not  *to  an  amount  exceeding  their  advances.  C.  ad- 
vanced 2,500/.  to  A.  and  B.  on  the  terms  of  an  agree- 
ment, which  incorporated  the  agreement  between  A.  and  B. ; 
which  provided  for  the  employment  of  the  capital  (includ- 
ing C.'s  advances)  in  the  business,  gave  C.  liberty  to  inspect 
and  take  copies  of  the  partnership  books,  entitled  him  to  five- 
sixtieths  of  the  estimated  annual  profits  of  the  business ;  and 
provided  for  a  final  account  and  repayment  at  the  end  of 
the  partnership  of  the  2,500/.,  unless  it  should  appear  that 
he  had  received  more  than  his  share  of  profits,  in  which  case 
he  was  to  refund  the  excess,  not  exceeding  his  2,500/. 

(/)  1  App.  Ca.  174.  Tennant,   6  Ch.    D.  303,  where  a 

(g)  5  Ch.  D.  458.     Compare  this    father  claimed  to  be  a  partner  with 

with  Mollwo,  March  &  Co.  v.  Court    his  son,  contrary  to  the  true  mean- 

of  Wards,  L.  R.  4  P.  C.  419,  noticed    ing  of   an   agreement    framed  to 

ante,  p.   33,  and  with  Ex  parte    avoid  a  partnership. 

96 


CH.  I,  8E0.  II.]       N\TURE    OF    CONTRACT    DETERMINED.  *40 

There  was  also  a  clause  empowering  A.  and  B.  to  pay- 
out the  2,5001.  in  the  event  of  C.'s  bankruptcy,  or  of  any 
dispute  between  the  parties,  and  an  arbitration  clause. 
This  agreement  with  C.  was  drawn  up  in  writing,  but  re- 
mained in  draft,  and  was  never  signed.  But  D.  also  ad- 
vanced money  on  the  same  terms,  embodied  in  a  written 
agreement  duly  signed  by  him  and  A.  and  B.  It  was  held 
by  Jessel,  M.  E. :  1.  That  the  unsigned  draft  agreement 
with  C.  was  not  a  sufficient  writing  to  bring  the  case  within 
the  statute.  2.  That  the  signed  agreement  with  D.  did  not 
entitle  him  to  the  protection  of  the  statute;  and  3,  that,  not- 
withstanding Cox  v.  Hickman,  and  that  class  of  cases  {ante, 
p.  30),  both  C.  and  D.  were  dormant  partners,  and  liable  as 
such  for  the  debts  of  A.  and  B.  The  judgment  in  this  case 
is  very  important,  and  well  deserves  attentive  study.  It 
proceeded  upon  the  ground  that  partnership  is  prima  facie 
the  result  of  participation  in  profits ;  and  that  the  true  result 
of  the  whole  arrangement  was  that  the  advances  were  not 
real  loans,  but  were  in  truth  contributions  of  capital  under 
color  of  loans. 

Observations  on  Pooley  v.  Driver. —  One  of  the  most  re- 
markable features  of  this  case  was  that,  when  the  time 
arrived  for  the  repayment  of  the  advances,  it  might  be  found 
that  not  only  was  there  nothing  to  repay,  but  that  the 
so-called  lenders  might  have  to  refund  part  of  what  they 
had  already  received,  even  to  the  extent  of  their  so-called 
loans.  (A)  This  practically  amounted  to  a  possible  loss  of 
their  advances,  and  distinguished  the  case  at  once 
from  a  true  *contract  of  loan ;  for  in  such  a  contract  [*40] 
the  money  lent  is  to  be  repaid  intact,  and  the  only 
risk  run  is  the  insolvency  of  the  borrower,  (i) 

(h)  See  the  clauses,  5  Ch.  D.  463,        (i)  See  ante,  p.  16. 
466,  and  the  comment  on  them  at 
p.  492. 

Vol.  I  — 7  97 


*40 


CONTRACTS   OF   PARTNERSHIP. 


[BOOK   I. 


A 


2.  By  holding  oneself  out  as  a  partner. 

Persons  who  hold  themselves  out  as  partners  incur  the  liabil- 
ities of  partners. 

The  other  mode  in  which  a  person  not  a  partner  becomes 
liable  as  if  he  were  one  is  by  so  conducting  himself  as  to 
iead  other  people  to  suppose  that  he  is  willing  to  be  regarded 
by  them  as  if  he  were  a  partner  in  point  of  fact.1    The  prin- 


i  To  establish  a  liability  against 
a  party  as  a  partner  for  the  acts  of 
others  it  must  be  made  to  appear 
that  a  copartnership  was  formed 
by  express  agreement,  or  that  there 
was  an  authorization  in  advance 
and  a  consent  to  be  bound  by  such 
acts  as  a  partner,  or  a  ratification 
of  the  acts  after  performance, 
with  full  knowledge  of  all  the  cir- 
cumstances, or  some  act  by  which 
an  equitable  estoppel  has  been  cre- 
ated. Central  City  Savings  Bank 
v.  Walker,  66  N.  Y.  424. 

As  to  the  liability  of  stockhold- 
ers in  cases  of  defective  incorpora- 
tion, or  after  the  expiration  of  the 
charter,  etc.,  see  ante,  p.  4,  note. 

Where  an  individual  represents 
himself  as  a  partner  in  a  certain 
firm,  or  permits  others  so  to  do,  or 
to  hold  him  out  as  such,  or  by  his 
acts  or  declarations  creates  in  the 
mind  of  another  a  reasonable  be- 
lief that  he  is  a  member  of  a  cer- 
tain firm,  he  is  liable  to  the  person 
so  believing,  on  a  bona  fide  contract 
made  by  the  latter  with  a  member 
of  such  firm,  as  such,  in  the  regu- 
lar course  of  such  business,  al- 
though in  fact  no  such  partnership 
existed.  Dailey  v.  Coons,  64  Ind. 
545;  Dodd  v.  Bishop,  30  La.  Ann. 
1178;  Buckingham  v.  Burgess,  3 
McLean,  364,  549;  Benedict  v. 
Davis,  2  id.  347 ;  Bowie  v.  Maddox, 


29  Ga.  285;  Fisher  v.  Bowles,  20 
111.  396;    Sherrod  v.  Langdon,  21 
Iowa,  518;  Grieff  v.  Bondonsquie, 
18    La.     Ann.     631;     Gumbel    v. 
Abrams,   20  id.   568;    Mershon  v. 
Ilobensack,  22  N.  J.  L.  372;  Craige 
v.  Warren,  3  Phil.  298 ;  Furber  v. 
Carter,  11  Humph.  271;  Crozier  v. 
Kirker,  4  Tex.  252 ;  Stearns  v.  Ha- 
ven, 14  Vt.  540;  Bragman  v.  Mc- 
Guire,  32  Ark.    733;    Mathews  v. 
Felch,  25  Vt.  536;  Rice  v.  Barrett, 
116  Mass.  312;  Thomas  v.  Green,  30 
Md.  1;    Barnett  Line  of  Steamers 
v.  Black  mar,  53  Ga.  98;  Cottrill  v. 
Vanduzen,    22  Vt.    511;    Hicks  v. 
Cram,  17  Vt.  449;  Craig  v.  Alver- 
son,  6  J.  J.  Marsh.  609 ;  Markham 
v.  Jones,  7  B.  Mon.  456 ;  Wabrath 
v.  Viley,  2  Bush,   478;   Shafer  v. 
Randolph,  99  Pa.  St.  250;  S.  C.  39 
Leg.  Intel.  288;  Slade  v.  Paschal. 
67  Ga.  541;   Gribble  v.   Harry,   2 
Tex.  App.  (Civ.)  702 ;  Grabenheimer 
v.  Rindskoff ,  54  Tex.  49 ;  White  v. 
Whaley,    1    Tex.    App.   (Civ.)    41; 
Rizer    v.    James,     26    Kan.    221; 
Humes    v.   O'Bryan,   74   Ala.   64; 
Hancock  v.  Hintrager,  60  la.  374; 
Kritzer    v.  Sweet,    57    Mich.  617; 
Entwistle  v.  Mulligan,  12  Atl.  Rep. 
(Pa.)  766;  Cirkel  v.  Crosswell,  36 
Minn.  323;  Sawyer  v.  Templar,  6 
West.    Rep.  441 ;  Harris  v.  Sessler, 
3  So.  W.  Rep.  316 ;  New  Orleans  v. 
Gauthreaux,    32    La.    Ann.    1126; 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT   DETERMINED. 


*40 


ciple  of  this  is  obvious  and  satisfactory,  and  is  well  laid 
down  by  Chief  Justice  Eyre  in  the  great  case  of  Waugh  v. 
Carver,  (k)     His  lordship  there  said : 

"  Now,  a  case  may  be  stated  in  which  it  is  the  clear  sense  of  the  parties 
to  the  contract  that  they  shall  not  be  partners;  that  A.  is  to  contribute 


Einstein  v.  Gourdin,  4  Woods,  C. 
Ct.  415;  Reed  v.  Kremer,  111  Pa. 
St.  482;  S.  C.  17  Weekly  Not.  Cas. 
233;  Lewis  v.  Wade,  1  Tex.  App. 
(Civ.)  383;  Rimel  v.  Hayes,  83  Mo. 
200;  Burgan  v.  Cahoon,  1  Penny. 
(Pa.)  321 ;  Sun  Ins.  Co.  v.  Kountz 
Line,  122  U.  S.  583;  Ala.  Fertilizer 
Co.  v.  Reynolds,  79  Ala.  497;  Town 
v.  Mason,  63  la.  345;  Newlin  v. 
Baily,  15  Bradw.  199;  Marble  v. 
Lypes,  82  Ala.  322;  Silby  v.  McCul- 
lough,  26  Mo.  App.  66 ;  Walker  v. 
Brown,  66  Tex.  556;  Baldy  v. 
Brackenridge,  2  So.  Rep.  (La.)  410. 
See,  also,  Baylor  Co.  v.  Craig,  6  So. 
West.  Rep.  (Tex.)  305. 

Where  there  is  no  partnership 
inter  se  there  can  be  none  as  to 
third  persons  unless  the  party 
sought  to  be  charged  has  by  his 
acts  estopped  himself  from  deny- 
ing that  he  is  a  partner.  Parchen 
v.  Anderson,  5  Mont.  438;  S.  C. 
51  Am.  Rep.  65;  Beecher  v.  Bush, 
45  Mich.  188;  S.  C.  40  Am.  Rep. 
465. 

A  partnership  as  to  third  persons 
can  only  arise  either  by  contract 
between  the  partners  themselves, 
by  implication  of  law  from  a  con- 
tract which  does  not  make  them 
partners  as  to  each  other,  but  does 
make  them  such  as  to  third  per- 
sons, or  by  some  act  or  declaration 
of  the  partners  by  which  third  per- 


sons are  reasonably  led  to  suppose 
that  the  partnership  exists.  Ein- 
stein v.  Gourdin,  4  Woods,  C.  Ct. 
415. 

In  order  to  fix  upon  a  person  lia- 
bility as  a  partner  on  the  ground 
that  he  has  been  held  out  as  such, 
two  things  must  occur:  first,  the 
alleged  act  of  holding  out  must 
have  been  done  either  by  him  or 
with  his  consent;  and  second,  it 
must  have  been  known  to  the  per- 
son seeking  to  avail  himself  of  it 
before  dealing  with  the  alleged 
partner.  Denithorne  v.  Hook,  112 
Pa.  St.  240;  S.  C.  17  Weekly  Not. 
Cas.  369 ;  Rimel  v.  Hayes,  83  Mo. 
200;  Thompson  v.  National  Bank, 
111  U.  S.  529;  Hannah  v.  Baylor, 
27  Mo.  App.  302. 

One  knowingly  allowing  himself 
to  be  held  out  to  the  world  as  a 
partner  is  estopped  from  asserting, 
as  against  a  party  contracting  with 
the  firm  upon  the  belief  that  he  is 
a  partner,  that  he  is  not  in  fact 
such;  and  it  is  not  necessary  for 
the  party  seeking  to  bind  such 
partner  to  show  that  he  gave  credit 
to  the  firm  on  account  of  such  part- 
ner's financial  ability.  Strecker  v. 
Conn,  90  Ind.  469. 

A  creditor  of  a  partnership  may 
prove  the  fact  of  a  partnership  as 
he  alleges  it  to  be  without  regard 
to  the  manner  in  which  the  parties 


(k)  Waugh  v.  Carver,  2  H.  Blacks,  found  stated  to  the  same  effect  in 
235.  See  Scarf  v.  Jardine,  7  App.  Ex  parte  Watson,  19  Ves.  461 ;  Ex 
Ca.  345,  now  the  leading  case  on  parte  Matthews,  3  V.  &  B.  125 ;  De 
this  subject.     The  principle  will  be    Berkom  v.  Smith,  1  Esp.  29. 

99 


*40 


CONTRACTS    OF    PARTNERSHIP. 


[book 


neither  labor  nor  money,  and,  to  go  still  farther,  not  to  receive  any 
profits.     But  if  he  will  lend  his  name  as  a  partner,  he  becomes,  as  against 


have  arranged  their  affairs  be- 
tween themselves;  he  is  not  con- 
cluded by  their  written  agreement 
as  to  the  relations  they  sustain  to 
each  other.  Reed  v.  Kremer,  111 
Pa.  St.  482;  S.  C.  17  Weekly  Not. 
Cas.  233. 

It  is  competent  for  creditors  to 
show  that  the  son  of  one  of  the 
parties  who  signed  the  articles  was 
the  real  partner  and  held  out  as 
such,  although  he  signed  articles 
in  the  name  of  his  mother.  Bishop 
v.  Austin,  33  N.  West.  Rep.  (Mich.) 
525. 

Where  the  conduct  of  a  party  is 
relied  upon  to  charge  him  as  a 
member  of  a  firm  of  which  he  is 
not  in  fact  a  member,  it  would  ap- 
pear that  the  creditor  relied  on 
such  conduct  and  trusted  the  firm 
on  the  faith  of  such  party  being  a 
member.  Cook  v.  Slate  Co.  36  O. 
St.  135;  S.  C.  38  Am.  Rep.  568. 

The  fact  that  an  agent  of  a  part- 
nership uses  the  firm  name  in 
transacting  its  business  without 
disclosing  that  he  is  not  a  member 
will  not  make  him  liable  as  part- 
ner to  those  with  whom  he  thus 
deals  unless  there  is  other  affirma- 
tive evidence  that  he  held  himself 
out  as  such.  Ihmsen  v.  Lathrop, 
.104  Pa.  St.  365;  S.  C.  42  Leg.  Intel. 
28. 

J.  F.  in  August,  1880,  sold  out  to 
the  wife  of  his  son,  who  bore  the 
same  name  as  himself,  and  she 
transferred  the  stock  to  her  hus- 
band, who  published  in  two  papers 
the  fact  of  his  purchase  of  the 
business.  He  continued  to  use  the 
old  letter-heads  in  his  correspond- 
ence, kept  the  old  signs  up,  and 


carried  on  the  store  in  the  name  of 
J.  F.  as  theretofore.  In  Novem- 
ber, 1880,  a  commercial  traveler 
of  the  plaintiff  who  knew  J.  F. 
(the  father)  sold  a  bill  of  goods  to 
the  son, —  the  father  being  pres- 
ent,—  and  these  and  other  goods 
ordered  by  letter  were  duly  deliv- 
ered. Neither  the  commercial 
traveler  nor  the  plaintiff  knew  of 
the  transfer  of  the  business.  Upon 
the  son's  subsequently  failing,  suit 
was  brought  against  the  father. 
Held,  in  the  absence  of  fraud  or  in- 
tention to  deceive,  that  the  father 
was  not  responsible.  Preston  v. 
Foellinger,  24  Fed.  Rep.  680.  See 
Notice  of  Dissolution. 

The  mere  fact  that  an  abbrevi- 
ated form,  as  "  Chas.  &  Wm.  Feick- 
ert"  instead  of  "  Charles  &  Will- 
iam Feickert,"  is  used  in  describing 
the  parties  of  a  note,  does  not,  as  a 
matter  of  law,  authorize  the  pub- 
lic to  assume  them  to  be  partners. 
Ryhiner  v.  Feickert,  92  111.  305. 

Where  one  member  of  a  firm  of 
millers  permits  his  copartner  to 
hold  the  firm  out  to  the  public  as 
dealers  in  grain,  and  knowingly  al- 
lows cards  and  letter  heads  to  be 
used  indicating  such  business,  he 
will  be  liable  with  his  copartner  on 
contracts  for  the  sale  or  purchase 
of  grain  for  future  delivery,  al- 
though such  contracts  were  made 
without  his  actual  knowledge  by 
his  copartner  in  the  firm  name. 
Williar  v.  Irwin,  11  Biss.  57. 

A  retired  partner  who  holds 
himself  out  as  a  member  of  the 
firm  after  his  retirement  will  be 
liable  to  those  dealing  with  the 
firm  under  the  belief  that  he  is 


100 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT    DETERMINED. 


*40 


all  the  rest  of  the  world,  a  partner,  not  upon  the  ground  of  the  real  trans- 
action between  them,  but  upon  principles  of  general  policy,  to  prevent 


still  a  member  thereof.  Slack  v. 
Parker,  20  Ir.  L.  T.  368;  S.  C.  54 
L.  T.  (N.  S.)  212. 

Where  a  firm  composed  of  two 
women  put  the  husband  of  one  in 
absolute  charge  of  the  business, 
and  he  made  purchases  on  his  own 
credit,  and,  with  his  wife's  knowl- 
edge and  consent,  acted  in  all  re- 
spects as  if  he  instead  of  his  wife 
was  one  of  the  partners,  held,  that, 
as  to  creditors  without  notice  to 
the  contrary,  he  was  to  be  consid- 
ered as  a  partner,  and  that  his 
statements  to  the  creditors  to  that 
effect  were  admissible  in  defense 
to  an  action  of  trover  for  goods 
taken  on  attachment;  and  that 
unless  superior  equities  had  arisen 
a  judgment  against  the  firm  con- 
cluded the  other  partner.  Par- 
shall  v.  Fisher,  43  Mich.  529. 

Where  several  persons  engage  in 
an  enterprise,  one  of  them  agree- 
ing to  assist  by  advancing  money, 
and  to  share  in  the  losses,  if  any, 
but  not  to  receive  any  part  of  the 
profits,  which  are  to  be  divided 
among  the  others  exclusively,  al- 
though such  one  is  not  to  be  deemed 
a  partner  as  between  the  others  and 
himself,  nevertheless,  if  he  holds 
himself  out  or  allows  himself  to  be 
held  out  as  a  partner  to  a  third 
person,  who,  under  the  belief  that 
he  is  such,  enters  into  a  contract 
with  them,  he  is  liable  upon  such 
contract.  Moss  v.  Jerome,  10  Bosw. 
220. 

Where  two  persons  authorize  a 
third  to  represent  and  hold  himself 
out  as  a  partner  with  them,  and, 
in  pursuance  thereof,  he  does  so, 
this  is  as  much  their  holding  them- 


selves out  as  such  partners  as  if 
the  same  representations  had  been 
made  by  them  in  person.  Hinman 
v.  Little,  23  Mich.  484. 

Where  an  obligation  signed  by 
two  persons  with  defendant  is,  on 
his  representation  that  he  is  a  mem- 
ber of  a  partnership,  exchanged 
for  another  signed  by  the  latter 
alone,  he  cannot,  in  an  action  by 
the  holder,  deny  that  he  is  a  part- 
ner. Burbank  v.  Haas,  9  La.  Ann. 
528. 

Where  two  out  of  three  partners 
gave  a  note  in  the  name  of  the 
two,  as  a  distinct  firm,  but  the 
three,  in  the  course  of  their  busi- 
ness, induced  the  belief  that  such 
was  their  firm  name,  held,  that  the 
three  were  liable  as  partners  on  the 
note.  Tarns  v.  Hitner,  9  Pa.  St. 
441. 

A.  represented  to  B.  that  C.  was 
his  nephew  and  that  they  intended 
to  purchase  some  cattle  together. 
Afterwards  C.  presented  to  B.  an 
order  purporting  to  be  signed  by 
A.,  stating  that  he  had  bought  the 
cattle,  and  asking  a  loan  of  $900. 
A.  denied  that  the  signature  to  the 
order  was  genuine,  and  B.  admit- 
ted that  it  was  not  genuine.  Held, 
that  it  was  competent  to  prove  the 
representations  made  by  A.  in  re- 
gard to  his  relations  to  C,  and  that 
if  they  were  such  as  to  create  a 
belief  in  the  mind  of  an  ordinarily 
prudent  man  that  he  would  be  re- 
sponsible for  money  advanced  to 
C.  he  is  estopped  from  denying 
such  liability.  Peck  v.  Lusk,  38 
Iowa,  93. ' 

The  defendants  agreed  to  enter 
into  copartnership  with  each  other 


101 


*40 


CONTRACTS   OF   PAETNEESIIIP. 


[BOOK   I. 


the  frauds  to  which  creditors  would  be  liable  if  they  were  to  suppose 
that  they  lent  their  money  upon  the  apparent  credit  of  three  or  four 


as  produce  commission  merchants, 
the  business  to  coin  men  ce  as  soon 
as  one  of  the  number  should  re- 
ceive and  pay  in  $6,000.  The 
money  was  not  paid  in,  but  never- 
theless an  office  was  taken  by  the 
parties,  upon  which  a  sign  was 
placed  containing  the  name  of  the 
firm,  and  bill-heads  were  printed 
and  a  set  of  books  opened  in  the 
firm  name,  without  any  objection 
on  the  part  of  either  of  the  part- 
ners, or  any  attempt  to  repel  the 
idea  of  a  partnership.  One  of  the 
partners,  in  the  name  of  the  firm, 
made  an  agreement  with  H.,  by 
which  the  latter  was  employed  as 
a  traveling  agent  of  the  firm,  his 
compensation  being  a  part  of  the 
profits  of  the  business  he  should 
obtain ;  and  the  firm  agreed  to  ac- 
cept and  pay  H.'s  draft  upon  them 
in  favor  of  the  plaintiff  for  the 
amount  H.  owed  to  the  plaintiff. 
Held,  1.  That  the  defendants  had, 
by  their  acts  and  language,  held 
themselves  out  and  represented 
themselves  to  H.  as  partners,  and, 
as  to  the  business  with  him,  they 
acted  as  partners,  and  he  believed 
them  to  be  and  dealt  with  them  as 
such.  2.  That  the  agreement  with 
H.,  though  made  by  one  of  the 
partners  without  the  knowledge  of 
the  others,  being  within  the  legiti- 
mate business  of  the  firm,  was  as 
binding  upon  the  firm  as  it  would 
have  been  had  all  assented  to  it. 
Burns  v.  Rowland,  40  Barb.  368. 

Partners  to  run  a  saw-mill,  make 
and  sell  lumber,  and  carry  on  the 
lumber  business  generally,  as  the 
latter  generally  includes  the  buy- 
ing of  timber  as  well  as  the  selling 


of  lumber,  are  commercial  part- 
ners. Copley  v.  Lawhead,  11  La. 
Ann.  615. 

Parties  buying  materials  and 
manufacturing  them  into  carriages 
for  sale  are  commercial  partners; 
but  mechanics  making  carriages  to 
order  or  repairing  them  are  not 
necessarily  so.  Co  wand  v.  Pulley, 
11  La.  Ann.  1. 

Although  a  purchase  of  property 
be  on  separate  and  not  on  joint  ac- 
count, yet,  if  the  interests  of  the 
purchasers  are  afterwards  mingled, 
with  a  view  to  a  joint  sale,  a  part- 
nership exists  from  the  time  that 
the  shares  are  brought  together. 
Rogers  v.  Nichols,  20  Tex,  719. 

Where  grain  received  at  a  mill 
as  toll  was  mixed  up  and  became 
the  subject  of  traffic  between  the 
defendants,  each  being  part  owner 
and  interested  in  the  proceeds  of 
the  sale,  held,  that  they  were  part- 
ners in  that  particular  business. 
Benson  v.  M'Bee,  2  McMull.  91. 

If  four  persons,  by  an  agreement 
in  writing,  enter  into  an  associa- 
tion for  the  manufacture  of  paper, 
providing  for  the  purchase  of  stock 
and  the  sale  of  paper  indefinitely, 
they  are  partners  in  the  business, 
although  there  is  no  express  stipu- 
lation to  share  profit  and  loss,  as 
that  is  an  incident  to  the  prosecu- 
tion of  their  joint  business.  Barrett 
v.  Swann,  17  Me.  180. 

The  owner  of  a  quartz-mill  leased 
land  adjacent  to  the  mill,  and  con- 
tracted to  crush  ore  for  his  tenants 
and  run  it  into  their  amalgamating 
works  on  the  leased  premises  for  a 
fixed  price  per  ton,  and  also  agreed 
to  supply  the  tenants'  works  with 


102 


CH.  I,  SEO.  II.]      NATURE   OF   CONTRACT   DETERMINED. 


*40 


persons,  when,  in  fact,  they  lent  it  only  to  two  of  them,  to  whom  with- 
out the  others  they  would  have  lent  nothing. " 


motive  power  at  a  stipulated  price. 
Held,  that  the  landlord  did  not 
thereby  become  a  partner  with  his 
tenants.  Mears  v.  James,  2  Nev. 
342. 

F.  sued  H.  to  charge  him  as  a 
partner  with  M.  for  advances  made 
upon  consignment  of  snuff.  H.  de- 
nied liability  with  M.  as  a  partner. 
Held,  that  if  M.  and  H.  purchased 
on  joint  account  and  shipped  the 
snuff  to  be  sold  on  joint  account, 
then  they  are  liable  jointly ;  but 
that  if  they  were  not  jointly  con- 
cerned in  the  sale  the  conduct  of 
M.  in  making  the  shipment  on 
joint  account,  if  not  done  with  the 
knowledge  of  H.,  could  not  make 
it  a  partnership  transaction.  Fel- 
ichy  v.  Hamilton,  1  Wash.  C.  C. 
491. 

The  rule  as  to  the  joint  liability 
of  two  persons  holding  themselves 
out  to  a  party  with  whom  they  are 
dealing  as  partners  applies  to  two 
firms  assuming  to  constitute  but 
one  firm.  Beall  v.  Lowndes,  4  S.  C. 
258. 

H.  and  Harrington  were  never 
partners,  and  no  such  firm  as  H.  & 
Co.  ever  existed;  but  Harrington 
gave  plaintiff  a  note  for  some  stag- 
ing property  purchased  by  him, 
signed  "  H.  &Co.,  by  Harrington," 
without  the  knowledge  of  H.  Two 
or  three  years  before  said  note  was 
given  H.  was  informed  that  Har- 
rington was  using  the  name  of  H. 
&  Co.  in  his  staging  business,  and 
he  afterwards  saw  Harrington  and 
told  him  he  must  not  use  that  name 
to  injure  him,  and  he  said  he  would 
not.  The  plaintiff  did  not  know  of 
such  previous  use  of  that  name  at 


the  time  said  note  was  given,  and 
it  did  not  appear  whether  Harring- 
ton made  any  representations  to 
him  at  that  time.  Held,  that  H. 
was  liable  on  said  note.  Smith  v. 
Hill,  45  Vt.  90. 

Three  parties  agreed  in  writing 
"to  enter  upon  an  operation  em- 
bracing the  purchasing  and  selling 
of  shingles,"  one  to  purchase  and 
the  other  two  to  receive  and  sell 
them,  and  the  shingles  to  be  the 
property  of  these  two,  and  all  the 
capital  to  be  furnished  by  them, 
but  the  profits  and  losses  to  be 
equally  divided  among  the  three. 
Held,  that  the  three  were  partners 
as  to  third  persons.  Getchell  v. 
Foster,  106  Mass.  42. 

A  person  agreed,  in  writing,  to 
lend  to  a  firm  of  furniture  manu- 
facturers his  notes  for  $15,000,  in 
consideration  of  their  transfer  to 
him  of  their  entire  stock,  fixtures, 
debts,  good-will,  etc.,  with  a  view 
that  they,  as  his  agents,  close  the 
business,  and  deliver  to  him  the 
proceeds,  the  same  to  pay,  firstly, 
their  outstanding  liabilities;  sec- 
ondly, his  notes ;  and  the  balance, 
if  any,  to  them.  Held,  that  such 
person  was  not  liable  for  articles 
afterwards  purchased  by  them  in 
their  own  name  to  complete  un- 
finished work.  His  frequent  pres- 
ence at  the  store,  seeing  the  work 
go  on,  raised  no  presumption  of 
silent  partnership  or  of  an  implied 
contract  to  pay  for  the  articles. 
Noblit  v.  Bonaffon,  81  Pa.  St.  15. 

If  two  persons  occupy  the  same 
store  for  the  same  business,  and 
hold  themselves  out  as  partners, 
they  will  be  responsible  as  partners 


103 


*40 


CONTRACTS    OF    PARTNERSHIP. 


[BOOK    I. 


Effect  of  knowledge  that  a  person  who  holds  himself 
out  as  a  partner  is  not  a  partner. —  The  doctrine  that  a 
person  holding  himself  out  as  a  partner,  and  thereby  inducing 


to  third  persons  for  goods  purchased 
and  used  for  the  benefit  of  the  firm, 
whatever  may  be  their  agreement 
with  each  other,  even  though  such 
third  persons  suppose  themselves 
to  be  giving  credit  to  one  alone. 
Smith  v.  Smith,  27  N.  H.  244. 

When  two  or  more  persons  agree 
to  become  partners,  and  actually 
proceed  to  carry  into  execution  the 
joint  undertaking,  the  relation  of 
partners  will  exist  as  to  third  per- 
sons, although  the  conditions  of 
the  partnership  are  not  understood 
alike  by  the  partners.  Cook  v. 
Carpenter,  34  Vt.  121. 

In  an  action  against  a  person 
charging  him  as  a  partner,  it  is 
competent  for  him,  in  exonera- 
tion of  himself,  to  introduce  the 
original  articles  of  copartnership, 
of  which  he  is  alleged  to  have  been 
a  member.  Hunn  v.  M'Kee,  4 
Ired.  L.  475. 

In  an  action  against  the  brewery 
firm  of  G.  &  Co.,  of  which  F.  was 
a  member,  for  labor,  etc. ,  in  fitting 
up  a  restaurant  some  miles  from 
their  brewery,  the  defense  being 
misjoinder,  in  that  the  restaurant 
was  F.'s  alone,  and  the  plaintiff 
having  proved  that  G.  was  pres- 
ent at  the  fitting  up  of  tbe  restau- 
rant and  ordered  the  sign  thereof 
to  be  painted  "G.  &  Co."  and 
that  G.  had  delivered  beer  from 
the  brewery  in  payment  there- 
for, Jield,  that  the  books  of  the 
brewery  were  inadmissible  to  show 
in  rebuttal  that  the  beer  so  paid 
for  was  charged  to  F.  Ganze  v. 
Fricke,  57  Pa.  St.  31* 


Where,  in  an  action  against  two, 
charging  them  as  partners,  evi- 
dence has  been  given  to  prove  that 
one  who  denies  his  liability  as  a 
partner  had  so  held  himself  out  as 
a  partner  as  to  enable  the  other  de- 
fendant to  pledge  their  joint  credit 
if  he  chose,  evidence  is  admissible 
to  prove  that  the  latter,  in  the  ab- 
sence of  the  former,  represented 
the  former  to  be  his  partner  to  the 
plaintiffs,  as  tending  to  prove  that 
the  plaintiffs  relied  on  the  joint 
credit  of  the  two,  and  to  rebut  evi- 
dence previously  introduced  by  the 
defendants  tending  to  prove  that 
the  plaintiffs  relied  upon  the  credit 
of  one  of  the  defendants  and  of  a 
third  person.  Hicks  v.  Cram,  17 
Vt.  449. 

A  person  cannot  give  himself 
credit  as  the  partner  of  another  by 
holding  himself  out  as  such,  with- 
out the  consent,  express  or  implied, 
of  such  other  person.  Crook  v. 
Davis,  28  Mo.  94. 

A  person  who  is  not  a  partner, 
but  has  become  by  circumstances 
liable  as  partner,  does  not  thereby 
acquire  any  of  the  rights  of  a  part- 
ner. His  separate  property,  in  case 
of  insolvency,  must  be  adminis- 
tered by  his  trustee,  according  to 
the  insolvent  laws.  Glenn  v.  Gill, 
2  Md.  1. 

If  one  holds  himself  out  to  be  a 
partner  of  another  that  does  not 
make  him,  in  fact,  a  partner,  nor 
render  him  liable  as  such,  except 
to  those  who  are  thereby  led  to  be- 
lieve he  is  a  partner,  and  who  give 
credit  to  the  supposed  firm  upon 


104 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT   DETERMINED. 


*40 


others  to  act  on  the  faith  of  his  representations,  is  liable  to 
them  as  if  he  were  in  fact  a  partner,  is  nothing  more  than  an 


such  belief.  Wood  v.  Pennell,  51 
Me.  52;  Irvin  v.  Conklin,  36  Barb. 
64. 

The  fact  that  a  certain  number 
of  persons  held  themselves  out  as 
partners  in  the  transaction  of  their 


ners,"  or  any  particular  word  to 
describe  the  relation  existing  be- 
tween the  carriers,  need  not  be  in 
the  petition.  Wyman  v.  Chicago 
&  Alton  R.  Co.  4  Mo.  App.  35. 
A  line  of  stage-coaches  was  run 


business  will,  prima  facie,  estab-    by  the  two  defendants  from  Barre, 


lish  a  partnership  in  an  action  by 
the  parties  against  third  persons, 
or  by  one  standing  in  the  same 
position.  McCarthy  v.  Nash,  14 
Minn.  127. 

Facts  which  will  make  persons 
partners  as  to  third  persons  are 
not  always  enough  to  render  them 
partners  between  themselves.  The 
mere  fact  that  a  person  puts  a  cer- 
tain amount  of  money  into  a  busi- 
ness, and  permits  his  name  to  be 
used  as  a  partner,  will  not  make 
him  a  joint  owner  of  the  goods 
used  in  the  business,  unless  that 
was  so  agreed  and  understood  at 
the  time  he  so  placed  his  money 
and  permitted  the  use  of  his  name. 
It  does  not  render  the  goods  part- 
nership property,  so  as  to  affect 
the  right  of  the  original  owner  to 
recover  on  a  policy  of  insurance 
issued  to  him.  Lycoming  Ins.  Co. 
v.  Barringer,  73  111.  230. 

Where  several  common  carriers, 
each  having  its  own  line,  associate 
and  form  what,  to  the  shipper,  is 
a  continuous  line,  and  contract 
to  carry  goods  through  at  an 
agreed  price,  which  the  shipper 
pays  in  one  sum,  and  which  the 
carriers  divide  among  themselves, 
then  they  are  jointly  and  severally 
liable  to  the  shipper  with  whom 
they  have  contracted  for  a  loss 
taking  place  on  any  part  of  the 
whole  line ;  and  the  word  "  part- 


through  Holden,  to  Worcester,  and 
back,  and  it  was  agreed  that  one 
of  them  should  furnish  and  main- 
tain horses  and  coaches,  and  receive 
the  money  paid  for  the  transporta- 
tion of  passengers  between  Holden 
and  Worcester,  and  that  the  other 
should  do  the  like  between  Holden 
and  Barre.  They  hired  a  man  to 
drive  all  the  way  from  Barre  to 
Worcester  and  back,  for  a  certain 
sum  per  month,  and  perquisites; 
and  money  was  delivered  by  the 
plaintiff  to  this  driver  to  carry  from 
Barre  to  Worcester,  but  he  ab- 
sconded without  delivering  it. 
Held,  that  the  driver  was  the  serv- 
ant of  the  defendants  jointly,  and 
that  they  were  jointly  liable  to  the 
plaintiff  for  the  money.  Cobb  v. 
Abbott,  14  Pick.  289.  See,  also, 
Dwight  v.  Brewster,  1  Pick.  50. 

Where  three  persons  run  a  line 
of  coaches  over  a  route  which  is 
divided  into  three  sections,  the  oc- 
cupant of  each  paying  the  expenses 
of  his  own  section,  but  the  money 
received  as  fare  of  the  passengers, 
deducting  tolls,  being  divided 
among  the  parties  in  proportion  to 
the  distances  run  by  each,  they  are 
jointly  liable  as  copartners  to  a 
third  person,  not  a  passenger,  for 
an  injury  received  through  the 
negligence  of  the  driver  of  a  coach 
of  one  of  them.  Champion  v.  Bost- 
wick,  18  Wend.  175. 


105 


*40 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


illustration  of  the  general  principle  of  estoppel  by  conduct.  (I) 
It  is  therefore  wholly  immaterial  whether  the  person  hold- 


A  pool  arrangement  between  the 
owners  of  different  steamboats, 
whereby  the  excess  of  net  earnings 
of  one  boat  over  the  other  is  to  be 
divided  at  the  end  of  the  season, 
does  not  alone  constitute  a  partner- 
ship so  as  to  create  a  joint  liabil- 
ity for  the  negligence  of  either. 
Fay  v.  Davidson,  13  Minn.  523. 

If  the  several  proprietors  of  dif- 
ferent portions  of  a  public  line  of 
travel,  by  agreement  among  them- 
selves, appoint  a  common  agent  at 
each  end  of  the  route  to  receive  the 
fare  and  give  through  tickets,  this 
does  not,  of  itself,  constitute  them 
partners  as  to  passengers  who  pur- 
chase through  tickets,  so  as  to  ren- 
der each  one  liable  for  losses  oc- 
curring on  any  portion  of  the  line. 
Ellsworth  v.  Tartt,  26  Ala.  733. 

Where  there  were  three  distinct 
companies  of  passenger  carriers, 
one  on  the  Atlantic,  one  on  the 
Isthmus,  and  one  on  the  Pacific, 
forming  one  connected  line,  and 
included  by  the  agent  in  one  adver- 
tisement, but  each  issuing  separate 
tickets,  and  having  no  joint  inter- 
est in  the  passage  money,  or  joint 
liability  for  loss,  held,  that  this 
did  not  constitute  a  partnership. 
Briggs  v.  Vanderbilt,  19  Barb.  222. 

K  an  arrangement  is  made  be- 
tween several  connecting  lines  of 
transportation  for  carrying  goods 
by  which  each  carrier  subsequent 
to  the  first  pays  what  is  due  for 
freight  when  the  goods  are  deliv- 
ered to  him,  and  the  last  carrier 
collects  the  whole  bill  of  the  con- 
signee, though  these  accounts  are 


settled  periodically,  and  each  route 
stipulates  to  charge  only  certain 
rates,  such  an  arrangement  does 
not  constitute  a  partnership  or  joint 
liability,  and  each  line  is  liable  only 
for  injury  caused  by  its  own  negli- 
gence. Darling  v.  Boston,  etc.  R. 
R.  Corp.  11  Allen,  295. 

A  contract  between  carriers  of 
connecting  routes  to  carry  goods 
over  the  continued  line  and  divide 
the  freight  money  of  goods  so  car- 
ried is  not  a  contract  of  partner- 
ship, and  an  action  by  one  of  them 
for  freight  will  not  be  dismissed  for 
the  non-joinder  of  the  other.  Mer- 
rick v.  Gordon,  20  N.  Y.  93. 

A  contract  between  a  railroad 
company  and  individuals  engaged 
in  transporting  merchandise  to  and 
from  the  termini  of  the  railroad, 
relating  to  such  transportation,  will 
not  make  them  partners.  Mohawk 
R.  R.  Co.  v.  Niles,  3  Hill  (N.  Y.), 
162. 

The  plaintiff  was  a  member  of  the 
society  known  as  "The  Patrons  of 
Husbandry,"  and  the  defendants 
members  of  the  "  State  Grange  "  of 
the  same  organization.  The  action 
was  upon  an  alleged  breach  of  war- 
ranty in  the  sale  of  a  "  Werner 
Harvester,"  by  one  McKaig,  the 
state  agent  of  "  The  Patrons  of  Hus- 
bandry," appointed  by  the  "State 
Grange."  Held,  that  as  to  mem- 
bers of  the  subordinate  "  Granges," 
whose  representatives  they  were, 
the  defendants  were  not  partners, 
nor  liable  for  the  acts  of  said  agent. 
Edgerly  v.  Gardner,  1  N.  W.  Rep. 
N.  S.  1004;  S.  C.  9  Neb.  130. 


(I)  As  to  which,  see  Pickard  v.     Cooke,  2  Ex.  654;  Carr  v.  L.  &  N. 
Sears,  6  A.  &  E.  469 ;  Freeman  v.    W.  Rail.  Co.  L.  R.  10  C.  P.  316. 

106 


CH.  I,  SEC.  II.]       NATURE    OF    CONTRACT    DETERMINED. 


*41 


ing  himself  out  as  a  partner  does  or  does  not  share 
the  profits  or  losses,  irti) 2  Nay  more,  even  if  it  *be  [*41] 
known  that  he  does  not  share  either,  still  he  may  be 
liable.  For  although  a  person  who  lends  his  name  may 
stipulate  for  an  indemnity  from  those  who  use  it,  it  by  no 
means  follows  that  he  ought  not  to  be  liable  to  third  par- 
ties merely  because  they  are  aware  of  such  stipulation. 
His  name  does  not  induce  credit  the  less  on  account  of  his 
right  to  be  indemnified  by  others  against  any  loss  falling 
in  the  first  instance  on  himself;  and  although,  in  the  case 
supposed,  he  cannot  be  believed  to  be  a,  partner,  the  lending 
of  his  name  does  justify  the  belief  that  he  is  willing  to  be 
responsible  to  those  who  ma}r  be  induced  to  trust  to  him 
for  payment,  (n) 

However,  in  Alderson  v.  Pope,  (o)  Lord  Ellenborough 
held  "  that  where  there  was  a  stipulation  between  A.,  B. 
and  C,  who  appeared  to  the  world  as  copartners,  that  C. 


In  an  action  to  enforce  a  prom- 
issory note  executed  to  plaintiffs  as 
a  copartnership,  neither  the  makers 
of  the  note  nor  their  personal  rep- 
resentatives can  dispute  the  firm 
relationship.  Wise  v.  Williams,  72 
Cal.  544. 

A  party  who  repudiates  partner- 
ship with  another  and  does  all  he 
can  to  prevent  a  recovery  by  him 
from  a  third  person,  cannot  subse- 
quently lay  claim  to  any  part  of 
judgment  recovered  on  the  ground 
that  it  is  part  of  partnership  assets. 
Miller  v.  Chambers,  34  N.  West. 
Rep.  (la.)  830. 

A  person  who  holds  out  and  rec- 
ognizes another  as  a  partner  in  the 
firm  business  is  estopped  from  de- 
nying the  copartnership;  and  a 
deed  of  assignment  of  the  partner- 
ship property  by  himself  in  the  firm 
name  requiring  releases  of  all  the 
creditors    accepting    under    it,   in 


which  the  nominal  partner  does 
not  join,  is  void.  Baylor  Co.  v. 
Craig,  6  So.  West.  Rep.  (Tex.)  305. 
(m)  Ex  parte  Watson,  19  Ves.  461. 
See,  also,  Kirkvvood  v.  Cheetham, 
2  Fos.  &  Fin.  798,  where  A.  was 
B.'s  agent,  and  A.  held  himself  out 
as  B.'s  partner;  both  A.  and  B. 
were  decided  to  be  liable  for  goods 
supplied  to  A.  for  B.  Compare 
Hardman  v.  Booth,  1  Hurls.  & 
Colt.  803. 

i  When  a  party  permits  another 
to  hold  him  out  as  partner,  and 
thereby  procure  credit  on  the 
strength  of  his  supposed  relation, 
neither  community  of  interest  nor 
participation  in  the  profits  is  neces- 
sary to  render  him  liable  as  partner. 
In  re  Jewett,  15  Bank.  Reg.  126. 

(n)  See  ace.  Brown  v.  Leonard,  2 
Chitty,  120. 

(o)  1  Camp.  404,  note. 


107 


*42  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

should  not  participate  in  the  profit  and  loss,  and  should  not 
be  liable  as  a  partner,  C.  was  not  liable  as  such  to  those 
who  had  notice  of  this  stipulation,  and  that  notice  to  one 
member  of  a  firm  was  notice  to  the  whole  partnership." 
The  report  of  this  case  states  no  more  than  what  is  here 
extracted,  and  the  reader  is  left  in  doubt  as  to  the  meaning 
of  the  words  "  should  not  be  liable  as  a  partner."  If  these 
words  meant  that  C.  was  to  be  indemnified  by  A.  and  B. 
the  observations  already  made  show,  it  is  conceived,  that 
the  decision  was  erroneous.  But  if  they  meant  that  C. 
would  not  be  liable  at  all  to  third  parties  for  the  acts  of  A. 
and  B.,  then  the  question  would  arise  whether  this  was  not 
altogether  inconsistent  with  C.'s  conduct,  and  whether  the 
maxim  protestatlo  facto  contraria  non  valet  would  not  apply. 
In  any  point  of  view  the  reported  note  of  the  case  is  un- 
satisfactory. 

Effect  of  fraud. —  Moreover,  if  a  person  has  been  induced 
by  promises  of  irresponsibility  or  by  fraud  to  hold  himself 
out  as  a  partner  with  others,  this  circumstance  does  not  re- 
lieve him  from  liability  to  third  parties  who  have  been 
[*42]  induced  by  his  conduct  to  trust  *kim  as  well  as  them, 
and  who  have  had  nothing  to  do  with  the  promises 
or  fraud  practiced  upon  him.  (p) 

Observations  on  the  phrase  holding  out. —  The  expres- 
sion in  Waugh  v.  Carver,  "if  he  will  lend  his  name  as  a 
partner  he  becomes,  as  against  all  the  rest  of  the  world,  a 
partner,"  requires  qualification;  for  the  real  ground  on 
which  liability  is  incurred  by  holding  oneself  out  as  a  part- 
ner is  that  credit  has  been  thereby  obtained.  This  was  put 
with  great  clearness  by  Lord  Wensleydale  in  Dickinson  v. 
Yalpy,  (q)  in  which  he  said,  "  If  it  could  have  been  proved 

(p)  See  Collingwood  v.  Berkeley,  persons  induced  to  join  companies, 
15  C.  B.  N.  S.  145 ;  Maddick  v.  by  the  false  and  fraudulent  state- 
Marshall,  16  C.  B.  N.  S.  387,  and  ment  of  directors,  cannot  on  that 
17  id.  829;  Ellis  v.  Schmaeck,  5  ground  escape  from  liability  to 
Bing.   521;   Ex  parte    Broome,    1  creditors. 

Rose,  69.     It  will  be  seen  in  the        (q)  10  B.   &  C.   140.     See,  also, 

volume  relating  to  companies  that  Ford     v.    Whitmarsh,     Hurls.    & 

108 


CH.  I,  SEC.  II.]   NATURE  OF  CONTRACT  DETERMINED.         *43 

that  the  defendant  had  held  himself  out  to  be  a  partner, 
not  to  the  world,  for  that  is  a  loose  expression,  but  to  the 
plaintiff  himself,  or  under  such  circumstances  of  publicity 
as  to  satisfy  a  jury  that  the  plaintiff  knew  of  it  and  believed 
him  to  be  a  partner,  he  would  be  liable  to  the  plaintiff  in 
all  transactions  in  which  he  engaged,  and  gave  credit  to  the 
defendant  upon  the  faith  of  his  being  such  partner.  The 
defendant  would  be  bound  by  an  indirect  representation  to 
the  plaintiff  arising  from  his  conduct  as  much  as  if  he  had 
stated  to  him  directly  and  in  express  terms  that  he  was  a 
partner  and  the  plaintiff  had  acted  upon  that  statement."  (r) 
What  constitutes  a  holding  out. —  Further,  a  person 
may  hold  himself  out  or  permit  himself  to  be  held  out  as  a 
partner,  and  yet  conceal  his  name.1  He  may  be  referred 
to  as  a  person  who  does  not  wish  to  have  his  name  dis- 
closed; and  if  he  is  so  referred  to  by  his  authorit}7-  he  will 
incur  liability  as  a  quasi-^vtner.  (s)  But  it  follows,  from 
the  principles  above  explained,  that  a  person  cannot  be 
liable  on  a  contract,  on  the  ground  that  he  held  himself  out 
as  a  partner,  unless  he  did  so  before  the  contract  was 
entered  *into.  (t) 2     It  also  follows  that  no  person  can  [-43] 

Walmesley,  N.  P.  Reports,  53.  Lord  unless  in  virtue  of  some  contract, 
Blackburn,  in  Scarf  v.  Jardine,  7  express  or  iinplieJ,  on  his  part,  in 
App.  Ca.  357,  expressed  the  same  legal  effect  creating,  as  between 
idea  in  different  words.  him  and  the  persons  actually  carry- 

(r)  See,  too,  Vice  v.  Anson,  7  B.     ing  on  the  business,  the  relation  of 
&  C.  409,  where  the  defendant  held     principal  and  agent.     Wild  v.  Dav- 
herself  out  as  a  partner,  but  not  to    enport,  48  N.  J.  L.  129. 
the  plaintiff.  (s)  Martyn  v.  Gray,  14  C.  B.  N.  S. 

1 A  person  who  is  held  out  as  a    824.  See,  also,  Maddick  v.  Marshall, 
partner,  or  as  a  dormant  partner,     16  id.  387,  and  17  id.  829. 
may,  although  he  has  not  signed  the        (t)  Baird    v.   Planque,   1   Fos.   & 
articles  of  partnership,  be  sued  and    Fin.  344. 

held  jointly  with  those  who  did  2  Where  there  is  no  evidence  to 
sign  them.  Wood  v.  Cullen,  13  charge  the  defendant  as  a  partner 
Minn.  394.  except     his    representation    made 

A  person  not  actually  engaged  in    after  the  delivery  of  the  goods,  the 
the  business  as  a  principal  and  not    jury  are  authorized,  if  not  required, 
holding  himself  out  as    a  partner    to  find  for  the  defendant.     Palmer 
cannot  be  held  for  debts  incurred  in    v.  Pinkham,  37  Me.  252. 
the  business  as  a  dormant  partner 

109 


*4:3  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

be  fixed  with  liability  on  the  ground  that  he  has  been 
held  out  as  a  partner,  unless  two  things  concur,  viz.,  first, 
the  alleged  act  of  holding  out  must  have  been  done  either 
b}r  him  or  by  his  consent,  (u) l  and  secondly,  it  must  have 
been  known  to  the  person  seeking  to  avail  himself  of  it.  (a?)2 
In  the  absence  of  the  first  of  these  requisites,  whatever  may 
have  been  done  cannot  be  imputed  to  the  person  sought  to 
be  made  liable;  and  in  the  absence  of  the  second  the  person 
seeking  to  make  him  liable  has  not  in  any  way  been  mis- 
led.  <y) 

Continued  use  of  old  name  after  retirement  of  partner. 
An  instructive  case  on  this  head  is  Newsome  v.  Coles,  (z) 
There  a  firm  of  four  partners  carried  on  business  under  the 
name  of  Thomas  Coles  &  Sons.  Thomas  Coles  died,  but 
the  three  sons  carried  on  business  in  the  old  name  for  a  few 
years;  they  then  dissolved  partnership,  two  of  them  estab- 
lishing a  new  business  and  the  other  continuing  the  old 
business  alone,  but  in  the  old  name.  The  dissolution  was 
advertised  in  The  Gazette.  The  plaintiff,  who  did  not  know 
of  the  dissolution,  but  had  had  no  dealings  with  the  firm 

(«)  In  Fox  v.  Clifton,  6  Bing.  776 ;  in  one  of  its  members.     McStea  v. 

Edmundson  v.  Thompson,  2  Fos.  &  Matthews,  50  N.  Y.  167. 

Fin.  564,  and  8  Jur.  N.  S.  235,  the  (x)  Pott   v.    Eyton,  3  C.    B.  32, 

actions  failed  on  this  ground.     See,  failed  on  this  ground, 

also,  Cornelius  v.  Harrison,  2  Fos.  2  See  Wright  v.   Powell,  8  Ala. 

&  Fin.  758.  560:  Heffner  v.  Palmer,  67  111.  161. 

1  In  order  to  render  a  party  liable  The  mere  fact  that  one  is  inter- 
on  the  ground  that  he  has  been  held  ested  in  the  purchase  of  horses  by 
out  as  partner,  he  must  have  had  another  will  not  render  him  liable 
notice  of  his  being  so  held  out,  or  to  a  seller  thereof  as  partner;  there 
there  must  be  circumstances  from  must  be  some  proof,  although 
which  notice  can  be  presumed.  In  slight,  that  the  seller  knew  that  he 
re  Jewett,  15  Bank.  Reg.  126 ;  Feli-  had  held  himself  out  as  a  partner 
chy  v.  Hamilton,  1  Wash.  C.  C.  in  the  transactions.  Heffner  v. 
491.  Palmer,  supra.      See    cases    cited 

One  who  has  been  engaged  in  ante,  in  preceding  notes, 

carrying  on  business  in  the  name  (y)  See,  also,  the  American  case, 

and  ostensibly  as  a  member  of  a  Thompson  v.  First  National  Bank 

firm  cannot  set  up  as  against  his  of  Toledo,  4  Davis,  Sup.  Ct.  Rep. 

own  acts  the  non-existence  of  the  531. 

firm  by  reason  of  a  want  of  consent  (z)  2  Camp.  617. 

110 


CH.  I,  SEC.  II.]       NATURE   OF   CONTRACT   DETERMINED.  *44 

before  its  dissolution,  sought  to  make  all  three  brothers  lia- 
ble on  a  bill  accepted  after  the  dissolution  by  the  one 
brother  who  continued  to  trade  under  the  old  name  and 
had  accepted  the  bill  in  that  name.  The  two  other  brothers, 
however,  had  never  held  themselves  out  to  the  plaintiff  that 
they  were  partners  in  any  firm  of  the  name  of  Thomas 
Coles  &  Sons:  they  had  done  nothing  to  authorize  the  use 
of  that  name  after  the  dissolution;  at  the  same  time  they 
knew  that  the  old  name  was  still  used,  and  they  had  taken 
no  steps  to  prevent  such  use.  This,  however,  it  was  held 
they  were  not  bound  to  do,  and  the  plaintiff  failed.1  The 
case  would  have  been  decided  differently  if  the  plaintiff 
had  been  a  customer  of  the  firm  before  its  dissolution, 
for  in  that  *case  he  would  have  been  justified  in  sup-  [*44] 
posing  that  there  had  been  no  change  in  the  firm,  (a) 

Application  of  doctrine  to  inchoate  partnerships,  etc. 
A  person  who  holds  himself  out  as  willing  to  become  a 
partner  does  not  incur  liability  by  so  doing.  Although  a 
person  who  represents  himself  to  be  a  partner  is  properly 
held  liable  as  a  partner  to  persons  who  have  acted  on  the 
faith  of  his  being  so,  it  would  be  in  the  highest  degree 
unjust  to  confound  a  representation  by  a  person  that  he  in- 
tended to  become  a  partner  with  a  representation  that  he 
was  one  in  point  of  fact,  and  to  hold  him  as  much  liable  to 
third  parties  for  the  one  representation  as  for  the  other. 
This  distinction  was  recognized  and  acted  on  in  Bourne  v. 
Freeth,  (b)  where  the  defendant,  who  had  signed  a  prospectus 

1  One  who  knowingly  permits  his  held  out  as  a  member  of  a  partner- 
name  to  be  used  as  a  member  of  a  ship  without  his  knowledge.  Camp- 
trading  firm,  under  sucli  circum-  bell  v.  Hastings,  29  Ark.  512.  See, 
stances  as  to  mislead  a  stranger  also.  Poillon  v.  Secor,  61  N.  Y.  456. 
who  deals  with  the  firm  on  the  (a)  See  the  note  in  2  Camp.  620. 
faith  that  he  is  liable  as  a  partner,  See,  also,  Carter  v.  Whalley,  1  B. 
is  liable  as  such.  Campbell  v.  Hast-  &  Ad.  11,  infra,  Bk.  II,  c.  2,  &  3. 
ings,  29  Ark.  512 ;  Carmichael  v.  (o)  9  B.  &  C.  632.  See,  too,  Key- 
Grier,  55  Ga.  116.     See  ante.  nell  v.  Lewis,  15  M.  &  W.  517,  and 

Diligence    in    ascertaining    and  Wyld  v.   Hopkins,    id.      Compare 

contradicting    the    report    is    not,  Martyn  v.  Gray,  14  C.  B.  N.  S.  824. 
however,  required  of  one  who  is 

111 


*45  CONTRACTS  OF  PARTNERSHIP.  [BOOK  I. 

containing  the  terms  on  which  it  was  proposed  to  form  a 
company,  was  held  not  to  have  held  himself  out  as  a  share- 
holder therein. 

Holding  out,  a  question  of  fact. — Whether  a  defendant 
has  or  has  not  held  himself  out  to  the  plaintiff  is  in  every 
case  a  question  of  fact,  not  a  question  of  law,  and  the  con- 
sequence is  that  there  is  great  apparent  conflict  in  the  cases 
on  this  head.1  In  Wood  v.  The  Duke  of  Argyll,  (e)  and  in 
Lake  v.  The  Duke  of  Argyll,  (d)  the  very  same  acts  were 
relied  on  as  a  holding  out,  viz.,  being  advertised  as  presi- 
dent of  a  society,  acting  as  president  at  a  meeting  and 
signing  some  resolutions  then  agreed  upon;  in  the  first  case 
this  was  considered  not  sufficient  and  the  defendant  had  a 
verdict;  whilst  in  the  last  it  was  considered  to  be  sufficient 
and  the  plaintiff  had  a  verdict.  The  jury  was  asked  whether 
the  defendant  had  held  himself  out  as  intending  to  pay  for 
the  work  charged,  and  the  question  was  answered  in  the 
affirmative  in  the  one  case  and  in  the  negative  in  the  other, 
and  the  court  in  each  case  refused  to  disturb  the  verdict. 

Defendant  held  out  by  others. —  The  most  difficult  cases 
of  this  class  occur  where  the  defendant  has  not  held  him- 
self out,  but  where  he  has  been  held  out  by  others,  and  he 
alleges  that  they  had  no  authority  to  do  so.  If  they  had 
no  such  authority  he  is  not  liable,  (e)  But  express 
[#45]  ^authority  is  not  necessary;  authority  may  be  infer- 
red from  his  conduct;  (f)  and  if  a  person  has  by 
signing  prospectuses  or  allowing  his  name  to  be  put  to  them, 
{g)  or  by  being  party  to  resolutions,  (A)  or  by  his  own  state- 
ments, though  not  intended  to  be  repeated,  (/)  or  has  in  any 

iln  a  suit  against  partners  the  (d)  6  Q.  B.  477. 

jury  are  not  called  on  to  decide  (e)  Ante,  p.  43,  note  (u). 

whether  the  partnership  actually  (/)  See  the  last  two  cases, 

existed,  but  only  whether  it  was  (g)  Collingwood  v.   Berkeley,  15 

held  out  to  the  plaintiffs  as  exist-  C.  B.  N.  S.  145. 

ing.     Young  v.  Smith,  25  Mo.  341 ;  (h)  Maddick  v.  Marshall,  16  C.  B. 

Shackleford    v.     Smith,    id.    348;  N.  S.  387,  and  17  id.  829. 

Stephenson  v.  Cornell,  10  Ind.  475.  (i)  Martyn  v.  Gray,  14  C.  B.  N.  S. 

(c)  6  Man.  &  Gr.  928.  824. 

112 


CH.  I,  SEC.  II.]       NATURE   OF   CONTRACT    DETERMINED.  "40 

other  way  so  conducted  himself  as  in  fact  to  have  author- 
ized the  holding  out  which  he  repudiates,  he  will  not  escape 
liability. 

Observations  on  the  liabilities  of  promoters  of  com- 
panies, etc. —  It  cannot  be  too  carefully  borne  in  mind  in 
all  cases  of  this  description  that  a  person  who  is  neither  a 
partner  nor  a  quasi-p&rtnev  is  liable,  on  the  general  princi- 
ples of  agency,  for  acts  done  by  others  with  his  authority, 
express  or  implied.  If,  therefore,  directors,  members  of 
committees,  managers  of  clubs,  or  any  other  persons  not  in 
partnership,  pass  resolutions  that  work  shall  be  done  or 
goods  supplied,  they  authorize  whatever  may  be  done  in 
pursuance  of  such  resolutions,  and  they  are  the  persons 
naturally  looked  to,  and  prima  facie  liable  to  pay  for  what 
may  be  so  done,  (k)  The  question  in  these  cases  is  simply 
one  of  agency,  and  the  question  of  partnership  or  no  part- 
nership is  immaterial,  save  that,  if  a  partnership  can  be 
established,  the  liability  of  one  member  for  the  acts  of  the 
others  in  the  prosecution  of  their  common  object  follows 
almost  as  a  matter  of  course. 

Holding  out  by  retiring  partner. —  In  cases  Avhere  part- 
ners carry  on  business  under  a  name  which  does  not  disclose 
who  the  partners  are,  the  doctrine  of  holding  out  must  be 
applied  with  care.  Suppose  A.  and  B.  carry  on  business 
under  the  name  of  X.  &  Co.  Neither  A.  nor  B.  holds  him- 
self out  as  a  member  of  that  firm  to  an}7  one  who  does  not 
know  their  connection  with  it.  (I)  If,  therefore,  A.  retires 
from  the  firm,  and  gives  no  notice  of  his  retirement,  he  will 
still  be  liable  to  old  customers  who  knew  of  his  connection 
with  X.  &  Co.,  and  who  continue  to  deal  with  it  on 
*the  faith  that  A.  is  still  a  member  of  it;  but  A.  will  [*46] 
incur  no  liability  to  new  customers  of  X.  &  Co.  who 

(Jc)  See  the  cases  in  the  last  five  Bing.  110:  Braithwaite  v.  Skafield, 
notes,  and  Chapleo  v.  Brunswick  9  B.  &  C.  401 ;  Burls  v.  Smith,  7 
Build.  Soc.   6  Q.  B.    D.   696;   Fir-    Bing.  705. 

bank's  Ex.  v.  Humphreys,  18  Q.  B.        (I)  See  Newsome  v.  Coles,  ante, 
D.    54 ;   Doubleday  v.   Muskett,    7    p.  43. 
Vol.  I  — 8  113 


*46  CONTEACTS  OF  PAETNEESHIP.         [BOOK  I. 

never  heard  of  him.  (??i)  Further,  if  on  A.'s  retirement  C. 
joins  B.,  and  B.  and  C.  carry  on  business  as  X.  &  Co.,  even 
an  old  customer  of  X.  &  Co.,  who  goes  on  dealing  with  it 
without  notice  of  A.'s  retirement  or  C.'s  admission,  cannot 
truly  say  that  A.  ever  held  himself  out  as  partner  with  C, 
or  with  both  B.  and  C. ;  and,  consequently,  even  an  old 
customer  cannot  maintain  an  action  against  A.,  B.  and  C. 
jointly  for  a  debt  contracted  by  X.  Co.  after  A.'s  retire- 
ment. The  old  customer  can,  in  the  case  supposed,  sue  A. 
and  B.  on  the  ground  that  he  dealt  with  X.  &  Co.  on  the 
faith  of  A.  and  B.  being  still  the  members  of  that  firm;  or 
he  can  sue  B.  and  C.  on  the  ground  that  they  are  his  real 
debtors;  but  he  must  elect  between  A.  and  B.  on  the  one 
hand  and  B.  and  Con  the  other;  he  cannot  (in  the  case 
supposed)  sue  A.,  B.  and  C.  on  the  ground  that  B.  and  C. 
are  in  truth  X.  &  Co.,  and  that  A.  is  estopped  from  denying 
that  he  is  a  member  of  that  firm.  This  was  decided  in 
Scarf 'v.  Jardine.  (n)  The  case  would  be  otherwise  if  A. 
and  B.  carried  on  business  in  their  own  names,  and  A.  re- 
tired and  C.  came  in,  and  if  B.  and  C.  carried  on  business 
with  A"s  consent  under  the  name  of  A.,  B.  and  C.  In  such 
a  case  A.  would  hold  himself  out  as  in  partnership  with 
both  B.  and  C,  and  would  be  estopped  from  denying  it  as 
against  any  one  dealing  with  the  new  firm  on  the  faith  of 
A.  being  a  member  of  it. 

Further,  if  the  old  customer  did  not  know  of  A.'s  retire- 
ment, but  did  know  that  C.  had  become  a  member  of  X.  & 
Co.,  such  customer  would,  it  is  apprehended,  be  entitled  to 
sue  A.,  B.  and  C.  jointly  for  a  debt  contracted  by  X  &  Co. 
after  A.'s  retirement  and  C.'s  admission,  (p) 

Holding  out  by  surviving  partner. —  If  a  partner  dies,  and 
the  surviving  partners  continue  the  old  business  in  the  old 

(m)  See  Newsonie  v.  Coles,  ante,        (o)  Scarf  v.   Jardine    is  not  an 

p.  43.  authority  against  this  proposition, 

(n)  7  App.  Ca.  345.    This  case  will  nor  are  Lord   Selborne's  observa- 

be  referred  to  hereafter  when  con-  tions  in  7   App.   Ca.    350,    as  the 

sidering    the    liability    of    retired  author  understands  them, 
partners. 

114 


CII.  I,  SEC.  III.]       NATURE   OF    CONTRACT   DETERMINED.       *47,  *"48 

name,  this  will  not  have  the  effect  of  rendering  the 
estate  of  the  deceased  liable,  even  to  old  '^customers  [*47] 
or  correspondents  of  the  firm,  for  acts  done  by  the 
survivors  after  the  death  of  their  late  copartner.  The  doc- 
trine of  holding  out  has  never  been  applied  to  such  a  case, 
and  the  executor  of  the  deceased  incurs  no  liability  by  the 
continued  use  of  the  old  name,  (p)1  Even  if  the  executor 
is  the  surviving  partner  using  the  old  name,  that  will  not 
make  any  difference;  for  although  as  executor  he  can  give 
a  lien  on  his  testator's  estate,  ordinary  debts  contracted  by 
him  do  not  charge  it.  (q) 

Torts. —  The  doctrine  of  holding  out  only  applies  in 
favor  of  persons  who  have  dealt  with  a  firm  on  the  faith 
that  the  person  whom  they  seek  to  make  liable  is  a  member 
of  it.  (r)  The  doctrine  is  entirely  misapplied  when  it  is  ex- 
tended beyond  the  principle  on  which  it  rests.  For  exam- 
ple, it  has  no  application  to  actions  of  tort  arising  from 
the  negligent  conduct  of  a  firm  where  no  trust  has  been 
put  in  it.  In  Stables  v.  EUy,  (*)  a  retired  partner,  whose 
name  was  on  a  cart,  was  held  liable  for  the  negligence  of 
its  driver.  But  although  in  that  case  there  may  have  been 
evidence  to  go  to  the  jury  that  the  defendant  was  liable, 
proof  by  him  that  the  driver  was  not  his  servant  would 
have  rendered  him  not  liable. 

^Section  III. —  Of  Sub-partnerships.  [*4S] 

Sub-partnerships  —  Socius  mei  socii,  socius  mens  non 
est. —  A  sub-partnership  is,  as  it  were,  a  partnership  within 

(p)  See  Webster  v.  Webster,  3  those  who  do.     Cooper  v.  Burns,  6 

Swanst.   490;  Devaynes  v.   Noble  La.  Ann.  740. 

(Houlton's  Case),  1  Mer.  616 ;  Vul-  (q)  See  Farhall  v.  Farhall,  7  Ch. 

liamy  v.  Noble,  3  Mer.  614.  123;  Owen    v.   Delamere,    15   Eq. 

1  The    surviving   members  of  a  134.     But  see  Vulliamy  t\.  Noble,  3 

partnership   created    by  contract,  Mer.  614.     See  further  on  this  sub- 

who,  after  its  dissolution  by  a  part-  ject,  infra,  Bk.  IV,  c.  1,  §  2. 

ner's  death,  do  not  give  themselves  (r)  See  Scarf  v.  Jardine,  7  App. 

out  to  the  world  as  commercial  part-  Ca.  357,  and  ante.  p.  42. 

ners,  are  not  bound  in  solido  with  («)  Stables  v.  Eley,  1  C.  &  P.  614. 

115 


*48  CONTRACTS  OF  PARTNERSHIP.  [BOOK  I. 

a  partnership;  it  presupposes  the  existence  of  a  partner- 
ship to  which  it  is  itself  subordinate.     An  agreement  to 
share  profits  only  constitutes  a  partnership  between  the 
parties  to  the  agreement.     If,  therefore,  several  persons  are 
partners,  and  one  of  them  agrees  to  share  the  profits  derived 
by  him  with  a  stranger,  this  agreement  does  not  make  the 
stranger  a  partner  in  the  original  firm.1     The  result  of  such 
an  agreement  is  to  constitute  what  is  called  a  sub-partner- 
ship, that  is  to  say,  it  makes  the  parties  to  it  partners  inter 
se;  but  it  in  no  way  affects  the  other  members  of  the  prin- 
cipal firm.     In  the  language  of  Civilians,  Socius  mei  socii, 
socius  mens  non  est.  {t)     In  Ex  parte  Barrow,  (u)  Lord 
Eldon  puts  the  law  on  this  subject  very  clearly:  "I  take 
it,"  he  says,  "to  have  been  long  since  established,  that  a 
man  may  become  a  partner  with  A.,  where  A.  and  B.  are 
partners,  and  yet  not  be  a  member  of  that  partnership 
which  existed  between  A.  and  B.     In  the  case  of  Sir  Chas. 
Kaymond,  a  banker  in  the  city,  a  Mr.  Fletcher  agreed  with 

See  Pollock  on   Partn.    (ed.  3)  p.  See,  however,  contra  as  to  cred- 

25,  where  this  blunder  was   first  itors,  Fitch  v.  Harrington,  13  Gray, 

pointed  out.  468,  ante,  p.  33,  note. 

1  An  agreement  between  a  part-  Where  money  is  given  by  A.  to  B. 

ner  in  a  firm  and  a  third  person,  to  be  used  in  the  formation  of  a 

that  the  latter  shall  receive  a  share  partnership  between  B.  and  C,  and 

of  the  partner's  share  of  the  profits,  the  money  is  given  in  consideration 

and  contribute  towards  his  share  of  that  A.  shall  have  one-half  of  B.'s 

losses,  does  not  make  the  third  per-  profits,  this  is  an  agreement  only  to 

son  a  partner  in  the  firm,  either  share  in  B.'s  profits  only  when  as- 

among  themselves  or  as  towards  certained  and  paid  over,  or  at  least 

others.  Burnett  v.  Snyder,  43  N.  Y.  set  apart  by  the  firm ;  and  no  action 

Superior  Court,  238;   Reynolds  v.  lies  upon  the  agreement  against  the 

Hicks.  19  Ind.  113 ;  Meyer  v.  Krohn,  firm,  because  the  firm  as  such  is  not 

114  111.  574;  Quackenbush  v.  Saw-  a  party  to  it.     Neither  the  fact  that 

yer,  54  Cal.  439 ;  Sitzer  v.  Beale,  19  B.  is  insolvent,  nor  that  a  portion  of 

W.  Va.  274;  Keystone  Nat.  Bank  v.  the  business  in  which  the  firm  en- 

Randle,  1  Pa.  County,  354 ;  Rocka-  gaged  against  the  wishes  of  A.  is 

fellow  v.  Miller,  9  Cent.  Rep.  (N.Y.)  illegal,  can  make  any  change  in 

862 ;  S.  C.  14  N.  East.  Rep.  433 ;  New-  this  rule.     Zeisler  v.  Steinmann,  53 

land  v.  Tate,  3  Ired.  Eq.  226;  Hankey  N.  Y.  Super.  Ct.  184. 

v.  Becht,  25  Minn.  212.     See,  also,  (t)  See  Pothier,  Partn.  §  91. 

Rushing  v.  Peoples,  42  Ark.  390.  (u)  2  Rose,  252. 

116 


CH.  I,  SEC.  IV.]       NATURE    OF    CONTRACT    DETERMINED. 


*49 


Sir  Chas.  Raymond  that  he  should  03  interested  so  far  as 
to  receive  a  share  of  his  profits  of  the  business,  and  which 
share  he  had  a  right  to  draw  out  from  the  firm  of  Raymond 
&  Co.  But  it  was  held  that  he  was  no  partner  in  that 
partnership;  had  no  demand  against  it;  had  no  account  in 
it;  and  that  he  must  ba  satisfied  with  a  share  of  the  profits 
arising  and  given  to  Sir  Chas.  Raymond."  (x) 

Liability  to  creditors. —  Since  the  decision  of  the  house 
of  lords  in  Cox  v.  Hickman  {ante,  pp.  30-35),  a  sub-partner 
cannot  be  held  liable  to  the  creditors  of  the  principal  firm 
by  reason  of  his  participation  in  the  profits  thereof,  (y) 


^Section  IV. —  Of   General  and  Particular  Part-  [*49] 

nerships. 

Universal  partnerships. —  It  is  customary  for  writers  on 
partnership  law  to  divide  partnerships  into  universal,1  gen- 


(x)  See,  too,  Bray  i».  Fromont,  6 
Madd.  5;  Ex  parte  Dodgson,  Mont. 
&  M'Ar.  445. 

(y)  Sea  on  this  subject  the  Scotch 
case  of  Fairholtne  v.  Marjoribanks, 
3  Ross,  L.  C.  on  Corn.  Law,  697. 

JAs  to  registration  of  an  act  of 
universal  partnership,  see  Murrell 
v.  Murrell,  33  La.  Ann.  1233. 

A  partnership  from  which  the 
parties  have  excluded  some  of  their 
respective  property  is  not  a  uni- 
versal partnership  under  the  Louisi- 
ana code.  Murrell  v.  Murrell,  33 
La.  Ann.  1233. 

The  evidence  to  support  the  exist- 
ence of  a  universal  partnership,  al- 
leged by  a  surviving  partner,  must 
be  very  clear.  Gray  v.  Palmer,  9 
Cal.  616. 

Where  two  brothers  entered  into 
partnership  without  written  ar- 
ticles and  continued  in  partnership, 
greatly  extending  their  business, 
and  dealing  in  various  kinds  of 
business  for  thirty  years  or  more, 


held,  that  the  partnership  must  be 
considered  to  be  general  and  unlim- 
ited, and  that  all  their  propert)r  of 
eveiy  description  was  held  in  com- 
mon. Lyman  v.  Lyman,  2  Paine, 
C.  C.  11.  Articles  of  agreement 
were  entered  into  between  three 
brothers,  which  recited  that  they 
had  previously  agreed  to  be  equal 
sharers  and  partners  in  the  product 
of  their  own  labor  and  those  under 
their  care,  and  to  bear  equally  the 
expense  of  carrying  on  a  farm, 
raising  stock,  purchasing  land,  ne- 
groes and  other  property,  whether 
jointly  or  individually.  The  articles 
then  provided  for  the  continuance 
of  the  partnership,  and  extended  it 
to  all  business  in  which  either  of 
them  might  engage,  and  stipulated 
that  if  either  of  the  brothers  died 
before  a  final  adjustment  and  divis- 
ion of  the  property  owned  by  them 
jointly  or  individually  the  survivor 
or  survivors  (if  one  or  two  of  them 
died  before  such  adjustment  and 


117 


*4.9  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

eral,  and  particular  (or  special  or  limited),  according  to  the 
extent  of  the  contract  entered  into  by  the  members.  The 
classification  is  traceable  to  a  passage  in  the  Digest  —  "So- 
cietates  contrahuntur  sive  universor-um  bonorum  sive  negotia- 
iionisalicujas,  sive  vectigalis,  sive  etiam  rei  unius"  (z) —  and 
is  not  worth  enlarging  upon,  except  for  the  purpose  of  dis- 
tinguishing cases  in  which  persons  are  partners  in  some 
trade  or  business  generally  from  those  in  which  they  are 
partners  in  some  particular  transaction  or  adventure  only. 
Partnership  in  one  particular  transaction  only.— If 
persons  who  are  not  partners  agree  to  share  the  profits  and 
loss,  or  the  profits,  of  one  particular  transaction  or  advent- 
ure, they  become  partners  as  to  that  transaction  or  advent- 
ure, but  not  as  to  anything  else,  (a)  For  example,  if  two 
solicitors,  who  are  not  partners,  are  jointly  retained  to  con- 
duct litigation  in  some  particular  case,  and  they  agree  to 
share  the  profits  accruing  therefrom,  they  become  partners 
so  far  as  the  business  connected  with  that  particular  case  is 
concerned,  but  no  further,  (b)  So  a  partnership  may  be 
limited  to  the  working  of  some  particular  patent ;  (c)  or  to 
the  working  of  it  in  some  particular  place  or  district,  (d)  In 
all  such  cases  as  these,  the  rights  and  liabilities  of  the  part- 
division)  should  heir  or  inherit  all  lien  against  the  lands.  Houston  v. 
the  property,  after  a  liquidation  Stanton,  11  Ala.  413. 
and  final  settlement  of  the  debts  (z)  Dig.  xvii,  tit.  2  (pro  socio),  1, 
or  lawful  claims  against  all  or  either    5  pr. 

of  them.  Held,  that  under  this  (a)  See  De  Berkom  v.  Smith,  1 
agreement,  lands  purchased  upon  Esp.  29 ;  Hey  hoe  v.  Burge,  9  C.  B. 
joint  account,  or  in  the  name  of  the  431;  Smith  v.  Watson,  2  B.  &  C. 
brothers  individually,  inured  to  the  401.  See  as  to  partnerships  in  prof- 
benefit  of  the  partnership;  that  if  its  only,  ante,  pp.  13,  14. 
one  of  the  partners  purchased  lands  (o)  Robinson  v.  Anderson,  20 
in  his  own  name  and  sold  them,  Beav.  98,  and  7  De  G.  Mac.  &  G. 
taking  a  note  to  himself  for  the  239;  M'Gregor  v.  Bainbridge,  7  Ha. 
purchase  money,  such  note  vested     164. 

in    the    partnership,    at    least    in        (c)  As  in  Lowell  v.  Hicks,  2  Y.  & 
equity,  and  upon  the  death  of  the    C.  Ex.  481. 

payee  the  surviving  partners  might        id)  As  in  Ridgway  v.  Philip,  1  Cr. 
file  a  bill  in  their  own  names  for    M.  &  R.  415. 
the  enforcement  of  the  equitable 

118 


CH.  I.  SEC.  IV.]       NATURE   OF   CONTRACT   DETERMINED. 


*49 


ners  are  governed  by  the  same  principles  as  those  which 
apply  to  ordinary  partnerships;^)  but  such  rights  and  lia- 
bilities are  necessarily  less  extensive  than  those  of  persons 
who  have  entered  into  less  limited  contracts.  The  extent 
to  which  persons  can  be  considered  as  partners  depends  en- 
tirely on  the  agreement  into  which  they  have  entered  and 
upon  their  conduct.1 


(e)  See  Reid  v.  Hollinsheacl,  4  B. 
&  C.  867,  and  the  cases  cited  in 
notes  (a)  and  (p). 

1  A  partnership  may  exist  in  a 
single  as  well  as  in  a  series  of 
transactions.  If  there  is  a  joint 
purchase,  with  a  view  to  a  joint 
sale  and  a  communion  of  profit 
and  loss,  this  will  constitute  a  part- 
nership. In  re  Warren,  Daveis, 
320;  Kayser  v.  Maugham,  8  Colo. 
232 ;  Williams  v.  Connor,  14  S.  C. 
621 ;  Yoeman  v.  Lasley,  40  Ohio  St. 
190;  Hulett  v.  Fairbanks,  id.  233. 

An  agreement  by  two  to  buy 
land  jointly  and  share  the  pro- 
ceeds constitutes  a  partnership. 
Yoeman  v.  Lasley,  40  Ohio  St.  490 ; 
Hulett  v.  Fairbanks,  id.  233;  Lud- 
low v.  Cooper,  4  Ohio  St.  1.  See, 
also,  Plunkett  v.  Dillon,  4  Houst. 
338,  ante. 

Several  persons  separately  pur- 
chased goods  to  be  put  on  board  of 
a  ship  for  a  voyage,  in  the  profits 
and  loss  of  which  they  were  to 
share  in  proportion  to  the  value  of 
the  goods  shipped  by  each.  Held, 
that  this  was  a  limited  partnership 
for  the  purposes  of  the  voyage,  and 
that  a  person  to  whom  the  share  of 
one  of  the  partners  was  hypothe- 
cated, with  the  knowledge  of  the 
others,  to  secure  a  loan  to  such 
partner  for  the  purposes  of  the 
voyage,  haJ  a  right  to  insist  that 
the  share  so  hypothecated  should 


not  be  sold  for  the  repairs  of  the 
ship  so  long  as  the  interests  of 
those  concerned  could  be  protected 
by  any  other  arrangement.  Ameri- 
can Ins.  Co.  v.  Coster,  3  Paige,  323. 
Where  defendants  are  sought  to 
be  charged  as  partners  in  a  single 
venture  only,  evidence  that  they 
are  not  general  partners  nor  con- 
nected in  business  is  irrelevant 
and  inadmissible.  Schollenberger 
v.  Seldonridge,  49  Pa.  St.  83. 

A.  and  B.  enter  into  a  contract 
with  C.  for  a  conveyance  from  him 
to  them  of  a  farm,  and  that  they 
will  pay  a  part  in  good,  negotiable 
promissory  notes,  to  be  indorsed 
by  them.     Held,  not  to  constitute 

them  special  partners,  so  that  one 

can  bind  both  by  an  indorsement 
in  the  name  of  both  without  the 

knowledge  and  assent  of  the  other. 

Ballou    v.    Spencer,   4    Cow.    163. 

See,  also,  as  to  special  partnerships, 

Ensign  v.  Wands,  1  John.  Cas.  171 ; 

Livingston  r.    Roosevelt,  4  John. 

270;  Post   V.  Kimberly,  9   id.  470; 

Mumford  v.  Nicoll,  20  id.  611 ;  Rey- 
nolds  v.    Cleveland,    4   Cow.    282; 

Campston  v.  McNair,  1  Wend.  457; 

Bentley  v.  White,  3  B.  Mon.  263; 

Mifflin*  v.  Smith,  17   S.  &   R.  165; 

Petrikin  v.  Collier,  1   Pa.  St.  247; 

Benson  v.  McBee,  2  McMull,  91; 

Solomon  v.  Solomon,  2  Kelly,  18; 

Ripley  r.  Colby,  23  N.  H.  438. 


119 


•50 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK    I. 


[*50]  ^Section  V. —  Of  Clubs  and  Societies  Not  Having 
Gain  for  Their  Object. 

Societies  not  having  gain  for  their  object. —  It  follows 
from  the  propositions  established  in  the  foregoing  pages 
that  no  partnership  or  ^wd^'-partnership  subsists  between 
persons  who  do  not  share  either  profit  or  loss,  and  wTho  do 
not  hold  themselves  out  as  partners. 

Societies  and  clubs,  the  object  of  which  is  not  to  share 
profits,  are  not  partnerships,  nor  are  their  members  as  such 
liable  for  each  other's  acts.1  It  was  held  in  Caldicott  v. 
Griffiths  (f)  that  the  members  of  "  The  Midland  Counties 
Guardian  Society  for  the  Protection  of  Trade "  were  not 
partners  inter  se;   and  in  Flemyng  v.  Hector  (g)  that  the 


1  Richmond  v.  Judy,  6  Mo.  App. 
465. 

A  voluntary  association,  insti- 
tuted for  moral,  benevolent  and 
social  objects,  where  there  is  no 
power  to  compel  payment  of  dues 
or  assessments,  and  where  the  right 
of  the  member  ceases  upon  a  fail- 
ure to  make  such  payment,  is  not 
a  partnership.  Lafond  v.  Deems,  81 
N.  Y.  507;  S.  C.  8  Abb.  (N.  C.) 
344;  Burt  v.  Lathrop,  52  Mich.  106. 

Such  an  association  should  not 
be  dissolved  by  the  court  on  slight 
causes,  and,  if  at  all,  only  when  it 
is  entirely  apparent  that  the  or- 
ganization has  ceased  to  answer 
the  ends  of  its  existence,  and  no 
other  mode  of  relief  is  attainable. 
Lafond  v.  Deems,  81  N.  Y.  507; 
S.  C.  8  Abb.  (N.  C.)  344. 

As  to  the  members  of  subordi- 
nate "  granges,"  whose  represent- 
atives they  are,  the  members  of  a 
state  grange  of  "The  Patrons  of 
Husbandry "  are  not  copartners. 
Edgerly  v.  Gardner,  9  Neb.  130. 

The  members  of  a  Masonic  lodge 


cannot,  without  evidence  to  war- 
rant the  inference,  be  deemed 
partners  in  the  business  of  pur- 
chasing real  estate,  and  erecting  a 
building  for  the  use  of  the  lodge, 
so  as  to  bind  each  of  them  for 
amounts  borrowed  by  a  committee 
composed  of  other  members,  to  be 
appropriate!  for  such  purposes. 
Ash  v.  Guie,  97  Pa.  St.  493 ;  S.  C. 
39  Am.  Rep.  818. 

The  members  of  a  voluntary  as- 
sociation are  jointly  and  severally 
liable  for  all  debts  contracted  in 
furtherance  of  the  objects  of  its 
formation ;  and  if  other  debts  for 
other  purposes  are  contracted  such 
of  the  associates  as  expressly  con- 
sented thereto  are  jointly  and  sev- 
erally liable.  Thomson's  Estate, 
12  Phila.  36. 

(/)  8  Ex.  898.  See,  too,  R.  v. 
Whitmarsh,  15  Q.  B.  600 ;  Bear  v. 
Bromley,  18  id.  271,  as  to  their  not 
requiring  registration  under  the  re- 
pealed act.  7  and  8  Vict.  c.  110. 

(g)  2  M.  &  W.  172. 


120 


CH.  I,  SEC.  V.]       NATURE    OF    CONTRACT    DETERMINED. 


•50 


members  of  the  "Westminster  Reform  Club"  were  not 
partners  as  against  third  persons.  (A)  Such  associations, 
although  they  consist  of  more  than  twenty  members,  need 
not  be  registered  under  the  Companies  Acts,  18G2.  (*)  It  is 
a  mere  misuse  of  words  to  call  such  associations  partner- 
ships; (J)  and  if  liabilities  are  to  be  fastened  on  any  of  their 
members  it  must  be  by  reason  of  the  acts  of  those  members 
themselves,  (k) l  or  by  reason  of  the  acts  of  their  agents ;  and 


(7i)  See,  too,  Todd  v.  Emly,  8  M. 
&  W.  505 ;  The  St.  James'  Club,  2 
De  G.  Mac.  &  G.  383. 

(0  Re  Siddall,  29  Cb.  D.  1.  They 
may  be  wound  up  under  the  act,  as 
will  be  seen  in  the  volume  on  that 
subject. 

(j)  See  ante,  p.  2.  R.  v.  Robson, 
16  Q.  B.  D.  137.  In  Lloyd  v.  Loar- 
ing,  6  Ves.  773,  the  Caledonian 
Lodge  of  Freemasons,  and  in  Silver 
v.  Barnes,  6  Bing.  N.  C.  180,  and 
Beaumont  v.  Meredith,  3  V.  &  B. 
180,  friendly  societies,  were  called 
partnerships.  In  Minnitt  v.  Lord 
Talbot,  L.  R  Ir.  1  Ch.  D.  143,  per- 
sons who  had  advanced  money  to 
add  to  and  improve  a  club  were 
held  to  have  a  lien  on  the  property 
for  their  money. 

(fc)  As  in  Cross  v.  "Williams,  7  H. 
&  N.  675,  where  the  commandant 
of  a  rifle  corps  was  held  liable  for 
all  uniforms  he  had  ordered. 

*See  Ewell's  Evans  on  Agency, 
30,  31,  308,  notes;  Richmond  v. 
Judy,  6  Mo.  App.  465. 

The  agent  is  personally  liable 
where  there  is  no  responsible  prin- 
cipal. 2  Kent's  Com.  630 ;  Blakely 
v.  Bennecke,  59  Mo.  193,  where  the 
action  was  upon  an  instrument 
signed  by  a  person  as  captain  of  a 
military  company.  Eichbaum  v. 
Irons,  6  W.  &  S.  67,  where  it  was 
held  that  the  members  of  a  com- 


mittee, appointed  by  a  public  polit- 
ical meeting  to  provide  a  free  din- 
ner for  the  party,  are  personally 
liable  for  the  bill. 

Pecuniary  liability  can  be  fast- 
ened upon  individual  members  of 
an  association,  organized  for  pur- 
poses other  than  trade  or  profit, 
only  by  reason  of  their  acts  or  the 
acts  of  their  agents :  and  agency  is 
not  implie  I  from  the  mere  fact  of 
association,  but  must  be  proved. 
A  course  of  dealing  may  amount 
to  proof  of  o.iginal  authority. 
Richmond  V.  Judy,  6  Mo.  App.  465. 

Individual  members  of  such  a 
club  are  liable  for  work  done  with 
their  concurrence  or  subsequent 
approval,  where  the  credit  was 
given  to  members  of  the  club. 
Richmond  v.  Judy,  6  Mo.  App.  465. 

In  order  to  hold  a  member  of  an 
unincorporated  religious  society 
responsible  for  its  debts  it  must 
be  shown  that  such  member  in- 
some  way  sanctioned  or  acquiesced 
in  their  creation.  Devoss  v.  Gray, 
22  Ohio  St.  159.  See,  also,  Ridgely 
v.  Dobson,  3  W.  &  S.  118;  Sproat 
v.  Porter.  9  Mass.  300. 

Where  certain  persons,  organized 
as  a  club,  expressly  authorized 
their  presiding  officer  to  execute  a 
note  in  the  name  of  the  club,  and 
for  its  use,  and  the  note  is  executed 
and  used,  those  who  thus  author- 


121 


*51  CONTRACTS   OF   PARTNERSHIP.  [l300K   I. 

the  agency  must  be  made  out  by  the  person  who  relies  on 
it,  for  none  is  implied  by  the  mere  fact  of  association.  {I) 
[*S1]  "-Societies  in  which  each  member  acts  for  him- 
self only. —  Upon  the  ground  that  there  is  neither 
communitj'  of  profit  nor  community  of  loss  it  has  been  held 
that  no  partnership  subsists  between  the  members  of  a 
mutual  insurance  society  in  which  each,  in  consideration  of 
a  payment  made  to  him,  underwrites  a  policy  for  a  stipu- 
lated sum.  A  polic}^  so  underwritten  is  neither  more  nor 
less  than  a  number  of  separate  contracts,  whereby  each 
underwriter  agrees,  on  a  given  event,  to  pay  the  whole  or  a 
proportionate  part  of  the  sum  written  against  his  name. 
In  such  a  society  there  is  no  joint  stock;  the  members  of  it 
enter  into  no  joint  contract;  but  each  is  alone  liable  for 
any  loss  which  may  happen  to  the  insured,  according  to 
the  terms  of  the  contract  into  which  each  for  himself  has 
entered,  (m) 

With  respect  to  industrial  and  provident  societies  see  39 
and  40  Victoria,  chapter  45. 

Section  YI. —  Of  Co-ownership. 

Co-owners  not  copartners. —  No  partnership  necessarily 
subsists  amongst  persons  to  whom  property  descends  or  is 
given  jointly  or  in  common;  and  even  if  several  persons 

ized  the  use  of  the  club  name  be-  ton,  and  Burls  v.  Smith,  the  de- 
came  partners  as  to  this  particular  fendant  was  a  member  of  the  man- 
transaction,  and  are  each  liable  to  aging  committee.  This  was  not  the 
the  payee  under  the  common  name  case  in  Cockerell  v.  Aucorapte,  or 
assumed  by  them.  Ferris  v.  Thaw,  Delauney  v.  Strickland.  See,  too, 
5  Mo.  App.  279.  Thomas  v.  Edwards,  2  M.  &  W.  215. 
(J)  Compare  Flemyng  v.  Hector,  (m)  See  Strong  v.  Harvey,  3  Bing. 
2M.&W,  172,  and  Wood  v.  Finch,  304;  Redway  v.  Sweeting,  L.  R.  2 
2  Fos.  &  Fin.  447,  where  the  agency  Ex.  400 ;  Gray  v.  Pearson,  L.  R.  5 
was  not  established,  with  Luck-  C.  P.  5G8 ;  Andrews'  &  Alexander's 
ombe  v.  Ashton,  2  Fos.  &  Fin.  705;  Case,  8  Eq.  176.  And  as  to  suits 
Cockerellt'.  Aucompte,  2C.  B.  N.  S.  between  the  members  of  such  so- 
440;  Burls  v.  Smith,  7  Bing.  705,  cieties,  Bromley  v.  Williams,  32 
and  Delauney  v.  Strickland,  2  Beav.  177 ;  Harvey  v.  Beck  with,  4 
Stark.  416,  where  the  agency  was  N.  R.  90  and  298,  and  12  W.  R.  819 
established.     In  Luckombe  v.  Ash-  and  896. 

122 


Cn.  I,  SEC.  VI.]       NATURE   OF   CONTRACT   DETERMINED. 


*51 


agree  to  buy  property  to  hold  jointly  or  in  common,  al- 
though by  the  purchase  they  become  co-owners,  (n)  they 
do  not  become  partners  unless  that  also  was  their  inten- 
tion, (o) 1 


(n)  As  to  whether  joint  pur- 
chasers become  tenants  in  common 
or  joint  tenants,  see  Lake  v.  Gib- 
son, 1  Eq.  Ca.  Ab.  290 ;  Aveling  v. 
Knipe,  19  Ves.  441;  Crossfield  v. 
Such,  8  Ex.  825;  Harris  v.  Fergus- 
son,  16  Sim.  308;  Robinson  v.  Pres- 
ton, 4  K.  &  J.  505 ;  Bone  v.  Pollard, 
24  Beav.  283;  Harrison  v.  Barton, 
1  J.  &  H.  287,  in  which  the  admis- 
sibility of  parol  evidence  oil  the 
point  was  much  discussed.  In 
French  v.  Styring,  2  C.  B.  N.  S. 
357,  aide,  p.  18,  the  race-horse  was 
clearly  held  in  common,  the  own- 
ers having  become  such  at  different 
times  and  by  different  titles. 

(o)  See  Kay  v.  Johnston,  21  Beav. 
536.  Whether  they  intended  to  be- 
come partners  or  not  may  of  course 
be  doubtful,  as  in  Sharpe  v.  Cum- 
mings,  2  Dowl.  &  L.  504,  where  two 
persons  hired  a  field  wherein  to 
graze  their  cattle.  This  subject 
will  be  adverted  to  hereafter  when 
treating  of  partnership  property. 
Pothier  has  an  appendix  on  the 
subject  at  the  end  of  his  essay  on 
partnership;  but  the  appendix  is 
omitted  from  Mr.  Tudor's  transla- 
tion of  that  essay.  See  further  on 
this  subject  the  last  chapter  in 
Story  on  Partnership. 

1 A  partnership  is  not  a  separate 
entity  whose  debts  must  be  paid 
before  the  members  have  a  title  to 
the  property ;  the  assets  belong  to 
the  individuals  composing  the  firm. 
Blanchard  v.  Paschal,  68  Ga.  32. 

A  mere  joint  ownership  in  per- 
sonal property  does  not  constitute 

1 


a  partnership.  Quackenbush  v. 
Sawyer,  54  Cal.  439;  Edson  v. 
Gates,  44  Mich.  253. 

Joint  patentees  are  tenants  in 
common  of  a  patent-right  and  not 
partners.  Fraser  v.  Gage,  8  West. 
R.  693. 

The  possession  of  a  note  by  one 
of  two  joint  parties  is  not  evidence 
that  the  parties  are  partners.  Ry- 
hiner  v.  Feickert,  92  111.  305. 

A  contract  by  two  parties  to  per- 
form a  particular  piece  of  work  is 
not  in  itself  a  contract  of  partner- 
ship inter  se.  Denithornew.  Hook, 
112  Pa.  St.  240;  S.  C.  17  Weekly 
Not.  Cas.  369. 

Mercantile  partners  are  joint  ten- 
ants in  the  effects  of  the  firm. 
Tracy  v.  Walker,  1  Flip.  C.  Ct.  41. 

Partners  or  tenants  in  common 
are  equally  entitled  to  the  posses- 
sion of  the  partnership  or  common 
property.  This  equality  of  right 
continues  after  a  dissolution  of  the 
partnership.  Morganstern  v.  Thrift, 
66  Cal.  577. 

The  moment  the  partnership 
ceases  partners  become  tenants  in 
common  of  the  partnership  prop- 
erty. Hewett  v.  Lewis,  4  Mackey 
(D.  C),  10. 

The  assignee  in  bankruptcy  is  a 
tenant  in  common  with  the  other 
partners  of  the  partnership  prop- 
erty, subject  to  the  rights  and 
claims  of  the  other  parties.  Daugh- 
erty  v.  Strauss,  1  Tex.  App.  (Civ.) 
508. 

An  agreement  by  which  A. 
furnishes  the  capital  and  B.  gives 
23 


*52 


CONTRACTS  OF  PARTNERSHIP. 


[book  I. 


[*52]      *  Co-ownership   and   copartnership    compared. — 

Speaking    generally,  and  excluding  all   exceptional 

scribed  for  the  purpose  of  building, 
and,  by  the  terms  of  the  contract, 
the  property  was  to  be  owned  by 
them  in  common  in  proportion  to 
the  amount  subscribed  by  each,  and 
was  to  be  sold  only  with  the  ap- 
proval of  a  majority,  held,  that 
they  were  not  partners,  and  that 
the  supreme  judicial  court  had  no 
jurisdiction  in  equity  for  the  ad- 
justment of  their  affairs.  Wood- 
ward v.  Cowing,  41  Me.  9. 

A  purchase  of  land  by  two  per- 
sons jointly,  and  the  erection  of  a 
building  thereon  by  one  of  them 
with  the  consent  of  the  other,  do 
not  make  them  partners.  Sikes  v. 
Work,  6  Gray,  433.  See,  also, 
Schaeffer  v.  Fowler,  111  Pa.  St.  451 ; 
S.  C.  17  Weekly  Not.  Cas.  162. 

But  joint  purchasers  of  land,  in- 
tended to  be  disposed  of  for  their 
joint  profit,  are  partners  in  the 
venture.  Hulett  v.  Fairbanks,  40 
Ohio  St.  233;  Yoeman  v.  Lasley, 
id.  190. 

The  plaintiff  purchased  of  the 
defendants  one-sixth  of  sixty-six 
bales  of  cotton,  for  which  he  paid 
them  in  full.  The  purchase  was 
made  in  Boston,  under  an  agree- 
ment that  the  cotton  should  be  de- 
livered at  New  York,  and  be  there 
sold  on  account  of  all  the  owners, 
and  be  divided  between  them. 
When  the  cotton  arrived  in  New- 
York,  the  defendants,  instead  of 
making  a  sale  or  division,  by  mis- 
take, and  without  the  knowledge 
or  consent  of  the  plaintiff,  sent  it 
out  of  the  state  to  their  factory  in 
New  Jersey.  Held,  not  to  make  a 
partnership,  inter  sese,  so  as  to 
preclude  the  plaintiff  from  suing 
24 


time  and  labor  in  planting  and 
gathering  oysters  for  the  market, 
the  profits  of  each  venture,  after 
deducting  expenses,  to  be  equally 
divided  between  them,  does  not 
make  them  partners,  but  merely 
parties  to  a  joint  venture.  Hous- 
man  v.  Weir,  15  Abb.  N.  C.  415. 
See,  also,  Edson  v.  Gates,  44  Mich. 
253. 

If  the  parties,  agreeing  to  buy 
land  and  build  a  mill,  subscribe 
articles  framed  for  the  purpose  of 
regulating  their  common  action  in 
regard  to  the  common  property  and 
the  prosecution  of  the  work,  they  do 
not  thereby  become  partners  unless 
the  articles  in  terms  establish  that 
relation.  Pillsbury  v.  Pillsbury, 
20  N.  H.  90. 

Where  two  joint  owners  of  a 
horse  entered  into  a  written  con- 
tract by  which  one  was  to  keep 
the  horse  for  a  certain  time  at  a 
certain  price,  half  of  which  was  to 
be  paid  by  the  other,  held,  that 
they  were  not  partners,  although 
so  calling  themselves  in  the  con- 
tract, and  that  an  action  would  lie 
on  the  contract  by  one  against  the 
other.     Oliver  v.  Gray,  4  Ark.  425. 

Two  persons  buy  a  horse,  each 
paying  one-half  the  purchase 
money,  agreeing  that  either  having 
possession  sball  provide  for  his  keep- 
ing without  cost  to  the  other,  that 
each  offer  the  horse  for  sale  and 
endeavor  to  sell  him  at  a  profit,  but 
that  neither  shall  sell  without  the 
concurrence  of  the  other.  They  are 
tenants  in  common  of  the  horse, 
and  not  partners.  Goell  v.  Morse, 
126  Mass.  480. 

Where  several  parties  had  sub- 


CH.  I,  SEC.  VI.]       NATURE    OF    CONTRACT    DETERMINED. 


Oil 


cases,  the  principal  differences  between  co-ownership  and 
partnership  may  be  stated  as  follows: 

1.  Co-ownership  is  not  necessarily  the  result  of  agree- 
ment.    Partnership  is.1 


for  the  eleven  bales,  or  their  value, 
to  which  he  was  entitled.  Ward 
v.  Gaunt,  6  Duer,  257. 

The  fact  that  the  joint  purchases 
were  made  as  an  investment 
merely,  each  party  paying  his  pro- 
portion of  the  purchase  money,  is 
not  sufficient  to  establish  the  ex- 
istence of  a  partnership,  as  between 
the  parties,  where  it  appears  that 
no  agreement  to  enter  into  part- 
nership was  made.  Chisholm  v. 
Cowles,  42  Ala.  179. 

Where  four  out  of  five  tenants 
in  common  of  a  paper-mill,  for  the 
more  convenient  management  of 
their  business,  entered  into  an 
agreement  that  one  of  their  num- 
ber should  be  sole  manager,  fore- 
man and  book-keeper,  another 
should  perform  general  labor  in  the 
mill,  another  should  be  engineer, 
and  the  fourth  should  "  collect 
stock  and  market  the  paper,"  at 
fixed  compensations  to  each,  held, 
that  this  constituted  a  partnership 
of  those  who  signed  it  in  the  busi- 
ness of  making  and  vending  paper, 
and  that  a  promissory  note,  given 
for  stock,  in  the  name  of  the  com- 
pany, by  the  party  appointed  to 
the  charge  of  that  department,  was 
binding  on  all  the  parties  to  the 
agreement.  Doak  v.  Swan,  8  Me. 
170. 

The  purchase  of  a  threshing- 
machine  by  two  parties,  to  be  used 
by  them  in  common,  in  payment  for 
which  they  execute  to  the  vendor 
their  joint  note,  renders  them  joint 
owners,  not  partners.  Iliff  v.  Bra- 
zill,  27  Iowa,  131. 


Part  owners  of  a  vessel  consid- 
ered as  partnership  in  Endsor  v. 
Simpson,  12  Phila.  392;  S.  C.  35 
Leg.  Intel.  120. 

1  Partnership  and  community  are 
not  to  be  confounded.  The  first  is 
based  on  the  contract  of  the  par- 
ties, which  thus  creates  the  com- 
munity ;  the  last  may  exist  inde- 
pendently of  any  contract  whatso- 
ever. Pickerellu  Fisk,  11  La.  Ann. 
277. 

The  defendants  were  patrons  of 
a  cheese  factory  owned  by  F.,  under 
an  arrangement  by  which  each  one 
was  to  take  the  milk  from  his  cows 
to  the  factory,  so  long  and  in  such 
quantities  as  he  pleased,  and  could 
have  as  much  of  the  cheese  that 
was  manufactured  at  the  factory 
as  his  milk  made,  paying  F.  one 
cent  per  pound  for  making  the 
cheese ;  or  he  could  have  his  cheese 
sold  with  other  cheese  that  was 
made  at  the  factory,  and  receive 
the  proceeds.  The  milk  that  each 
person  took  to  the  factory  was 
credited  to  him,  each  having  an 
interest  in  the  cheese  made  in  pro- 
portion to  the  quantity  of  milk  he 
furnished.  The  cheese  was  not  di- 
vided, but  was  sold  from  time  to 
time  for  the  patrons.  Held,  that 
the  defendants  were  not  partners, 
but  were  tenants  in  common  of  the 
cheese.  But  when  all  the  defend- 
ants consented  that  a  committee  of 
three,  appointed  for  that  purpose, 
should  sell  the  whole  of  the  cheese 
belonging  to  all,  they  became 
jointly  liable  to  perform  any  valid 
contract  their  committee  made  for 


125 


*52 


CONTRACTS  OF  PAUTNERSHIP. 


[BOOK  I. 


2.  Co-ownership  does  not  necessarily  involve  coram  unity 
of  profit  or  of  loss.     Partnership  does. 

3.  One  co-owner  can,  without  the  consent  of  the  others, 
transfer  his  interest  to  a  stranger,  so  as  to  put  him  in  the 
same  position  as  regards  the  other  owner  as  the  transferor 
himself  was  before  the  transfer.    A  partner  cannot  do  this. 

4.  One  co-owner  is  not  as  such  the  agent,  real  or  implied, 
of  the  others.     A  partner  is.1 


the  sale  of  the  cheese.  Hawley  v. 
Keeler,  62  Barb.  231.  See,  also, 
Sargeant  v.  Downey,  45  Wis.  498, 
ante.  p.  19,  note. 

A  mere  community  of  interest 
will  not  constitute  a  partnership ; 
there  must  also  be  an  agreement  to 
share  in  profit  and  loss.  Therefore, 
where  one  owns  an  interest  in  a  cer- 
tain patent,  to  develop  which  cer- 
tain work  was  performed,  that  fact 
does  not  necessarily  of  itself  make 
him  a  partner  with  the  other 
owner,  and  liable  solely  as  partner 
for  the  work.  Boeklen  v.  Harden- 
burgh,  37  N.  Y.  Superior  Ct.  110. 

An  association  between  two  per- 
sons, one  of  whom  has  invented  a 
method  of  clarifying  sugars,  to  ob- 
tain a  patent  for  it  in  their  joint 
names,  and  sell  its  use  for  a  certain 
sum  on  each  box  of  sugar  clarified, 
of  which  each  is  to  have  a  percent- 
age, does  not  make  them  commer- 
cial partners.  Hermans  v.  Duvig- 
neaud,  10  La.  Ann.  114. 

Parties  who  enter  into  an  agree- 
ment by  which  one  is  bound  to  con- 
tribute land  and  stock  for  its  culti- 
vation, and  the  other  to  contribute 
personal  skill,  and  labor,  and  other 
stock,  each  to  furnish  a  special  por- 
tion of  the  food  for  the  animals,  to 
pa}-  equally  the  expenses  of  the 
plantation,  and  to  divide  equally 
the    crops,  are   partners,  and  not 


tenants  in  common.  Autrey  v. 
Frieze,  59  Ala.  587. 

Where  one  of  the  partners  in  a 
company,  formed  for  the  purpose 
of  buying  and  selling  lands  on 
speculation,  after  the  company  has 
ceased  active  operations,  transfers 
to  a  stranger  one-half  of  the  net 
profits  of  his  share  in  the  company, 
the  residue  of  his  interest,  together 
with  the  entire  control  and  direc- 
tion of  his  share,  having  been  pre- 
viously assigned  to  one  of  his 
copartners,  in  consideration  of 
moneys  advanced  to  him  on  ac- 
count of  it, —  this  creates  between 
the  two  assignees  not  a  partnership, 
but  a  tenancy  in  common  in  the 
share  of  tfheir  assignor ;  nor  does  it 
constitute  the  second  assignee  a 
partner  in  the  company.  Cowles 
v.  Garrett,  30  Ala.  341. 

The  agreement  of  one  joint  owner 
of  a  plantation  with  the  other  to 
receive  a  fixed  compensation  per 
annum  for  his  interest  is  not  a 
partnership,  but  merely  a  lease  of 
the  joint  interest.  Mcllvaine  v, 
Armfield,  5  La.  Ann.  302. 

1  If  two  persons  buy  a  horse,  each 
paying  one-half  of  the  purchase 
money,  under  an  agreement  that 
either  of  them  having  possession  of 
the  horse  shall  provide  for  his 
keeping  without  cost  to  the  other, 
and  that  each  shall  offer  the  horse 


126 


CH.  I,  SEC.  VI.]       NATURE    OF    CONTRACT   DETERMINED. 


*52 


5.  One  co-owner  has  no  lien  on  the  thing  owned  in  com- 
mon for  outlays  or  expenses,  nor  for  what  may  be  clue 
from  the  others  as  their  share  of  a  common  debt.  A  part- 
ner has.1 

6.  One  co-owner  of  land  is  entitled  to  have  it  divided 
between  himself  and  co-owners,  but  not  (except  by  virtue 
of  a  recent  statute)  to  have  it  sold  against  their  consent. 
A  partner  has  no  right  to  partition  in  specie,  but  is  entitled, 


for  sale,  and  endeavor  to  procure  a 
purchaser  at  a  profit  over  his  cost, 
but  that  neither  shall  sell  the  horse 
without  the  concurrence  of  the 
other,  they  are  tenants  in  common 
of  the  horse,  and  not  partners ;  and 
if  a  person  who  is  neither  an  inn- 
keeper nor  a  livery-stable  keeper, 
with  whom  the  horse  has  been 
placed  by  one  part  owner,  sells  the 
horse  by  authority  of  the  latter  and 
without  the  knowledge  or  consent 
of  the  other  owner,  retaining  out 
of  the  proceeds  of  the  sale  the  cost 
of  keeping  the  horse,  paying  the 
balance  to  the  owner  who  author  • 
ized  the  sale,  and  not  accounting 
to  the  other  owner,  and  with  no 
reservation  of  his  half  interest  in 
the  horse,  it  is  a  conversion  of  the 
latter's  interest,  for  which  an  ac- 
tion will  lie  against  both  wrong- 
doers. Goell  v.  Morse,  126  Mass. 
480. 

A  declaration  based  upon  an  as- 
signment of  choses  in  action,  al- 
leged to  have  been  made  by  certain 
specified  persons  as  co-owners, 
does  not  support  a  claim  of  title 
based  on  a  finding  that  the  assign- 
ment was  made  by  one  of  them  in 
the  name  of  a  firm,  composed  of 
both,  after  the  other  had  with- 
drawn f rom  the  partnership.  Seeley 
v.  Albrecht,  41  Mich.  525. 

1 S.  and  W.  were  owners  in  com- 


mon of  land ;  S.  sues  W.  to  recover 
one-half  the  cost  of  improvements 
made  and  taxes  paid  by  S.  during 
W.'s  absence.  Held,  that  from  the 
relation  of  S.  and  W.,  in  the  ab- 
sence of  any  express  agreement, 
the  law  implied  certain  mutual 
rights  and  duties.  Of  these  the 
most  prominent  are:  the  right  of 
partition,  when  either  desires  it: 
the  right  of  mutual  participation 
of  the  fruits  and  revenues,  and  the 
consequent  duty  to  account  to  each 
other  therefor ;  the  duty  of  the  co- 
proprietor,  who  is  present,  and  in 
actual  possession,  to  take  the  same 
care  of  the  property  as  if  it  were 
wholly  his  own;  the  right  of  in- 
curring expenses  necessary  for  the 
preservation  of  the  common  prop- 
erty, and  consequent  obligations  of 
reimbursing  one  another  for  such 
outlays.  If  one  of  the  proprietors 
make  some  change  in  the  property, 
in  the  other's  absence,  not  neces- 
sary for  its  preservation,  which  oc- 
casions the  co-proprietor  a  loss,  or 
which  he  has  just  cause  not  to  ap- 
prove of,  the  former  does  so  at  his 
own  risk  and  under  the  obligations 
of  an  equitable  restoration.  It  is 
not  indeed  a  partnership,  but  it  is 
controlled  in  some  respects  by 
analogous  rules.  Smith  v.  Wilson, 
10  La.  Ann.  257. 

127 


*52 


CONTRACTS    OF    PARTNERSHIP. 


[cook  I. 


on  a  dissolution,  to  have  the  partnership  property,  whether 
land  or  not,  sold,  and  the  proceeds  divided.1 


1  Prior  to  April,  1870,  plaintiffs 
and  defendants  were  part  owners 
of  a  newspaper,  including  the  pro- 
prietary interest  and  good-will 
therein,  as  well  as  presses,  engines, 
boilers,  shafting,  type,  and  all  ap- 
purtenances used  in  printing  and 
publishing  it.  Plaintiffs  and  C. 
were  its  sole  conductors,  editors 
and  business  managers. 

In  April,  1870,  plaintiffs,  defend- 
ants and  C.  made  a  written  agree- 
ment by  which  the  plaintiffs  and 
C.  were  to  have  as  compensation 
for  their  services  to  be  rendered 
sixty  per  cent,  of  the  profits.  The 
remaining  forty  per  cent,  of  profits 
were  to  be  divided  between  the 
proprietors  or  part  owners,  viz. :  the 
plaintiffs  and  defendants  herein. 
This  agreement  was  to  continue 
five  years,  and  specially  preserved 
the  title  to  the  property  in  the  pro- 
prietors as  tenants  in  common. 

At  the  end  of  five  years  no  other 
written  agreement  was  made,  but 
plaintiffs,  without  C,  were  to  con- 
tinue to  conduct  the  paper  as  be- 
fore, excepting  that,  instead  of 
receiving  sixty  per  cent,  of  the 
profits  for  services,  plaintiffs  were 
to  get  a  reasonable  compensation. 

A  difference  arose  as  to  what 
was  a  reasonable  compensation. 
Plaintiffs  insisted  that,  as  a  result 
of  the  dealings  of  the  parties,  and 
the  written  agreement,  a  partner- 
ship existed  between  them,  and 
that  a  dissolution  of  it  had  oc- 
curred, or  should  be  adjudged,  an 
accounting  taken,  the  firm  prop- 
erty sold,  etc. 

The  main  contest  was  as  to  what 
was  the  firm  property.     Held,  that 


as  the  parties  were  owners  in  com- 
mon of  the  property  above  named 
before  the  agreement  was  made ;  — 
as  the  agreement  specially  pre- 
serves their  title  as  such  through 
the  time  that  the  business  as  to 
which  they  were  partners  lasted ;  — 
and  as  the  mere  use  of  such  prop- 
erty owned  in  common  by  them 
for  the  business  did  not  make  it 
partnership  property  (because  there 
was  a  special  agreement  that  it 
should  be  held  in  common,  and  be- 
cause plaintiffs  used  it  as  agents 
and  not  as  partners),  plaintiffs  have 
no  right  to  a  judgment  that  this 
property  be  sold  in  winding  up  the 
partnership  business.  Held,  that 
the  good-will  that  might  be  deemed 
attached  to  the  operations  of  the 
partnership  through  the  five  years 
under  the  written  agreement,  and 
since,  must  be  considered  as  ac- 
cessory to  and  an  accretion  of  the 
good-will  and  business  that  existed 
in  April,  1870,  and  which  was 
owned  in  common.  Held,  that  as 
to  the  business  of  publication  of  the 
paper  from  April,  1870,  to  the  pres- 
ent, plaintiffs  and  defendants  were 
partners,  and  plaintiffs  are  entitled 
to  a  judgment  for  a  dissolution  and 
accounting, —  the  judgment  to  con- 
tain a  proper  adjudication  that  the 
property  in  existence  in  April,  1870, 
is  not  partnership  property.  Ex- 
cluding this  property,  there  will  be 
no  difficulty  in  ascertaining  what 
is  partnership  property.  Held,  that 
plaintiffs  are  entitled  to  a  reason- 
able compensation  for  their  serv- 
ices since  April,  1875.  Auten  v. 
Ellingwood,  51  How.  Pr.  359. 


128 


CH.  I,  SEC, VI.]       NATURE    OF   CONTRACT    DETERMINED.  *53 

7.  As  between  the  real  and' personal  representatives  of  a 
deceased  co-owner  of  freehold  land  the  equitable  as  well  as 
the  legal  interest  in  his  share  is  real  estate;  whilst,  as  be- 
tween the  real  and  personal  representatives  of  a  deceased 
partner,  the  equitable  interest  in  his  share  of  partnership 
freehold  property  is  treated  as  personal  estate,  although  the 
le^al  interest  in  it  is  real  estate. 

8.  Co-ownership  not  necessarily  existing  for  the  sake  of 
gain,  and  partnership  existing  for  no  other  purpose,  the 
remedies  by  way  of  account  and  otherwise  which  one 
co-owner  *has  against  the  others  are,  in  many  impor-  [*53] 
tant  respects,  different  from  and  less  expensive  than 
those  which  one  partner  has  against  his  copartners,  (p)1 

Co-owners  sharing  profits. —  When,  however,  co-owners 
of  property  employ  it  with  a  view  to  profit,  and  divide  the 
profit  obtained  by  its  employment,  the  difference,  if  any, 
between  them  and  partners  becomes  very  obscure.  The 
point  to  be  determined  is  whether,  from  all  the  circum- 
stances of  the  case,  an  agreement  for  a  partnership  ought 
to  be  inferred;  but  this  is  often  an  extremely  difficult  ques- 
tion. 

If  each  owner  does  nothing  more  than  take  his  share  of 
the  gross  returns  obtained  by  the  use  of  the  common  prop- 
erty, partnership  is  not  the  result.     On  the  other  hand,  if 

(p)  See  infra  as  to  this.  defendant)  should  take  possession 
•Joint  purchasers,  without  an  of  the  property  and  transport  it 
agreement  of  partnership,  are  not  from  place  to  place  upon  a  per- 
enlitled  to  the  remedies  nor  sub-  forming  tour,  and  to  apply  the  re- 
ject to  the  responsibilities  of  part-  ceipts  first  to  the  payment  of  the 
ners.  Brady  v.  Calhoun,  1  Pa.  140.  money  advanced  by  the  other  (the 
An  agreement  to  divide  the  in-  plaintiff),  and  then  to  the  payment 
come  of  a  business  does  not  consti-  of  himself,  the  receipts  came  to 
tute  a  partnership ;  nor  does  mere  defendant's  hands  not  as  a  partner, 
joint  ownership  in  personal  prop-  but  as  a  trustee ;  and  the  plaintiff 
erty.  So  where  a  circus  property  had  a  right  to  compel  the  defend- 
<vas  transferred  to  two  parties  (the  ant  to  account  for  so  much  as  came 
plaintiff  and  defendant  herein)  to  to  his  hands  for  the  purpose  of  dis- 
secure  an  indebtedness  for  money  charging  his  trust.  Quackenbush 
advanced  severally  by  them,  and  it  v.  Sawyer,  5  Pacific  Coast  L.  J. 
was  agreed  that  one  of  them  (the  277. 
Vol.  1  —  9                         129 


*51  CONTRACTS    OF   PARTNERSHIP.  [BOOK   I. 

the  owners  convert  those  returns  into  money,  bring  that 
money  into  a  common  stock,  defray  out  of  it  the  expenses 
of  obtaining  the  returns,  and  then  divide  the  net  profits, 
partnership  is  created  in  the  profits  if  not  also  in  the  prop- 
erty which  yields  them.  Many  perplexing  cases  may  be  im- 
agined intermediate  between  those  here  put  as  examples, 
but  the  following  illustrations  will,  it  is  hoped,  enable  the 
reader  to  appreciate  the  distinction  in  question. 

Joint  purchasers  of  goods  for  resale. —  If  several  per- 
sons jointly  purchase  goods  for  resale,  with  a  view  to  divide 
the  profits  arising  from  the  transaction,  a  partnership  is 
thereby  created,  (q)  But  persons  who  join  in  the  purchase 
of  goods,  not  for  the  purpose  of  selling  them  again  and 
dividing  the  profits,  but  for  the  purpose  of  dividing  the 
goods  themselves,  are  not  partners,  and  are  not  liable  to 
third  parties  as  if  they  were.  Coope  v.  Eyre  (?■)  is  a  leading 
case  in  support  of  this  proposition.  There  an  agreement 
was  come  to  that  one  person  should  purchase  oil  and  then 
divide  it  amongst  himself  and  others,  they  paying  him  their 
proportion  of  the  price.  The  oil  was  bought  accordingly, 
and,  the  purchaser  becoming  bankrupt,  the  seller  sought  to 
make  the  other  parties  to  the  agreement  pay  for  the  oil. 
But  it  was  held  that  the  purchaser  purchased  as  a  principal 
and  not  as  an  agent,  and  that  as  there  was  no  community 
of  profit  or  loss  the  persons  amongst  whom  the  oil 
[*54r]  was  to  be  divided  could  not  be  *made  liable  as  part- 
ners or  ^wa-^'-partners.  In  Hoare  v.  Dawes  (s)  there 
was  a  similar  agreement,  and  Lord  Mansfield  thought  at 
first  that  there  was  a  ^w^m'-partnership,  but  he  and  Willes, 
Ashhurst  and  Butler,  JJ.,  ultimately  decided  that  there 
was  not,  there  being  no  agreement  to  share  profit  or  loss, 
and  there  being  no  pretense  for  holding  the  purchasers 
liable  for  the  acts  of  each  other  by  reason  of  their  holding 
themselves  out  as  partners. 

(2)  Reid  v.  Hollinshead,  4  B.  &  C.        (r)  1  H.  Blacks.  37. 
867.  (s)  1  Doug.  371. 

130 


CH.  I,  SEC.  VI.]       NATURE    OF   CONTRACT    DETERMINED. 


*54 


So,  in  Gibson  v.  Zupto?i,  (t)  two  persons  joined  in  the  pur- 
chase of  some  wheat,  with  the  intention  of  dividing  and  pay- 
ing for  it  equally,  and  it  was  held  that  as  there  was  no 
joint  interest  in  profit  or  loss  they  could  not  be  considered 
partners  either  as  between  themselves  or  as  regarded  third 
parties. 

Part  owners  sharing  the  produce  of  their  property. — 
Moreover,  part  owners  who  divide  what  is  obtained  by  the 
use  or  employment  of  the  thing  owned  are  not  thereby  con- 
stituted partners.  For  example,  if  two  tenants  in  common 
of  a  house  let  it  and  divide  the  rent  equally  amongst  them, 
they  are  not  partners,  although  they  may  pay  for  repairs 
out  of  the  rent  before  dividing  it.  (u) !     So  two  persons  who 


(t)  9  Bing.  297. 

(«)  See  per  Willes,  J.,  in  the  case 
cited  in  the  next  note.  See,  also, 
Lyon  v.  Knowles,  3  B.  &  Sm.  556, 
where  the  gross  receipts  of  a  theater 
were  divided ;  and  London  Finan- 
cial Assoc,  v.  Kelk,  28  Ch.  D.  107. 

1 A  person  cannot  be  charged  as 
a  copartner  in  business  carried  on 
at  a  mill,  for  the  price  of  a  steam- 
engine  and  machinery  erected  in 
the  mill,  under  a  written  contract 
with  another  person,  admitted  to 
be  a  copartner,  by  proof  of  his 
being  owner  as  tenant  in  common 
of  the  mill  with  those  admitted  to 
be  copartners;  and  of  his  having 
said  that  the  engine  was  satisfac- 
tory, and  that  when  the  mill  was 
built  he  was  a  partner  in  the  con- 
cern, but  had  since  sold  out  to  the 
others.  Thurston  v.  Horton,  16 
Gray,  274. 

Upon  the  question  whether  one 
of  the  defendants  was  a  partner  in 
a  certain  firm,  it  appeared  that  he 
was  a  tenant  in  common  of  certain 
real  estate  in  Bethlehem,  and  went 
there  and  transacted  some  busi- 
ness.    He  contended  that  any  acts 


and  sayings  of  his,  applicable  to 
his  relation  as  tenant,  and  expli- 
cable by  it,  were  not  sufficient  to 
prove  him  a  partner,  even  though, 
in  the  absence  of  the  tenancy  in 
common,  they  might  tend  to  prove 
the  partnership,  the  burden  of 
proof  being  on  the  plaintiff.  The 
court  instructed  the  jury  that  his 
taking  part  in  the  management  of 
the  land,  and  cutting  down  and 
disposing  of  the  timber,  with  the 
other  tenants  in  common,  did  not 
necessarily  make  him  a  partner 
with  them;  that  they  were  to 
weigh  and  consider  the  evidence 
derived  from  his  acts  and  declara- 
tions, and  if,  upon  a  view  of  the 
whole  case,  they  thought  it  more 
probable  that  whatever  he  did  and 
said  referred  solely  to  his  interest 
as  a  tenant  in  common,  and  not  to 
his  interest  as  a  partner,  they 
should  return  that  verdict  for  the 
defendant.  But,  if  they  believed 
it  more  probable  that  his  acts  and 
sayings  proved  him  to  be  a  part- 
ner, and  did  not  refer  solely  to  his 
interest  as  a  tenant  in  common, 
thev  should  find  for  the  plaintiff. 


131 


*55  CONTRACTS  OF  PARTNERSHIP.  [DOOK  t. 

are  tenants  in  common  of  a  race-horse,  and  share  his  win- 
nings on  the  one  hand,  and  the  expenses  of  his  keep  on  the 
other,  are  not  partners,  but  co-owners  only,  (x)  So  part 
owners  of  ships  are  not  usually  partners,  (?/)  although  they 
may  bo  partners  as  well  as  part  owners,  as  was  the  case  in 
Campbell  v.  Mullctt.  (s) 

Co-owners  of  mines. —  So,  again,  with  respect  to  mines 
and  quarries.  Tenants  in  common  or  joint  tenants  of  a 
mine  or  quarry  may  or  may  not  be  partners;  and  the  mine 
or  quarry  itself  may  or  may  not  be  part  of  a  common  stock. 
But  it  is  highly  inconvenient,  if  not  altogether  impossible,  for 
co-owners  of  a  mine  or  quarry  to  work  it  themselves 
[*55]  without  becoming  partners,  at  least  in  the  ^profits  of 
the  mine;  and  persons  who  work  a  mine  or  quarry 
in  common  are  regarded  rather  as  partners  in  trade  than  as 
mere  tenants  in  common  of  land,  (a) 

Three  cases  have  here  to  be  considered : 

Co-owners  partners  in  profits  and  in  mine. —  1.  The  co- 
owners  may  be  partners  not  only  in  the  profits,  but  also  in 
the  mine  itself.  The  co-owners  are  then  partners  to  all  in- 
tents and  purposes,  and  their  mutual  rights  and  obligations 
are  determined  by  the  law  of  partnership  as  distinguished 
from  the  law  of  co-ownership,  (b) 

Co-owners  not  partners  at  all. —  2.  The  co-owners  may 
not  be  partners  at  all;  neither  in  the  profits  or  in  the  mine. 

Held,   that  the  instructions  were  (a)  See  Jefferys  v.  Smith,  1  Jac. 

correct.  Chase  v.  Stevens,  19  N.  H.  &  W.  298;  Crawshay  v.  Maule,  1 

464.  Swanst.   495;    Fereclay  v.   Wight- 

(x)  French  v.  Styring,  2  C.  B.  N.  wick,  1  R.  &  M.  45. 
S.  357.  Qucere,  whether  there  was  (6)  There  is  no  authority  for  say- 
in  this  case  a  partnership  in  the  ing  that  in  this  case  one  of  the 
profits?  It  would  seem  not;  the  partners  can,  in  the  absence  of  a 
agreement  being  to  divide  the  win-  special  agreement  or  custom,  assign 
nings  as  gross  returns.  See  ante,  his  share  without  the  consent  of  the 
p.  18.  other  partners.     That  in  this  case 

(y)  Helme  v.  Smith,  7  Bing.  709 ;  the  right  is  to  a  sale,  and  not  to  a 

Ex  parte  Young,  2  V.  &  B.  242 ;  partition  of  the  mine,  see  Wild  v. 

Ex  parte    Harrison,   2  Rose,   76;  Milne,  26  Beav.  504;  Crawshay  v. 

Green  v.  Briggs,  6  Hare,  395.  Maule,  1  Swanst.  495 ;  Lees  v.  Jones, 

(z)  2  Swanst.  551.     See  id.  p.  575.  3  Jur.  N.  S.  954. 

132 


CH.  I,  SEC.  VI.]       NATURE    OF    CONTRACT   DETERMINED.  *0<J 

Their  mutual  rights  and  obligations  are  then  determined 
by  the  law  of  co-ownership  as  distinguished  from  the  law 
of  partnership.  In  this  case  each  owner  is  entitled  to  an 
account  of  what  the  others  have  got  from  the  mine  more 
than  their  share  ;(c)  and  to  transfer  his  share  in  the  mine 
without  the  consent  of  the  other  owners; (d)  and  to  have 
a  partition  made  of  the  mine  between  him  and  them.  But 
the  writer  conceives  that  in  the  case  now  supposed  no 
owner  is  entitled  to  have  the  mine  sold  against  the  consent 
of  the  others,  (e)  Whether,  if  the  co-owners  cannot  agree 
as  to  the  mode  of  working  the  mine,  an  action  will  lie  for 
the  appointment  of  a  receiver  and  manager  is  not  settled. 
Lord  Eldon,  in  Jefferys  v.  Smith,  (/)  is  generally  understood 
to  have  intimated  that  it  will;  but  the  case  before  him  was 
not  of  the  description  now  under  discussion,  being  one  in 
which  the  mines  were  worked  in  partnership;  and  in 
a  recent  and  care*fully  considered  case  the  contrary  [*5GJ 
rule  was  treated  as  more  correct,  (g) 

Go-owners  partners  in  profits  only.—  3.  The  co-owners 
of  a  mine  may  work  it  together,  bring  the  produce  into  a 
common  fund,  and  be  partners  in  the  profits  of  the  mine, 
but  not  in  the  mine  itself.  In  this  case  the  mutual  rights 
and  obligations  of  the  owners  are  determined  partly  by 
the  law  of  partnership,  and  partly  by  the  law  of  co-owner- 
ship, and  some  curious  anomalies  are  the  consequence.  The 
most  important  of  these  are  as  follows: 

1.  Each  co-owner  may  transfer  his  interest  in  the  mine 

(c)  Denys  v.  Schuckburgh,  4Y.  &  187,  supports  the  same  view,  but 
C.  Ex.  42.  the  circumstances  of  the  case  are 

(d)  Bentley  v.  Bates,  4  Y.  &  C.     not  sufficiently  known. 

EX-  132.  (g)  Roberts  v.   Eberhardt,   Kay, 

(e)  J.  e.,  except  under  the  Act  31  148.  Where  the  mine  has  been 
&  32  Vict.  ch.  40,  enabling  a  sale  to  worked  in  partnership,  and  the 
be  made  in  lieu  of  partition.  See  partnership  has  been  dissolved,  and 
Steward  v.  Blakeway,  4  Ch.  603,  the  mine  ordered  to  be  sold,  an  in- 
and  6  Eq.  479.  terim  receiver  and  manager  will, 

(/)  1  J.  &  W.  302.  Wynget  v.  if  necessary,  be  appointed.  Lees  v. 
Heathcotc,  cited  in  4  Y.  &  C.  Ex.     Jones,  3  Jur.  N.  S.  954. 

133 


*57  CONTRACTS  OF  PARTNERSHIP.         [BOOK  t. 

and  in  the  partnership  working  it  without  the  consent  of 
the  other  owners,  (h) 

2.  Each  co-owner  is  entitled  to  maintain  an  action  for  an 
account  against  the  others  without  seeking  for  a  dissolu- 
tion of  the  partnership,  (i) 

3.  Upon  a  dissolution  of  the  partnership,  the  mine  itself, 
not  being  partnership  property,  must  be  divided  between 
its  several  owners  and  not  be  sold,  (k)  unless  under  the 
statute  enabling  sales  to  be  made  in  lieu  of  partition.  (I) 

4.  As  between  the  real  and  personal  representatives  of  a 
deceased  partner,  his  share  of  the  mine  will  be  real  and  not 
personal  estate,  (m) 

5.  With  a  view  to  a  dissolution  the  court  will,  if  neces- 
sary, appoint  a  receiver  and  manager  to  carry  on  the  mine 
for  the  benefit  of  all  parties  interested,  (n) 

6.  The  obligation  of  each  co-owner  to  account  to 
[*57]  the  *others  is  the  same  as  that  of  one  partner  to  ac- 
count to  his  copartners,  and  much  more  extensive, 
therefore,  than  the  obligation  which  exists  in  a  case  of  mere 
co-ownership.  The  lien  which  each  partner  has  on  the 
shares  of  his  copartners  for  what  is  due  from  them  to  the 
partnership  extends  to  cases  of  this  third  class;  (o)  as  does 
also  the  obligation  which  one  partner  is  under  to  account  to 
his  copartners  for  benefits  he  may  have  received  in  respect 

(h)  Bentley  v.  Bates,  4  Y.  &  C.  (u)  Roberts  v.   Ebei-hardt,   Kay, 

Ex.    182;   Crawshay  v.    Maule,    1  148;  Lees  v.  Jones,  3  Jur.   N.  S. 

Swanst.  517-19.  954 ;  Jefferys  v.  Smith,  1  J.  &  W. 

(i)  Bentley  v.  Bates,  4  Y.  &  C.  302;    Rowe  v.   Wood,    2    id.    553; 

Ex.  182.  Wynget  v.   Heathcote,  cited  4  Y. 

(fc)  Steward  v.  Blakeway,  4  Ch.  &  C.  Ex.  187.     Whether  a  receiver 

603,  and  6  Eq.  479.     A  sale  was  de-  and  manager  will  be  appointed  if 

creed  in  the  cases  referred  to  ante,  no  dissolution  is  sought,  see  the 

note  (b),  but  in  them  the  mine  was  judgment  in  Roberts  v.  Eberhardt. 

a  partnership  asset.     Consider  the  (o)  Fereday  v.  Wightwick,  1  R.  & 

analogous  case  of  a  ship.  M.  45 ;  Roberts  v.  Eberhardt,  Kay, 

(I)  31  &  32  Vict.  ch.  40.  148;  Crawshay  v.  Maule,  1  Swanst. 

(to)  Steward   v.   Blakeway,   ubi  495. 
supra. 

134 


OH.  I,  SEC.  VI.]      NATURE   OF   CONTRACT   DETERMINED.  *58 

of  the  common  property.  It  has  been  decided  that  where 
two  tenants  in  common  of  a  mine  construct  a  shaft  at  their 
own  expense  in  land  belonging  to  one  of  them  exclusively, 
money  paid  by  a  stranger  for  the  use  of  that  shaft  belongs 
to  both  tenants,  and  not  exclusively  to  him  in  whose  land 
the  shaft  is  constructed,  (p) 

Note  on  the  remedies  available  by  one  co-owner  against  the 

others. 

In  order  still  further  to  understand  the  differences  between  co-owner- 
ship and  copartnership  it  is  necessary  to  compare  the  rights  and  reme- 
dies of  co-owners  against  each  other  with  the  correspoding  rights  and 
remedies  of  partners.  The  rights  and  remedies  of  partners  inter  se  will 
be  fully  investigated  hereafter ;  but  as  there  is  no  compendious  sum- 
mary of  the  rights  and  remedies  of  co-owners  inter  se,  the  following 
note  is  here  appended. 

The  obligation  of  a  partner  to  account  with  his  copartner  arises  ex 
contractu,  and  this  obligation  is  not  confined  to  the  partners  themselves, 
but  devolves,  with  its  correlative  right,  upon  their  respective  represent- 
atives. The  obligation  of  one  co-owner  to  account  with  the  other  for 
the  profits  which  may  have  arisen  from  the  common  property  cannot  be 
based  upon  contract  where  no  contract  has  been  entered  into;  but  it  by 
no  means  follows  that  because  there  is  no  contract,  express  or  tacit,  to 
6hare  profits,  each  co-owner  ought  to  be  entitled  to  get  what  he  can  and 
to  keep  what  he  may  get.  This  was  seen  plainly  enough  by  the  Roman 
lawyers,  who  properly  held  an  obligation  to  arise  quasi  ex  contractu, 
and  who  found  no  difficulty  in  declaring  that  every  co-owner  ought  to 
account  to  the  others  for  the  profits  received  by  himself,  and  to  con- 
tribute with  them  to  the  expenses  properly  incurred  for  the  common 
benefit,  (q)  Our  ancestors,  however,  seem  to  have  taken  a  different 
view  of  the  matter. 

*By  the  strict  rule  of  the  common  law,  one  co-owner  of  land  was  [*58] 
entitled  to  no  account  from  another  unless  the  former  had  made 
the  latter  his  bailiff,  or  had  been  actually  ousted  from  the  land ;  (r)1  and 
one  co-owner  of  a  chattel  had  no  remedy  against  another  unless  he  had 
destroyed  the  common  property,  (s)  The  statute  4  Anne,  chapter  16, 
section  27,  has  placed  co-owners  of  land  in  a  somewhat  better  position 

(p)  Clegg  v.  Clegg,  3  Giff.  322.  (r)  See  Co.  Lit.  200. 

(q)  See  Inst.  lib.  3,  tit.  27,  §§  3-5 ;        1  As  to  wrongs  to  real  property  by 
and  Dig.  lib.  x,  tit.  2,  1.  25,  §  16,     one  tenant  in  common,  see  Cooley 
and  tit.  3,  1.  4,  §  3,  and  lib.  xvii,     on  Torts,  327. 
tit.  2,  1.  34.  (s)  Ibid. 

135 


*59  CONTRACTS    OF    PARTNERSHIP.  [BOOK    I. 

than  they  were  in  before,  by  enacting  that  an  action  of  account  may  be 
maintained  by  one  co-owner  against  another  for  receiving  more  than  his 
share ;  but  nothing  has  been  done  to  improve  the  law  as  to  co-owners  of 
chattels  except  by  the  introduction  by  equity  judges  of  rules  founded 
on  the  principles  of  the  Roman  law.1 

The  inadequacy  of  the  remedies  available  by  one  co-owner  against 
another  at  common  law  is  justified  by  early  writers  upon  the  ground 
that  each  tenant  in  common  has  it  in  his  own  power  to  enter  on  the 
common  property,  if  it  be  land,  and  to  get  possession  of  the  common 
property,  and  retain  it,  if  it  be  an  ordinary  chattel ;  and,  according  to 
the  writers  in  question,  it  is  only  when  one  co-owner  prevents  the  other 
from  entering  in  the  first  case,  and,  by  destroying  the  chattel,  from  get- 
ting possession  of  it  in  the  other,  that  there  is  any  necessity  for  having 
recourse  to  an  action,  (t)  The  unsatisfactory  nature  of  this  reasoning  is 
too  apparent  to  require  comment ;  for,  admitting  its  force  in  the  case  of 
land,  it  is  plainly  in  the  highest  degree  unjust  to  allow  one  co-owner  of 
a  valuable  chattel  to  keep  it  exclusively  in  his  own  possession,  and  to 
tell  the  other  that  his  only  remedy  is  to  take  it  peaceably  when  he  sees 
his  time,  and  having  got  it  to  be  careful  not  to  part  with  it.  Unsatis- 
factory, however,  as  the  reasoning  is,  it  affords  the  only  explanation  of 
the  actual  state  of  the  law  upon  the  subject  under  consideration. 

In  order  to  understand  accurately  the  remedies  which  by  the  law  of 
this  country  are  available  for  one  co-owner  against  another,  it  is  neces- 
sary, in  the  first  place,  to  distinguish  land  from  chattels. 

1.  With  respect  to  land. 

Co-owners  of  land. —  1.  If  land  is  owned  by  several  persons,  jointly 
or  in  common,  each  is  entitled  to  enter  upon  and  occupy  it.  (a) 

2.  If  any  one  of  them  is  actually  excluded  by  the  others  he  can  bring 
an  action  for  the  recovery  of  his  undivided  share;  (x)  and  having  recov- 
ered he  can  sue  for  mesne  profits ;  (y)  and  in  an  action  for  them  the  jury 
are  not  bound  to  confine  the  damages  to  the  value  of  the  actual  profits 
made  by  the  defendant,  (z)  In  case  of  actual  exclusion  or  destrue- 
ns] tion  an  action  for  *damages  will  also  lie  by  one  co-owner  against 

1  As  to  conversion  by  one  tenant  (x)  Lit.  §§  322  and  323,  and  Coke's 

in  common,  see  Cooley  on  Torts,  Com.  upon  them.     As  to  evidence 

455,  of  actual  exclusion,  see  Doe  v.  Pros- 

(J)  See  Lit.  §  323.  ser,  Cowp.  217;  Jacobs  v.  Seward, 

(u)  Lit.  §  323.    One  is  not  entitled  L.  R.  5  H.  L.  464. 

to  a  receiver  as  against  the  others  (y)  Goodtitle  v.   Tombs,   3  Wils. 

if  they  do  not  exclude  him.     Sand-  118. 

ford  v.  Ballard,  30  Beav.  109.     See  (z)  Ibid, 
infra,  note  (&). 

136 


CH.  I,  SEC.  VI.]       NATURE    OF    CONTRACT    DETERMINED.  *59 

the  other;  (a)1  and  now  an  injunction  and  a  receiver  can  be  obtained, 
even  though  there  is  no  actual  exclusion.  (6) 

3.  Subject  to  the  provisions  of  the  act  of  31  and  32  Victoria,  chapter 
40,  one  co-owner  of  land  is  entitled  to  have  it  divided  between  himself 
and  the  other  owners,  although  they  may  not  desire  a  partition,  (c) 

4.  If  one  co-owner  makes  the  other  his  bailiff  or  receiver,  the  latter 
can  be  compelled  to  account,  not  only  for  what  he  has  received,  but  also 
for  what  he  might  have  received  without  his  own  wilful  default,  (d) 

5.  And  by  the  statute  of  Anne  (4  Anne,  ch.  19,  §  27),  one  Co-owner 
who  receives  more  than  his  share  can  be  made  to  account  to  the  other 
owners  for  what  he  has  received  more  than  he  ought,  (e) 

6.  But  it  has  been  decided,  since  the  passing  of  this  statute,  that  one 
co-owner  of  land,  who  merely  occupies  the  whole,  is  not  liable  to  pay 
any  rent  to  the  other  owners.  (/) 

7.  And  it  has  also  been  decided  that  if  one  co-owner  not  only  occupies 
the  whole  land,  but  expends  his  own  industry  and  capital  upon  it,  and 
thereby  realizes  profit  (e.  g.,  by  farming),  he  is  not  liable  to  account  to 
his  co-owners  for  any  share  of  such  profit,  (g) 

8.  But  if  one  co-owner  of  land  derives  gain,  not  from  the  mere  use 
of  the  land  by  himself,  but  by  being  paid  for  the  use  thereof  by  others, 
he  must  account  to  the  other  owners  for  what  be  receives  beyond  his 
own  share,  (h) 

9.  A  fortiori,  if  one  co-owner  of  land  derives  gain  by  wasting  the 
common  property,  he  is  liable  to  account  to  the  other  owners  for  their 
shares  of  the  money  so  obtained,  (i)    He  can  also  be  restrained  by  a 

(a)  Cresswell  v.  Hedges,  1  H.  &  Beav.     534;     Wheeler    v.    Home, 

C.  421,  where  the  defendant  paid  Willes,  208;  M'Mahon  v.  Burchell, 

money  into  court  in  respect  of  the  2  Ph.  127.    But  see  Drury  v.  Drury, 

damage  to  tbe  plaintiff's  share.  1  Rep.  in  Ch.  49.    In  Turner  v.  Mor- 

i  See,  generally,  Cooley  on  Torts,  gan,  8  Ves.  145,  there  was  exclu- 

32^  sion.     Where  one  of  the  co-owners 

(6)  See  Jud.  Act,  1873,  §  25,  cl.  8.  is  an  infant,  see  Pascoe  v.  Swan, 

Porter  v.  Lopes,  7  Ch.  D.  358 ;  Sand-  27  Beav.  508. 

ford  v.  Ballard,  33  Beav.  401.  (g)  Henderson  v.  Eason,  17  Q.  B. 

(c)  See  Bac.  Ab.  Joint  Tenants,  I,  701,  and  2  Ph.  308:  Jacobs  v,  Sew- 
7,   and  Agar  v.  Fairfax,   17  Ves.  ard,  L.  R.  5  H.  L.  464. 

533,  and  the  notes  to  it  in  2  Wh.  &  CO  Henderson  v.  Eason,  17  Q.  B. 

Tud.  L.  C.  701-     See>   too>   Clegs  v'  CleSS>  3 

(d)  Co.  Lit.  2006,  and  172a.  Giff.    322,   ante,  p.   57,   note  (p) ; 

(e)  The  remedy  at  law  was  by  an  Carter  v.  Home,  1  Eq.  Ca.  Ab.  17, 
action  of  account  and  not  by  an  as  to  sharing  benefits  derived  by 
action  for  money  had  and  received,  one. 

Thomas    v.     Thomas,    5   Ex.    28;        (i)    Co.    Lit.    2006;    Martyn    v. 

Jacobs  v.  Seward,  L.  R.  5  H.  L.  464.     Knowllys,  8  T.   R.    145.     See  the 

(/)  Teasdale    v.    Sanderson,    33    last    sentence    in    the    judgment. 

137 


*60 


CONTRACTS    OF    PARTNERSHIP. 


TlJOOK    I. 


co-tenant  from  committing  destructive  waste,  (k)  but  not  from 
[*60]  cutting  timber  in  a  *proper  and  judicious  manner ;  nor,  it  is  con- 
ceived, from  mining  in  a  similar  way.  (Z) 
10.  If  one  of  several  joint  tenants,  or  tenants  in  common  of  a  house, 
lays  out  money  in  necessary  repairs,  his  outlays  will  be  taken  into 
account  upon  a  partition  or  sale ;  (m)  but  he  cannot  enforce  contribution 
by  an  action  for  damages  (n)  "  unless  he  and  his  co-tenants  are  under 
some  duty  or  obligation  to  others  to  repair : "  see  the  authorities  in  notes 
(m)  and  (n) ;  nor  has  he  any  lien  on  the  house  or  on  the  interest  of  his 
co-tenants  therein  for  their  shares  of  the  expense,  (o) 


2.  With  respect  to  chattels. 

Co-owners  of  chattels. —  Ships  are  by  far  the  most  important  chat- 
tels usually  owned  in  common.  But  great  care  is  required  in  applying 
the  rules  which  govern  ships  to  other  chattels ;  for,  in  the  first  place, 
the  principles  enforced  in  the  court  of  admiralty  differ  in  many  im- 
portant respects  from  those  by  which  the  ordinary  courts  are  governed ; 
and,  in  the  next  place,  the  stringent  provisions  of  the  ship  registry  acts 
have  frequently  rendered  it  impossible  to  apply  to  ships  those  general 
doctrines  of  equity  which  are  applicable  to  other  kinds  of  property.1 


See,  as  to  injunctions  to  restrain 
waste,  Twort  v.  Twort,  16  Ves.  128. 

(fc)  Arthur  v.  Lamb,  2  Dr.  &  Sm. 
428;  Wilkinson  v.  Haygarth,  12 
Q.  B.  837. 

(I)  Arthur  v.  Lamb,  2  Dr.  &  Sm. 
428;  Wilkinson  v.  Haygarth,  12  Q. 
B.  837. 

(to)  See  Leigh  v.  Dickson,  15  Q. 
B.  D.  60. 

(it)  Ibid.,  where  the  passage  in 
Co.  Lit.  200a,  and  F.  N.  B.  162, 
and  the  old  writ  of  contribution, 
are  explained. 

(o)  Re  Leslie,  23  Ch.  D.  252.  See, 
also,  Kay  v.  Johnston,  21  Beav.  536 ; 
Teasdale  v.  Sanderson,  33  Beav. 
534. 

1  To  the  point  that  joint  owner- 
ship of  a  vessel,  in  the  absence  of 
special  agreements,  does  not  create 
a  partnership,  see  Hopkins  v.  For- 
syth, 14  Pa.  St.  34 ;  Ward  v.  Bode- 
inan,  1  Mo.  App.  272;  Holmes  v. 
U.  S.   Ins.   Co.   2  John.  Cas.    329 ; 


Phillips  v.  Purington,  15  Me.  425. 
See,  also,  Macy  v.  De  Wolf,  3 
Woodb.  &  M.  193. 

As  to  what  acts  of  part  owners 
of  a  vessel  will  render  them  liable 
to  be  sued  as  partners,  see  Bacon 
v.  Cannon,  2  Houst.  47. 

The  interest  of  all  the  joint  own- 
ers are  not  barred  by  a  sale  on 
execution  against  part.  Hopkins 
v.  Forsyth,  14  Pa.  St.  34. 

Where  a  part  owner  of  a  steam- 
boat, built  by  partners,  sells  the 
whole  of  the  boat,  and  delivers 
possession  to  the  purchaser,  a  sale 
by  the  other  owner  is  the  sale  of  a 
chose  in  action  merely,  or  a  right 
to  sue,  which  could  not  be  trans- 
ferred to  the  vendee;  and  such 
vendee  will  not  be  protected  by  a 
court  of  equity  as  an  innocent 
bona  fide  purchaser,  but  the  first 
sale  will  be  confirmed,  as  more 
money  was  obtained  by  the  sale 
than  would  have  been  got  under 


138 


CH.  I,  SEO.  VI.]      NATURE   OF   CONTRACT   DETERMINED.  *G1 

For  the  purpose,  therefore,  of  avoiding  error  in  pursuing  the  present 
subject  of  inquiry,  ships  must  be  distinguished  from  other  chattels. 

1.  Ships. —  A  considerable  portion  of  the  law  which  regulates  the 
mutual  rights  and  obligations  of  part  owners  of  ships  is  based  upon  the 
assumption  that  it  is  particularly  for  the  benefit  of  the  public  that  ships 
should  not  lie  idle,  (p)  Hence  it  is  that  a  majority  of  the  part  owners  of 
a  ship  can  employ  her  against  the  will  of  the  others,  upon  giving  them 
security  to  the  value  of  their  shares;  (q)  a  course  which  cannot  be 
taken  by  a  majority  of  the  part  owners  of  any  other  chattel.  Where  a 
ship  is  sent  on  a  voyage  by  some  of  the  part  owners  against  the  will  of 
the  others,  the  dissentients  are  not  entitled  to  share  the  profits  of  the 
voyage,  (r)  nor  are  they  liable  to  contribute  to  its  losses,  (s)  But  where 
a  ship  is  employed  by  all  the  part  owners,  or  by  some  of  them,  but  not 
against  the  will  of  the  others,  (t )  they  all  share  her  gross  earnings,  and 
contribute  to  the  expenses  incurred  in  obtaining  them ; l  and  in  such  a 
case  there  is  little,  if  any,  difference  between  the  account  which  is 
taken  between  the  part  owners,  and  that  which  would  be  taken  if  they 
were  actually  partners. 

*Before  any  division  of  profits  amongst  the  part  owners,  the  gross  |*61] 
freight  or  earnings  of  the  adventure  must  be  applied  in  payment  of 
the  expenses  of  the  voyage  yielding  them,  including  the  costs  of  repairs 
and  outfit  for  that  voyage,  (w)  Lord  Hardwicke  went  further,  and  held 
that  each  part  owner  had  a  lien  on  the  ship  itself,  and  on  the  proceeds 
of  its  sale,  for  the  balance  due  to  him  from  the  other  owners  on  the 
joint  account,  and  had  a  right  to  a  sale  of  the  ship  as  if  it  were  part- 
nership property,  (x)  But  Lord  Eldon  thought  this  was  going  too  far ; 
and  he  reversed  Lord  Hardwicke's  decision ;  and  it  is  now  settled  that 
there  is  no  such  lien  or  right,  (y)  Lord  Eldon's  view,  however,  has  not 
prevailed  in  America,  (z) 

a  sale  by  decree,  and  the  proceeds  l  See,  however,  Macy  v.  De  Wolf, 

will  be  applied  to  settling  up  the  3  Woodb.  &  M.  193. 

partnership  affairs.  Hewitt  v.  Stur-  (w)  Green  v.   Driggs,  6  Ha.  395; 

devant,  4  B.  Mon.  453.  Lindsay  v.  Gibbs,  22  Beav.  522,  and 

(p)SeeMaclachlanontheLawof  26  id.  51,  and  3  De  G.  &  J.  690; 

Merchant  Shipping,  p.  90,  ed.  2.  Alexander  v.  Simms,  18  Beav.  80, 

(q)  Ibid.  p.  94.  and  5  De  G.  M.  &  G.  57. 

(r)  Anon.  2  Ch.  Ca.  36 ;  Davis  v.  (x)  Doddington  v.  Hallet,  1  Ves. 

Johnston,  4  Sim.  539.  S.  497,  and  see  A.-G.  v.  Borrodaile, 

(s)  Horn  v.  Gilpin,  1  Ambl.  255.  1  Price,  148,  and  per  Lord  Eldon, 

Davis  v.  Johnston,  4  Sim.  539,  is  not  2  V.  &  B.  243. 

opposed  to  this.  The  marginal  note,  (tj)  Ex  parte  Young,  2  V.  &  B. 

however,  is  calculated  to  mislead.  242 ;  Ex  parte  Harrison,  2  Rose,  76. 

(t)  Strelly  v.  Winson,  1  Vern.  296,  (z)  See  Story  on  Part.  §  444. 
as  corrected  by  Horn  v.  Gilpin,  1 
Amb.  255. 

139 


*62  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

2.  Other  chattels. —  Passing  from  ships  to  other  chattels,  the  position 
of  a  part  owner  not  in  possession  was  at  law  most  disadvantageous; 
for,  1,  he  could  not  obtain  possession  otherwise  than  by  taking  the 
thing  itself  if  he  had  the  chance;  (a)  2,  he  could  not  obtain  the  value 
of  his  share  unless  the  thing  had  been  actually  or  virtually  destroyed ;  (6) 
and  3,  these  rules  applied  as  well  to  the  produce  of  the  thing  as  to  the 
thing  itself,  (c)  Whether,  if  one  tenant  in  common  of  a  chattel  sold  it, 
the  other  had  any  remedy  at  law  for  his  share  of  the  money  produced 
by  the  sale  was  doubtful,  (d) l  unless  the  sale  had  conferred  a  good  title  to 
the  entirety  upon  the  purchaser,  when  a  remedy  clearly  existed,  (e) 

The  obligation  of  a  co-owner  of  a  chattel  to  account  for  the  gain 
which  he  might  have  derived  from  its  use  may  therefore  be  said  to  have 
been  hardly,  if  at  all,  recognized  at  law.  In  equity  the  case  was  other- 
wise ;  but  it  is  surprising  how  little  direct  authority  there  is  upon  the 
subject  of  co-ownership  if  the  decisions  relating  to  ships  and  the  wind- 
ing up  of  partnerships  are  excluded  from  consideration.  The  principles, 
however,  upon  which  these  decisions  are  based  may  safely  be  applied 
to  other  cases  if  the  anomalies  introduced  by  the  ship  registry  acts,  and 
the  fact  that  the  rights  of  partners  and  those  claiming  under  them 
depend  upon  contract,  are  borne  in  mind. 

When  the  profits  derived  by  one  part  owner  of  a  chattel  are  not  at- 
tributable to  his  own  industry  and  exertions,  but  are  simply  what  he 
receives  from  others  in  respect  of  it  (e.  g.,  dividends  of  stock,  or  shares, 
or  money  paid  for  hire)  —  or  where  the  profits  are  produced  in  the 
[*62]  ordinary  ^courses  of  nature  (e.  g.,  by  breeding)  —  there  is  no  diffi- 
culty in  coming  to  the  conclusion  that  his  co-owners  are  entitled 
to  make  him  account  to  them  for  their  shares  of  what  their  property 
may  have  produced.  Further,  when  one  co-owner  of  a  chattel  derives 
gain  from  its  use,  and  those  gains  are  attributable,  mainly,  or  in  part, 
to  his  own  industry  and  exertions,  justice  to  the  other  owners  and  to 
him  requires  either  that  the  gains  made  by  him  shall  be  shared  by  all, 
they  making  him  a  proper  allowance  for  his  trouble  and  reimbursing 
him  his  expenses ;  or  that  he  shall  be  allowed  to  keep  the  whole  profits, 
paying  the  other  owners  a  proper  sum  for  the  use  of  their  property.     Of 

(a)  Lit.  §  323,  and  see  2  Wms.  Ex.  145;  Barton  v.  Williams,  5  B. 

Saund.  47o.  &  A.  395 ;  and  Williams  v.  Barton, 

(6)  Co.  Lit.  200 ;  Jacobs  v.  Sew-  3  Bing.  139. 
ard,  L.  R.  5  H.  L.  464.  *  See,  generally,  Cooley  on  Torts, 

(c)  See  Fennings  v.  Grenville,  1  455,  where  the  subject  will  be 
Taunt.   241,   where  a  whale    had  found  fully  considered. 

been  converted  into  blubber  and  (e)  See  Jacobs  v.  Seward,  L.  R.  5 

oil.  H.  L.  464,  and  the  cases  in  the  last 

(d)  See  Heath  v.  Hubbard,  4  note,  and  per  Willes,  C.  J.,  in 
East,   110;  Mayhew  v.   Herrick,  7  Wheeler  v.  Horn,  Willes,  208. 

C.   B.   229;  Morgan  v.  Marquis,  9 

140 


CH.  I,  SEC.  VI.]       NATURE    OF    CONTRACT    DETERMINED.  *G2 

these  two  modes  of  adjusting  the  rights  of  the  parties  the  first  seems 
to  be  most  in  accordance  with  the  course  usually  adopted  in  analogous 
cases.  Notwithstanding,  therefore,  the  little  direct  authority  upon  the 
point,  the  writer  ventures  to  submit  that,  as  a  general  rule,  where  one 
owner  of  a  chattel  derives  gain  from  its  use,  he  is,  independently  of 
any  contract,  bound  to  account  to  the  other  owners  for  their  respective 
shares,  he  being  allowed  all  proper  charges  and  expenses.  (/) 

Co-owners  of  patents  and  copyrights.— Cases  may,  nevertheless, 
arise  in  which  justice  may  be  done  by  allowing  each  co-owner  to  make 
what  he  can  and  to  keep  what  he  may  get.  This  may  occur  where 
the  chattel  is  such  that  each  co-owner  can,  in  fact,  enjoy  his  rights 
to  the  full  extent  without  the  concurrence  of  the  other  owners  (e.  g., 
where  the  chattel  is  a  patent  for  an  invention).  In  the  case  of  a  patent, 
belonging  to  several  persons  in  common,  each  co-owner  can  assign 
his  share  and  sue  for  an  infringement,  (g)  and  can  also  work  the  patent 
himself,  and  give  licenses  to  work  it,  and  sue  for  royalties  payable  to 
him  for  its  use ;  (h)  and  it  is  now  settled  that  he  is  entitled  to  retain 
for  his  own  benefit  whatever  profit  he  may  derive  from  the  working, 
although  it  is  perhaps  still  open  to  question  whether  he  is  not  liable  to 
account  for  what  he  receives  in  respect  of  the  licenses.  {%) l  The  mutual 
right  of  co-owners  of  a  copyright,  not  being  partners,  have  not  been 
much  discussed ;  but  it  has  been  decided  that  a  license  to  represent  a 
dramatic  entertainment,  granted  by  one  only  of  several  co-owners  of  the 
copyright  in  it,  does  not  bind  the  others,  nor  prevent  them  from  recov- 
ering their  shares  of  the  penalties  imposed  by  statute  on  persons  who 
infringe  the  copyright,  (k) 

(/)  See  the  judgment  of  V.-C.        >  Persons  may  be  joint  owners  of 

Wigram  in  Green  v.  Briggs,  6  Ha.  a  patent-right  and  not  be  partners 

395^  and    Strelley    v.    Winson,    1  in  the  business  of  selling  interests 

Vern.  297.     See,  also,  1  Story's  Eq.  in  the  same.     Manhattan  B.  Mfg. 

Jur.  §  466.  Co.  v.  Sears,  1  Sweeny  (N.  Y.),  426. 

(g)  See  Dunnicliff  v.  Mallett,  7  C.  See,  also,  Parkhurst  V.  Kinsman,  1 

B.  N.  S.  209,  and  Walter  v.  Lava-  Blatchf.  488. 

ter,   8  id.    162.     As  to  tenants  in        The  mere   conveying  an    undi- 

common  of  trade-marks,  see  Dent  vided  interest  in  a  patent  to  each 

v.  Turpin,  2  J.  &  H.  139.  of    four    parties    does    not    make 

'  (h)  Sheehan  v.  Great  East  Rail,  them  partners,  yet  if  they  agree  to 

Co.  16  Ch.  D.  59.  make  a  common  interest  to  sell, 

(i)  Mathers  r.  Green,  1  Ch.  29,  re-  and  divide  the  net  proceeds  equally, 

versing  S.   C.  34  Beav.  170.     The  a  partnership  is  created.     Penni- 

same  point  was  discussed,  but  not  man  v.  Munson,  26  Vt.  164. 
decided,  in    Hancock    v.   Bewley,        (k)  Powell   v.    Head,  12  Ch.   D. 

Johns.    601.     See,    also,    Russell's  686.     See  some  observations  on  the 

Patent,  2  De  G.  &  J.  130;  Horsley  indivisibility  of  copyright  in  4  H. 

v.  Knighton's  Patent,  8  Eq.  475.  L.  C.  992. 

141 


^2  CONTRACTS  OF  PAETNERSHIP.         [BOOK 


avo 
a 


If  part  owners  of  an  ordinary  chattel  cannot  agree  who  ought  to  hs 
it,  or  how  it  ought  to  be  employed,  the  only  remedy  (if  any)  appear 
to  be  by  an  action  for  an  injunction  or  a  receiver  and  a  sale.  (I) 

(I)  See  Jud.  Act,  1873,  §  25,  cl.  8. 

142 


♦CHAPTER  II. 


[*63] 


OF  THE  CONSIDERATION  OF  A  CONTRACT  OF  PARTNERSHIP. 

Consideration  for  a  partnership. —  Agreements  to  share 
profits,  like  all  other  agreements,  require  to  be  founded  on 
some  consideration  in  order  to  be  binding.  Any  contribu- 
tion in  the  shape  of  capital  or  labor,  or  any  act  which  may 
result  in  liability  to  third  parties,  is  a  sufficient  considera- 
tion to  support  such  an  agreement,  (a) l 


(a)  See  The  Herkimer,  Stewart's 
Adrc.  Rep.  23;  Anderson's  Case,  7 
Ch.  D.  75. 

!The  consideration  of  the  con- 
tract of  partnership  in  this  case 
consists  of  the  mutual  covenants 
and  promises  of  the  copartners,  and 
the  acts  they  respectively  engage 
to  perform.  Hence,  although  the 
business  of  the  partnership  was  the 
buying  and  selling  of  slaves,  it 
cannot  be  said  that  the  considera- 
tion of  the  partnership  contract 
was  the  purchase  of  slaves.  Belcher 
v.  Conner,  1  S.  C.  88. 

When  an  agreement  to  become 
stockholders  in  specified  shares  in 
a  partnership,  and  to  pay  the 
amount  subscribed,  is  signed  by  a 
number  of  persons,  with  the  num- 
ber of  shares  and  the  aggregate 
amount  thereof  annexed  to  their 
names,  though  no  promise  is  named 
in  the  agreement,  in  effect  each 
party  promises  to  the  others  to  pay 
the  amount ;  and  the  promises  of 
the  others  are  a  consideration  for 
the  promise  of  each,  and  the  par- 
ties are  sufficiently  definite.  Kirn- 
mins  v.  Wilson,  8  W.  Va.  584. 


When  such  subscribers  organize 
a  company  and  appoint  a  treasurer, 
and,  by  agreement  of  the  parties, 
one  makes  a  promissory  note,  pay- 
able to  the  person  appointed  treas- 
urer, for  his  unpaid  share,  the 
previous  liability  and  agreement 
constitute  an  adequate  considera- 
tion for  the  note.  Kimmins  v. 
Wilson,  supra, 

A  contract  of  partnership  be- 
tween two  physicians,  F.  and  S., 
provided  that  they  should-  divide 
equally  the  gross  receipts  of  their 
joint  business  in  a  certain  town; 
that  F.  might  be  absent  six  months 
in  the  year,  or  for  any  remaining 
portion  of  the  year,  and  S.  might 
be  absent  when  he  pleased,  but 
neither,  if  absent  more  than  two 
days  at  a  time,  should  have  any 
part  of  the  income  derived  from 
the  business  of  the  other  during 
that  time ;  that,  before  either  party 
should  withdraw  from  the  contract, 
any  horse  or  carriage  purchased 
for  the  joint  business  should  be 
sold,  and  the  loss  sustained  by  the 
party  withdrawing;  that  if  F. 
should  withdraw  and  cease  to  do 


143 


*Ci  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

A  bona  fide  contract  of  partnership  is  not  invalidated  by 
the  unequal  value  of  the  contributions  of  its  members,  for 
they  must  be  their  own  judges  of  the  adequacy  of  the  con- 
sideration of  the  agreement  into  which  they  enter. 

As  observed  by  Vice-Chancellor  Wigram,  "If  one  man 
has  skill  and  wants  capital  to  make  that  skill  available,  and 
another  has  capital  and  wants  skill,  and  the  two  agree  that 
the  one  shall  provide  capital  and  the  other  skill,  it  is  per- 
fectly clear  that  there  is  a  good  consideration  for  the  agree- 
ment on  both  sides,  and  it  is  impossible  for  the  court  to 
measure  the  quantum  of  value.  The  parties  must  decide 
that  for  themselves."  (b) 

Profits  to  be  shared,  but  losses  not. —  It  often  happens 
that  persons  agree  that  all  profits  shall  be  shared  ratably, 
and,  nevertheless,  that  all  losses  shall  be  borne  by  some  or 
one  of  them  exclusively.  Such  an  agreement  is  not  neces- 
sarily invalid  as  a  nudum  pactum;  for  it  is  nothing  more 
than  an  agreement  providing,  amongst  other  things,  that 
some  or  one  of  the  partners  shall  indemnify  the  others 
against  losses;  and  the  very  fact  that  these  latter  become, 
or  agree  to  become,  partners  is  quite  sufficient  consideration 
to  give  validity  to  a  contract  that  they  shall  be  indemnified. 
Such  agreements  appear,  moreover,  to  be  reasonable 
[*6i]  where  the  partners  ^indemnified  leave  the  whole 
management  of  the  concern  to  their  copartners,  (c) 

business  in  that  town,  without  prise,  without  anything  being  fur- 
having  shared  the  benefit  of  the  nished  by  the  latter  to  accomplish 
business  at  all,  then  S.  should  pay  the  object  of  the  copartnership,  is 
him  a  certain  sum.  Held,  that,  so  without  mutuality,  and  accord- 
long  as  the  contract  was  executory,  ingly  is  void.  Mitchell  v.  O'Neale, 
there  was  no  evidence  of  any  con-  4  Nev.  504. 

sideration  for  the  agreement  to  pay  (b)  Dale  v.  Hamilton,  5  Ha.  393. 
the  sum  mentioned,  apparent  on        (c)  Geddes  v.  Wallace,  2  Bli.  270, 

the    face   of    the    contract    itself,  is  an  instance  of  such  an  agree- 

Frothingham  v.  Seymour,  118  Mass.  ment.      However,    in    Brophy    v. 

489.  Holmes,  2  Moll.  1,  the  L.  C.  Hart 

A   copartnership    agreement  in  expressed  an  opinion  that  an  agree- 

which  one  of  tho  partners  promises  ment  between  A.  and  B.  that  A. 

to  give  the  other  partner  an  equal  should    advance    capital,   that  B. 

interest  in  the  profits  of  the  enter-  should  be  sole  manager,  and  that 

144 


CH.  II.]  CONSIDERATION.  *65 

Of  the  return  of  premiums. 

Premiums. —  It  frequently  happens,  when  one  person  is 
admitted  into  partnership  with  another  already  established 
in  business,  that  it  is  agreed  that  the  incoming  partner 
shall  pay  the  other  a  premium,  *.  e.,  a  sum  of  money  for 
his  own  private  benefit.  Such  an  agreement  is  valid;  and 
if  the  premium  is  not  duly  paid  it  may  be  recovered  by  an 
action,  provided  the  plaintiff  has  been  ready  and  willing  to 
take  the  defendant  into  partnership  as  agreed,  (d) 

The  consideration  for  the  premium  is  not  only  the  crea- 
tion of  a  partnership  between  the  person  who  takes,  and 
him  who  parts  with,  the  money,  but  also  the  continuance 
of  that  partnership;  and  if  a  person  on  his  entry  into  a 
partnership  pays  a  premium  and  then  the  partnership  is 
determined  sooner  than  was  expected,  the  question  arises 
whether  any,  and  if  any  what,  part  of  the  premium  ought 
to  be  returned? 

In  order  to  determine  this  point  it  is  necessary,  in  the 
first  place,  to  ascertain  whether  the  agreement  for  the  pre- 
mium was  or  was  not  tainted  with  fraud. 

Premiums  returnable  in  cases  of  fraud.— If  a  person 
has  been  deluded  into  becoming  a  partner  by  false  and 
fraudulent  representations,  and  has  paid  a  premium,  he  may 
take  one  of  two  courses,  viz. :  either  abide  by  the  contract 
and  claim  compensation  for  the  loss  occasioned  by  the  fraud, 
which  he  may  do  in  taking  the  partnership  accounts;  or  he 
may  disaffirm  the  contract  and  thereby  entitle  himself  to 
a  return  of  the  whole  of  the  money  he  has  paid,  (e) 
And  *in  a  case  of  this  sort,  in  the  event  of  the  bank-  [*65] 

they  should  divide  the  profits  (d)  Walker  v.  Harris,  1  Anstr. 
equally,  but  that  all  losses  should  245,  where  it  was  held  that  no 
fall  on  B.,  was,  as  regards  the  last  partnership  deed  need  be  ten- 
stipulation,  void,  as  being  nudum  dered. 

pactum;  and  his  lordship  thought  (e)  See  infra,  pp.  65  et  seq.;  and 

that  under  such  an  agreement  the  as  to  rescinding  for  fraud,  infra, 

losses  should  be  born  equally.  But  book  iii,  c.  10. 
see,  as  to  such  partnerships,  ante, 
pp.  15  et  seq. 

Vol.  I— 10  145 


*65  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

ruptcy  of  the  defrauding  partner,  the  amount  of  the  pre- 
mium paid  to  him  is  a  debt  provable  against  his  estate  in 
competition  with  his  separate  creditors.  (/) 

Return  of  premium  where  the  consideration  for  it  lias 
failed. —  But  if  the  agreement  by  virtue  of  which  the  part- 
nership was  entered  into,  and  the  premium  became  pay- 
able, is  not  tainted  by  fraud,  then  the  proper  mode  of 
dealing  with  the  premium  is  not  so  easy  to  determine.  In 
the  first  place,  assuming  the  partnership  to  have  been  in 
fact  created,  it  is  clear  that  there  has  not  been  a  total  fail- 
ure of  consideration  for  the  premium;  and,  consequently 
it  cannot  be  recovered  as  money  paid  for  a  consideration 
which  has  failed,  (g)  In  the  next  place,  persons  who  enter 
into  partnership  know  that  it  may  be  determined  at  any 
time  by  death  and  other  events;  and  unless  they  pro- 
vide against  such  contingencies,  they  may  fairly  be  con- 
sidered as  content  to  take  the  chance  of  their  happening, 
and  the  tendency  of  modern  decisions  is  to  act  on  this 
principle,  (h) 

Apportionment  of  premium  when  partnership  ceases 
sooner  than  was  expected. —  On  the  other  hand,  if  a  per- 
son receives  a  premium  for  taking  another  into  partnership, 
which  is  to  endure  for  a  certain  time,  and  then  himself  does 
anything  which  determines  the  partnership  before  that  time 
has  elapsed,  he  may  be  fairly  considered  as  having  pre- 
cluded himself  from  insisting  on  his  strict  right  to  retain  or 
be  paid  his  whole  premium.  Moreover,  where  there  has  been 
no  misconduct,  a  premium  paid  for  a  partnership  for  a  term 
of  years  has  been  held  apportionable  in  the  event  of  a  pre- 
mature determination  of  the  partnership  by  an  unforeseen 

(/)  Ex  parte  Turquand,  2  M.  D.  (g)  See  Taylor  v.  Hare,  1  Bos.  & 
&  D.  339.  And  see  Bury  v.  Allen,  Pul.  N.  R.  260. 
1  Coll.  589.  The  case  of  Ex  parte  (h)  Whincup  v.  Hughes,  L.  R.  6 
Broome,  as  reported  in  1  Rose,  69,  C.  P.  78 ;  Ferns  v.  Carr,  28  Ch.  D. 
is  opposed  to  this;  but  see  on  that  409.  See,  also,  Akhurst  v.  Jack- 
case  the  note  in  1  Coll.  598,  and  the  son,  1  Swanst.  85;  Bond  v.  Mil- 
observations  at  the  end  of  the  judg-  bourn,  20  W.  R.  197. 
ment,  id.  p.  607. 

146 


CIT.  II.]  CONSIDERATION.  *QQ 

occurrence.  The  fact  that  the  consideration  for  the  pre- 
mium has  partially  failed  has  been  considered  sufficient  to 
render  it  inequitable  to  retain  or  obtain  payment  of  the 
whole  premium.  (?') 

*The  principles  applicable  to  cases  of  this  descrip-  [*66'] 
tion  are  not  even  yet  well  settled ;  nor  are  the  de- 
cisions upon  them  easy  to  reconcile. 

The  following  rules  are,  however,  submitted  to  the  reader 
as  guides  on  this  subject: 

1.  Partnerships  at  will. —  Where  a  partnership  is  en- 
tered into  for  no  specified  time,  and  there  is  no  agreement 
for  a  return  or  an  apportionment  of  the  premium  in  the 
event  of  an  unexpected  determination  of  the  partnership, 
no  part  of  the  premium  is  returnable  on  the  happening  of 
such  event.  A  case  of  fraud  must  be  dealt  with  on  its  own 
demerits;  and  a  person  taking  another  into  partnership  for 
no  definite  time  cannot,  as  soon  as  he  has  received  the  pre- 
mium, dissolve  the  partnership  and  retain  what  has  been 
paid  as  the  consideration  for  it.  (k)  But  laying  aside  fraud, 
and  supposing  there  to  be  nothing  except  a  partnership 
created  for  no  specified  time  and  determined  soon  after  its 
creation,  it  is  difficult  to  hold  that  it  was  in  fact  entered 
into  for  a  longer  time,  and  that  the  person  who  came  in, 
paying  a  premium,  has  not  got  all  for  which  he  stipulated.  (I) 

2.  Partnerships  for  a  time  —  Agreements  to  dissolve. — 
Where  a  partnership  is  entered  into  for  a  specified  time, 
and  is  determined  prematurely,  the  first  matter  for  consid- 
eration is  whether  the  parties  have  come  to  any  agreement 
on  the  dissolution.     If  they  have,  and  if  they  have  also 

(i)  Similar  views  have  been  taken  78,  and  Ferns  v.  Carr,  28  Ch.  D. 

with,  respect  to  what  is  right  in  409. 

cases  of  a  similar  kind,  arising  on  (k)  Featherstonhaugh  v.  Turner, 

the  death  of  a  solicitor  who  has  25  Beav.  382.    See,  also,  Hamil  v. 

been  paid  a  premium  by  an  arti-  Stokes,   Dan.    20,   and  Burdon  v. 

cled  clerk.     See  Hirst  v.  Tolson,  2  Barkus,  4  De  G.  F.  &  J.  42,  per  L. 

Mac.  &  G.  134 ;  Ex  parte  Bayley,  J.  Turner. 

9  B.  &  C.    691.     But  these  cases  (Z)  See  per  Lord  El  don  in  Tatter- 
have  been  since  disapproved.     See  sail  v.  Groote,  2  Bos.  &  P.  134. 
Whincup  v.  Hughes,  L.  R.  6  C.  P. 

147 


*67  CONTRACTS  OF  PARTNERSHIP.         [BOOK  1. 

provided  for  the  premium,  it  must  be  dealt  with  according 
to  the  agreement;  but  if  the  agreement  on  dissolution  is 
silent  with  respect  to  the  premium,  the  inference  is  that 
the  parties  did  not  intend  to  deal  with  it,  nor  to  vary 
their  rights  to  it  under  the  original  agreement  for  its  pay- 
ment, (m) 
[*67]  *Where,  however,  no  agreement  is  come  to  on  the 
dissolution,  then  the  cause  of  dissolution  must  be  con- 
sidered. 

Premature  termination,  (a)  By  death.— Death  is  a 
contingency  which  all  persons  entering  into  partnership 
know  may  unexpectedly  put  an  end  to  it.  If,  therefore, 
they  do  not  expressly  guard  against  this  risk,  they  may  rea- 
sonably be  treated  as  content  to  incur  it;  and,  if  death 
should  unexpectedly  happen,  no  return  of  premium  not  ex- 
pressly provided  for  can,  it  is  apprehended,  be  demanded,  (n) 
But  even  in  this  case,  if  a  person  knows  himself  to  be  in  a 
dangerous  state  of  health,  and  conceals  that  fact,  and  induces 
another  to  enter  into  partnership  with  him,  and  to  pay  him 
a  premium,  and  shortly  afterwards  dies,  the  fraud  so  prac- 
ticed will  entitle  the  partner  paying  the  premium  to  a  return 
of  part  of  it;  and  he  can  obtain  such  return  in  an  action  for 
a  partnership  account :  he  need  not  rescind  the  contract  in 
toto.  (o) 

(b)  By  bankruptcy. —  Bankruptcy  of  the  partnership  as 
distinguished  from  the  bankruptcy  of  one  of  the  partners 
cannot,  it  is  apprehended,  be  a  ground  for  apportioning  a 
premium;  for  it  is  a  contingency  which  every  one  may  fairly 
be  taken  as  contemplating,  (p)  But  the  bankruptcy  of  a  part- 
ner receiving  a  premium  is  a  ground  for  its  apportionment 
if  he  was  embarrassed  when  the  partnership  commenced, 

(m)  See  Lee  v.  Page,  30  L.  J.  Ch.  (?i)  See  Whincup  v.  Hughes,  L.  R. 

857,  and  7  Jur.  N.  S.  768.     A  mere  6  C.  P.  78;  Ferns  v.  Carr,  28  Ch.  D. 

consent  to  dissolve  may  leave  all  409. 

questions  of  this  sort  open,  as  in  (o)  Mackenna  v.  Parkes,  36  L.  J. 

Astle  v.  Wright,  23  Beav.  77 ;  Wil-  Ch.  366,  and  15  W.  R.  217. 

son  v.  Johnstone,  16  Eq.  606;  Bury  (p)  See  Akhurst    v.   Jackson,  1 

v.  Allen,  1  Coll.  589.  Swanst.  85. 

148 


CH.  n.]  CONSIDERATION.  *68 

and  this  fact  was  not  known  to  his  copartner;  (q)  but  not 
if  it  was.  (/•)  What  the  effect  would  be  if  he  became  em- 
barrassed after  the  commencement  of  the  partnership  has 
not  been  decided.  The  bankruptcy  of  the  partner  paying 
the  premium  cannot  entitle  him  or  his  trustee  to  a  return 
of  any  part  of  it,  unless  he  has  been  made  bankrupt  by  his 
copartner  who  has  received  the  premium,  (s) 

(c)  Lunacy. —  The  lunacy  of  a  partner  causing  a  dissolu- 
tion would  perhaps  be  considered  as  a  ground  for  apportion- 
ing the  premium. 

*(d)  Disagreements. —  Disagreements  between  the  [*68] 
partners  resulting  in  a  dissolution  have  given  rise  to 
much  difficulty.  The  tendency  of  modern  decisions  is  to 
apportion  the  premium  in  these  cases  not  only  where  neither 
partner  is  to  blame,  (t)  but  a  fortiori  where  the  partner 
receiving  the  premium  has  so  misconducted  himself  as  to 
give  the  partner  paying  it  a  right  to  have  the  partnership 
dissolved ;  (u)  and  it  matters  not  that  the  latter  may  him- 
self not  be  altogether  free  from  blame;  (aj)  nor  is  the  rule 
altered  by  the  fact  that  the  partners  have  consented  to  dis- 
solve since  the  institution  of  legal  proceedings,  (y) 

Misconduct. —  But  where  a  partner  has  paid  or  agreed  to 
pay  a  premium,  and  has  so  misconducted  himself  as  to  in- 
duce the  court  to  dissolve  the  partnership  on  that  ground, 
he  cannot  recover  any  part  of  the  premium  if  he  has  paid 

(q)  Freeland  v.  Stansfeld,  2  Sm.  was  the  party  to  receive  the  pre- 

&  G.  479.  mium. 

(r)  Akhurstu.  Jackson,  1  Swanst.  (x)  Atwood  v.  Maude,  3  Ch.  369, 

85.              •  where  the  partner  paying  the  pre- 

(s)  As  in  Hamil  v.  Stokes,  Dan.  mium     was     plaintiff;    Astle     v. 

20,  and  4  Price,  161.     In  this  case  Wright,   23    Beav.    77 ;    Pease    v. 

it  is  to  be  observed  that  the  con-  Hewitt,    31    Beav.    22.      Compare 

tract    of  partnership  was    not  re-  Airey  v.   Borham,  29    Beav.   620, 

scinded  on  the  ground  of  fraud.  where  nothing  was  returned. 

(t)  Atwood  v.  Maude,  3  Ch.  369.  (y)  Bury  v.  Allen,  1  Coll.  589; 

(u)  Builock  v.  Crockett,  3  Giff.  Astle  v.  Wright,  23  Beav.  77;  Wil- 

507.     See,  also,   Rooke  v.   Nisbet»  son  v.  Johnstone,  16  Eq.  606.    Com- 

50  L.  J.  Ch.  588,  where  the  part-  pare  Lee  v.  Page,  7  Jur.  N.  S.  768, 

ner  dissolving  was   in   fault,  and  and  30  L.  J.  Ch.  857. 

149 


*69  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

it,  nor  avoid  paying  it  if  it  is  due  and  it  is  still  unpaid,  (s)  In 
Wilson  v.  Johnstone,  (a)  Y.-C.  Wickens  held  that  the  mis- 
conduct must  be  such  as  to  amount  to  a  complete  repudia- 
tion of  the  contract  of  partnership;  but  he  did  not  lay  down 
any  rule  for  determining  what  misconduct  amounts  to  such 
a  repudiation,  and  the  statement  in  the  text  is  in  accordance 
with  the  latest  decision  on  the  subject,  (b) 

3.  Amount  to  be  returned.—  There  is  no  definite  rule 
for  deciding  in  any  particular  case  the  amount  which  ought 
to  be  returned.  The  time  for  which  the  partnership  was 
entered  into,  and  the  time  for  which  it  has  in  fact  lasted, 
are  the  most  important  matters  to  be  considered;  but 
[*69]  other  circumstances  must  often  be  taken  into  *ac- 
count  in  order  to  decide  what  is  fair  between  the 
parties.  (<?)  At  the  same  time  the  rule  generally  adopted  is 
to  apportion  the  premium  with  reference  to  the  agreed  and 
actual  duration  of  the  partnership,  (d) 

The  proper  time  for  obtaining  the  decision  of  the  court 
upon  the  question  whether  any  part  of  a  premium  is  return- 
able or  not  is  the  hearing  of  the  action.  An  inquiry  on 
this  point  will  not  be  added  afterwards  except  under  special 
circumstances,  (e) 

(z)  See  Bluck  v.  Capstick,  12  Ch.  (d)  See  Wilson  v.  Johnstone,  16 

D.   863;  Wilson  v.   Johnstone,    16  Eq.  606;  Atwood  v.  Maude,  3  Ch. 

Eq.  606;  Aireyv.  Borham,  29  Beav.  369;   Bury  v.   Allen,   1   Coll.   589; 

620 ;  Atwood  v.  Maude,  3  Ch.  369.  Astle  v.  Wright,  23  Beav.  77 ;  Pease 

(a)  16  Eq.  606.  v.  Hewitt,  31  Beav.  22.      Compare 

(b)  Bluck  v.  Capstick,  12  Ch.  D.  Bullock  v.  Crockett,  3  Giff.  507; 
863.  Freeland  v.  Stansfeld,  1  Sm.  &  G.' 

(c)  Lyon  v.  Tweddell,  17  Ch.  D.  479;  Hamil  v.  Stokes,  Dan.  20, 
529,  which  shows  that  the  court  where  this  rule  was  not  adhered  to. 
has  a  wide  discretion  in  this  mat-  (e)  Edmunds  v.  Robinson,  29  Ch. 
ter.  D.  170. 

150 


^CHAPTER  III.  [*70] 

OF  THE  PERSONS  CAPABLE  OF  ENTERING  INTO  PARTNER- 
SHIP. 

The  parties  to  a  contract  of  partnership  may  be  consid- 
ered with  reference  to 

1.  Their  number. 

2.  Their  capacity. 

Section  I. —  Of  the  Number  of  Partners. 

Number  of  partners. —  By  the  common  law  of  this  coun- 
try there  is  no  limit  to  the  number  of  persons  who  may  be 
associated  together  in  partnership,  (a) l 

Statutes  regulating  the  number  of  persons  who  may  be 
partners. —  But  from  time  to  time  various  statutes  have 
been  passed,  declaring  that  certain  partnerships  shall  be 
either  altogether  illegal,  or,  at  all  events,  deprived  of  some 
important  rights,  or  exposed  to  serious  penalties,  if  their 
members  exceed  a  prescribed  number.  Of  these  statutes  the 
Companies  Act,  1862.  is  the  only  one  of  present  practical 
importance.  This  act,  by  section  4,  limits  the  greatest  num- 
ber of  persons  who  can  carry  on  business  as  partners  other- 
wise than  under  its  provisions  to  ten,  if  the  business  is  that  of 
bankers,  and  to  twenty  in  other  cases,  (b)  But  this  enact- 
ment does  not  apply  to  partnerships  formed  before  the  2d 
November,  1862  (see  §  2),  nor  to  those  formed  in  pursu- 
ance of  some  other  act  of  parliament,  or  of  letters  patent, 

(a)  As  to  the  supposed  illegality        1 A    partnership    must    contain 
of  partnerships  so  large  as  to  be    more  than  one  person.     Stirling  v. 
incapable  of  practically  suing  and    Heintzman,  42  Mich.  449. 
being  sued,   see    the    volume    on        (6)  See  on  this  subject  the  volume 
Companies.  on  Companies. 

151 


*71  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

nor  to  companies  engaged  in  working  mines  within  and 
subject  to  the  jurisdiction  of  the  Stannaries. 

All  the  other  statutes  relating  to  this  subject,  except  the 

Banking  Act  of  7  George  IV.,  chapter  46,  have  been 
[*71]  repealed  (c);  and  ^although  that  act  is  still  in  force, 

no  partnership  or  company  can  now  be  formed  under 
it.  That  act  limited  the  number  of  persons  who  could  law- 
fully carry  on  business  as  bankers  in  partnership  and  issue 
notes  (except  under  certain  restrictions)  to  six.  (d) 

Section  II. —  Of  the  Capacity  of  Partners. 

Persons  who  cannot  be  partners. —  By  the  law  of  this 
country  a  valid  contract  of  partnership  can  be  entered  into 
between  any  persons  who  are  not  under  the  disabilities  of 
minority  or  unsoundness  of  mind,  and  are  not  convicts 
within  the  meaning  of  33  and  34  Victoria,  chapter  23.  As 
will  be  seen  hereafter,  when  treating  of  illegal  partnerships, 
there  are  certain  trades,  businesses  and  professions  which 
cannot  be  lawfully  carried  on,  either  solely  or  in  partner- 
ship, unless  some  statutory  requisite  has  been  complied 
with;  but  now  that  the  disabilities  under  which  spiritual 
persons  formerly  lay  have  been  removed,  (e)  the  writer  is 
not  aware  that  there  is  any  class  of  persons  (except  con- 
victs) who,  being  of  sound  mind,  and  over  twenty-one, 
are  rendered  incapable  of  becoming  members  of  a  part- 
nership. Married  women  may  be  partners,  as  will  appear 
later  on. 

(c)  A  list  of  them  will  be  found  that  contracts  entered  into  con- 
in  the  second  edition  of  this  treat-  trary  to  theni  shall  not  be  void, 
ise,  vol.  i,  p.  82.  See  Lewis  v.  Bright,  4  E.  &  B.  917. 

(d)  See  on  this  subject,  infra,  Consequently  the  disability  under 
book  i,  ch.  5,  §  1.  which  the  clergy  formerly  lay,  and 

(e)  The  law  relating  to  the  clergy  which  rendered  all  partnerships 
is  now  1  and  2  Vict.  ch.  106,  §§  29-  and  companies  of  which  they  were 
31,  and  4  Vict.  ch.  14.  Although  a  de  facto  members  illegal  (Hall  v. 
violation  of  those  laws  is  attended  Franklin,  3  M.  &  W.  259),  exists  no 
with  the  risk  of  suspension  and  dep-  longer. 

rivation,   it    is   expressly  enacted 

152 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE    OF    ENTERING.  *72 

Agreements  entered  into  between  several  persons,  some 
of  whom  are  03?"  law  incompetent  to  contract,  are  not  wholly 
null  and  void,  but  are  only  in  some  respects  less  effective 
than  if  all  the  parties  to  them  were  competent.  Hence, 
there  is  nothing  to  prevent  a  person  who  is  not  sui  juris 
from  being  a  partner.  But  if  any  such  person  is  a  partner, 
his  or  her  want  of  capacity  to  contract  will  necessarily  give 
rise  to  consequences  deserving  special  notice.  These  may 
be  considered  as  they  affect,  1,  aliens;  2,  felons  and  out- 
laws :  3,  infants ;  4,  lunatics ;  5,  married  women ;  and  6,  cor- 
porations and  companies. 

*1.  Aliens.  [*72] 

Alien  friends. —  There  is  nothing  to  prevent  an  alien,  not 
an  enemy,  from  being  a  partner,  (f)  But  a  public  minis- 
ter of  a  foreign  state,  accredited  to  and  received  by  the 
queen,  cannot  be  sued  here  even  in  respect  of  commercial 
transactions  in  which  he  may  have  engaged,  (g) 

Alien  enemies  stand  in  a  very  different  position  from 
alien  friends. 

Effects  of  war  on  the  rights  of  partners. —  When  two 
supreme  powers  are  at  war,  all  persons  who,  for  the  time 
being,  are  the  subjects  of  either,  become,  in  contemplation 
of  the  civil  tribunals  of  both,  hostile  to  the  subjects  of  the 
other;  and  so  long  as  the  war  lasts  the  subjects  for  the 
time  being  of  the  one  country  are  incapable  of  entering 
into  any  valid  contract  with  the  subjects  of  the  other;  and 
all  remedies  available  for  the  one  against  the  other,  in  re- 
spect of  transactions  before  the  war,  are  suspended.  (A) 
Consequently  no  partnership  can  subsist  between  the  sub- 
jects of  hostile  powers;  (i)1  and  if  two  partners  are  resident 

(/)    Co.    Lit.     129&;    Bac.    Ab.  Taunt,  440 ;  Ex  parte  Boussmaker, 

Alien,    D.     See,    generally,   as   to  13  Ves.  71 ;  Potts  v.  Bell,  8  T.  R. 

aliens,  33  Vict.  ch.  14.  548.     See  the  note  to  Clemontson 

(g)  Taylor  v.  Best,  14  C.  B.  487;  v.  Blessig,  11  Ex.  141. 
Magdalena  Steam  Nav.  Co.  v.  Mar-        (i)   See  Evans  v.   Richardson,  3 

tin,  2  E.  &  E.  94.  Mer.  469 ;  and  infra,  the  chapter 

(h)  Albrecht  v.  Sussmann,   2  V.  on  dissolution. 
&  B.  323;  Willison  v.  Patteson,  7        '  See  The  Rapid,  8  Cranch,  155; 

153 


*73  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

in  two  different  countries  tli  r  partnership  is  determined  by 
a  war  between  those  countries.  (Jc) l 

These  doctrines,  however,  are  only  recognized  and  en- 
forced by  the  belligerent  powers.  Neutrals  do  not  apply 
them  to  the  determination  of  commercial  questions  arising 
between  the  subjects  of  belligerent  states. 

It  is  to  be  remembered  that  whether  a  person  is  or  is  not 
to  be  considered  as  an  enemy  depends,  not  on  whether 
there  is  war  between  this  country  and  his  native  land, 
[*73]  but  upon  whether  '-there  is  war  between  this  country 
and  the  country  in  which  he  is  voluntarily  resident. 
It  is  the  place  of  his  residence  or  trading,  and  not  the  place 
of  his  birth,  which  is  of  importance  in  these  matters ;  {I) 2 
and,  therefore,  if  a  foreigner  comes  over  here,  enters  into 
partnership  here,  and  dwells  here,  and  then  war  breaks  out 
between  this  country  and  that  of  which  he  is  a  native,  the 
partnership  will  not,  nor  will  his  rights  as  a  partner,  be 
affected  by  the  war,  any  more  than  if  he  were  an  English- 
man, (m)  On  the  other  hand,  if  a  partnership  consists 
wholly  of  Englishmen,  some  of  whom  reside  here  and  some 
in  another  country,  and  war  breaks  out  between  that  coun- 
try and  this,  the  partners  become  enemies  for  all  purposes 
of  trade  and  commerce  just  as  much  as  if  those  abroad 
were  natives  of  the  country  in  which  they  reside,  (n).     The 

Scholefield  v.  Eichelberger,  7  Pet.  (I)  See  Albretcht  v.  Sussman,  2 

585;  The  San  Jose  Indiana,  2  Gall.  V.  &  B.  323;  Willison  v.  Patteson, 

268.  7  Taunt.  440 :  Houriet  v.  Morris,  3 

(k)  See  Griswold  v.  Waddington,  Camp.  303 ;  Bell  v.  Reid,  1  M.  &  S. 

15  John.  57,  and  16  id.  438  (Amer.).  726. 

Whether  peace  operates  retrospect-  2  See  Griswold  v.  "Waddington,  16 

ively,  see  New  York  Life  Ins.  Co.  John.   438 ;  The  Julia,   8  Cranch, 

v.  Statham,  3  Otto,  24  (Amer.) ;  and  1817 

Parsons  on  Part.  ch.  3,  §§  1,  3.  (m)  See  Wells  v.  Williams,  1  Ld. 

i  See  Woods  v.  Wilder,  43  N.  Y.  Raymond,  282,  and  1  Salk.  46,  in 

164;  Cohen  v.  N.  Y.  Life  Ins.  Co.  which  it  was  held  that  a  plea  of 

50  id.  610;  Kershaw  v.  Kelsey,  100  alien  enemy  was  no  defense  to  an 

Mass.  561 ;  N.  Y.  Life  Ins.   Co.  v.  action  brought  by  a  foreigner  dom- 

Statham,  93  U.  S.  24 ;  Mutual  Ben-  iciled  here,  though  there  was  war 

efit  Life   Ins.   Co.  v.  Hildyard,  37  between  his  country  and  this. 

N.  J.  L.  444.  (»)  See  M'Connell  v.   Hector,   3 

154 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE    OF    ENTERING.  *T4 

same  is  true,  even  in  the  absence  of  any  fixed  residence  in 
the  belligerent  country,  if  some  of  the  partners  go  over 
there  and  trade  there  during  the  war.  (p) 


2.  Melons  and  outlaws. 

Felons  and  outlaws. —  Formerly  a  felon's  or  outlaw's 
share  in  a  partnership  vested  in  the  crown ;  (p)  and  although 
a  felon  or  outlaw  could  contract,  he  could  not  sue  in  his 
own  right  until  his  disability  had  been  removed;  i.  e.,  in  the 
case  of  felony,  until  pardon  or  expiration  of  the  term  of 
punishment;  and  in  case  of  outlawry,  until  its  reversal.  (^) 
But  no  person  could  plead  his  own  attainder  or  outlawry  as 
a  defense  to  an  action  against  him.  (r)  As  regards 
outlaws  the  law  in  these  respects  ^remains  unchanged ;  [*7-A] 
the  law,  however,  respecting  felons  was  materially 
altered  by  33  and  3i  Victoria,  chapter  23.  This  act  abolished 
forfeiture  for  felony,  (s)  and  empowers  the  crown  to  com- 
mit the  custody  and  management  of  the  property  of  any 
convict  (i.  e.,  a  person  sentenced  to  death  or  penal  servi- 
tude) {t)  to  an  administrator,  (u)  in  whom  all  the  convict's 
property,  both  real  and  personal,  then  becomes  vested,  (x) 
Moreover,  a  convict  is  absolutely  disabled  from  alienating 
any  property  or  making  any  contracts,  and  from  suing,  (y) 
except  when  lawfully  at  large  under  a  proper  license,  (z) 
Provision  is  also  made  for  the  appointment  of  an  interim 
curator  of  a  convict's  property,  (a)  Practically  this  act 
facilitates  the  dissolution  and  winding-up  of  a  partnership 
in  the  event  of  a  member  being  convicted  of  felony;  but  it 

Bos.  &  P.  113;  O'Mealey  v.  Wilson,  (q)  Ibid.     And    see    Bullock    v. 

1  Camp.  482 ;  and  compare  Roberts  Dodds,  2  B.  &  A.  258. 

v.  Hardy,  3  M.  &  S.  533,  and  Ex  (r)  Foster's  Cr.  L.  61. 

parte  Baglehole,  18  Ves.  525,  and  1  (s)  §  1. 

Rose,  271.  (t)  §  6. 

(o)  See  The  Young  Klassina,  5  Ch.  (u)  §  9. 

Rob.  303 ;  The  Indian  Chief,  3  id.  (x)  §  10. 

12;  The  Portland,  id.  41.  {y)  §  8. 

(p)  Bac.    Ab.    Felony  and    Out-  (z)  §  30. 

la  wry ;  Co.  Lit.  128.  (a)  §  21  et  seq. 

155 


'74 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


is  unnecessary  to  allude  further  to  this  statute  in  the  pres- 
ent place. 

3.  Infants. 

Infant  partners. —  An  infant  may  be  a  partner.1     But, 
speaking  generally,  whilst  he  is  an  infant  he  incurs  no  lia- 


'An  infant  may  be  a  partner, 
and  his  father,  though  indebted 
and  insolvent,  may  release  to  his 
son  all  claim  to  his  services ;  and 
the  consent  of  the  father  to  the 
son's  becoming  a  partner  is  a  re- 
lease of  his  services.  Penn  v. 
Whitehead,  17  Gratt.  503. 

An  infant's  partnership  agree- 
ment is  not  void,  but  voidable  only. 
Dunton  v.  Brown,  31  Mich.  182; 
Osburn  v.  Farr,  42  Mich.  134. 
See,  also,  Whitney  v.  Dutch,  14 
Mass.  457 ;  S.  C.  Evvell's  Lead.  Cas. 
38;  McGunn  v.  Hanlin,  29  Mich. 
476. 

A  minor  may  disaffirm  and  thus 
put  an  end  to  his  partnership  con- 
tract ;  but  asking  for  the  appoint- 
ment of  receiver  to  convert  the 
assets  into  money  and  pay  first  to 
him  the  amount  invested,  andtlien 
the  firm  debts,  amounts  to  a  ratifi- 
cation of  all  that  was  done  in  the 
purchase  of  goods  and  assets  of 
the  firm,  and  the  court  will  apply 
them  first  against  the  firm  debts. 
Shirk  v.  Shultz,  12  West.  Pep.  (Ind.) 
684;  S.  C.  15  N.  East.  Rep.  12.' 

In  an  action  upon  a  contract  for 
goods  sold  and  delivered  to  a  part- 
nership, one  member  of  which  is  a 
minor,  the  plea  of  infancy  may  be 
interposed  by  him  in  bar  of  per- 
sonal liability  upon  such  contract. 
Folds  v.  Allardt,  5  Minn.  488. 

As  to  the  plea  of  non  est  factum 
and  infancy  in  an  action  upon  a 
promissory  note  against  an  alleged 


firm,  see  King  v.  Barbour,  70  Ind. 
35. 

Although  an  infant  may  become 
a  partner  he  cannot  be  held  indi- 
vidually for  the  contracts  of  the 
firm  unless  he  ratifies  them  after 
majority.  Bush  v.  Linthicum,  59 
Md.  344. 

An  infant  may  rescind  his  agree- 
ment of  partnership  and  recover 
back  his  investment  therein  less 
the  amount  received  from  the  firm. 
Sparmann  v.  Keim,  83  N.  Y.  245; 
S.  C.  9  Abb.  N.  C.  1 :  reversing  44 
N.  Y.  Super.  Ct.  163.  See,  how- 
ever, Page  v.  Morse,  128  Mass.  99; 
Adams  v.  Beall,  10  East.  Rep.  771. 

A  bill  for  a  rescission  filed  by  one 
who  was  a  minor  at  the  formation 
of  the  partnership,  but  who  had 
attained  his  majority  more  than 
six  years  before  filing  his  bill, 
held,  to  be  filed  too  late.  Whelen 
v.  Harrison,  40  Leg.  Intel.  170. 

While  an  infant  is  a  partner  his 
acts  within  the  scope  of  the  firm 
business  will  bind  the  firm.  Av- 
ery v.  Fisher,  28  Hun,  508  (an  as- 
signment) ;  Bush  v.  Linthicum,  59 
Md.  349. 

A  person  against  whom,  with  his 
partner,  proceedings  in  insolvency 
have  been  instituted  cannot  avoid 
them  on  the  ground  that  his  part- 
ner was  an  infant  when  the  pro- 
ceedings were  begun,  if  the  infant 
was  then  represented  by  a  guardian 
ad  litem,  and  has  ratified  the  pro- 
ceedings   after    arriving    at    age. 


156 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE    OF    ENTERING. 


:"74 


bility  and  is  not  responsible  for  the  debts  of  the  firm;  and 
when  he  comes  of  age,  or  even  before,  he  may,  if  he 
chooses,  disaffirm  past  transactions,  (b) l 


Winchester  v.  Thayer,  129  Mass. 
139. 

Where  a  person  engaged  in  busi- 
ness as  copartner  with  another, 
and  ostensibly  competent  to  con- 
duct it,  incurs  in  form  the  usual 
liability  appertaining  to  it,  and 
escapes  such  liability  by  pleading 
infancy,  it  is  not  a  just  exercise  of 
discretion  to  allow  him  to  recover 
costs  after  having  enjoyed  the  ad- 
vantages of  the  purchase  of  prop- 
erty by  the  firm.  Yamato  Trading 
Co.  v.  Hoexter,  44  Hun  (N.  Y.), 
491. 

Where  a  father  invests  his  own 
funds  and  personal  services,  or  the 
funds  of  his  children  in  his  hands 
as  guardian,  arising  from  an  un- 
authorized sale  of  their  property, 
in  a  partnership  for  their  benefit, 
and  the  children  afterwards  seek 
to  enforce  the  partnership  in 
equity,  the  other  partner  cannot 
avail  himself  of  these  facts  to  avoid 
the  contract.  Stein  v.  Robertson, 
30  Ala.  286. 

Where  one,  being  a  widow  and 
natural  tutrix  of  her  minor  chil- 
dren, and  having  the  possession 
and  administration  of  the  property 
of  her  deceased  husband's  succes- 
sion during  her  life,  entered  into  a 
partnership  with  the  heirs,  who 
were  of  full  age,  and  slaves  and 
other  property  of  the  succession 
were  employed  and  used  by  the 
partnership,  held,  that  the  minor 
heirs  were  not,  and  could  not  be 
made  by  their  natural  tutrix,  mem- 
bers of  the  partnership ;  and  that 
they,  consequently,  after  her  death 
had  the  right  to  sue  for  and  re- 


cover from  the  surviving  partners 
a  debt  due  them  by  the  partner- 
ship before  a  settlement  and  liq- 
uidation of  partnership  affairs. 
Cuille  v.  Gassen,  14  La.  Ann.  5. 

(b)  See  Goode  v.  Harrison,  5  B.  & 
A.  157-9 ;  Ex  parte  Taylor,  8  De  G. 
M.  &  G.  254. 

1  See  Dunton  v.  Brown,  supra,  to 
the  point  that  an  infant's  voidable 
contract  of  partnership  is  not 
avoidable  by  him  till  he  becomes 
of  age.  As  to  when  an  infant 
may  avoid  his  voidable  acts,  see, 
generally,  Ewell's  Lead.  Cases  on 
Inf.  &  Cov.  92,  96,  and  cases  cited. 
As  to  what  amounts  to  a  ratifica- 
tion of  a  partnership  by  an  infant, 
see  Ewell's  Lead.  Cases,  169,  170, 
175. 

A  minor  entered  into  partnership 
in  Sussex  county  with  two  others, 
and  put  in  $1,000.  Before  he  came 
of  age  the  partnership  was  dis- 
solved, the  minor  receiving  his 
$1,000.  After  the  dissolution  he 
removed  to  Huntington  county, 
and  A.  recovered  a  judgment 
against  the  members  of  the  firm, 
including  the  minor,  without  his 
knowledge.  A.  transferred  the 
judgment  to  B.  Three  years  after- 
wards B.  brought  an  action  on 
the  judgment,  and  recovered  a 
second  judgment,  no  process  being 
served  on  the  minor.  B.  caused 
an  execution  to  be  issued  to  the 
sheriff  of  Huntington  county,  and 
to  be  levied  on  the  property  of  the 
minor  there.  The  minor  filed  a 
bill  stating  the  foregoing  facts, 
charging  fraud,  etc.,  and  obtained 
an  injunction  to  stay  proceedings 


157 


*75 


CONTRACTS   OF   PARTNERSHIP. 


[BOOK    I. 


The  irresponsibility  of  an  infant  for  the  debts  of  a  part- 
nership of  which  he  is  a  member  is  an  obvious  consequence 
of  his  general  incapacity  to  bind  himself  by  contract,  and 
does  not  require  to  be  supported  by  any  special  authority,  (c) 
It  might,  perhaps,  be  thought  that  an  infant  who  held  him- 
self out  as  a  partner  would  be  liable  to  persons  trusting  to 
his  representations  if  they  did  not  know  him  to  be  under 
age;  but  this  is  not  so;  (Y7)1  and  as  an  infant  is  not 
[*75]  responsible  for  the  torts  of  *his  agent,  an  infant  part- 
ner cannot  be  held  liable  for  the  misconduct  of  his 
copartners.  The  irresponsibility  of  an  infant  as  a  partner 
seems  therefore  to  be  complete,  except  in  cases  of  fraud. 

But  an  infant  who  was  guilty  of  fraud  was  not  so  free 
from  liability  in  equity  as  he  was  at  law;  (e)  and  equitable 
as  distinguished  from  legal  relief,  e.  g.,  rescission  of  con- 
tract, may  be  obtained  against  him.  (f)  In  accordance  with 
these  principles,  although,  as  a  rule,  an  infant  cannot  be 


on  the  execution.      Vansyckle  v. 
Rorback,  6  N.  J.  Eq.  234. 

(c)  Chandler  v.  Parkes,  3  Esp.  76 ; 
Jatfray  v.  Frebain,  5  id.  47;  Gibbs 
v.  Merrill,  3  Taunt.  307 ;  and  Bur- 
gess v.  Merrill,  4  id.  468,  show  that 
an  infant  partner  ought  not  to  be 
joined  as  a  defendant  in  an  action 
against  the  firm. 

(d)  See  Price  v.  Hewitt,  8  Ex.  146 ; 
Johnson  v.  Pye,  Vin.  Ab.  Enfant, 
H.  2,  pi.  16 ;  Glossop  v.  Column,  1 
Stark.  25 ;  Green  v.  Greenbank,  2 
Marsh.  485. 

1  To  the  point  that  the  false  and 
fraudulent  declaration  of  an  infant 
that  he  is  of  full  age,  made  at  the 
time  of  entering  into  a  contract, 
does  not  prevent  him  from  avoid- 
ing the  contract  at  his  election, 
see  Burley  v.  Russell,  10  N.  H.  184; 
Conroe  v.  Birdsall,  1  John.  Cas.  127 ; 
Ferguson  v.  Bobo,  54  Miss.  121; 
Merriam  v.  Cunningham,  11  Cush. 
40;  Norris  v.  Vance,  3  Rich.   164; 


Carpenter  v.  Carpenter,  45  Ind. 
142;  Curtin  v.  Patton,  11  S.  &  R. 
309;  Stoolfoos  v.  Jenkins,  12  id. 
403;  Brown  v.  McCune,  5  Sandf. 
221 ;  Knell's  Lead.  Cas.  219. 

Where  the  principal  defendant 
in  garnishment  proceedings  is  a 
firm,  a  verdict  discharging  one  of 
the  partners  because  he  is  an  in- 
fant does  not  release  the  gar- 
nishee. Bethel  v.  Chipman,  57 
Mich.  379. 

It  seems  that  where  two  persons 
have  held  themselves  out  as  part- 
ners, one  of  them,  being  of  full 
age,  cannot  be  heard  to  allege,  as 
against  the  firm  creditors,  that  a 
contract  of  partnership  was  void- 
able because  the  other  was  a 
minor.  David  v.  Bir chard,  53  Wis. 
492. 

(e)  See  Wright  v.  Snowe,  2  De  G. 
&  S.  321. 

(/)  Lempriere  v.  Lange,  12  Ch. 
D.  675. 


158 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE   OF    ENTERING.  '"75 

made  bankrupt,  {g)  yet  if  he  fraud ulently  represents  himself 
as  of  age,  and  obtains  credit  by  his  false  representations, 
and  is  made  bankrupt,  the  adjudication  against  him  will 
not  be  superseded,  and  his  deceived  creditors  will  be  paid 
out  of  his  estate.  (A) 

Repudiation  by  infant. —  Moreover,  notwithstanding  the 
general  irresponsibility  of  an  infant,  he  cannot,  as  against 
his  copartners,  insist  that  in  taking  the  partnership  ac- 
counts he  shall  be  credited  with  profits,  and  not  be  debited 
with  losses.  The  infant  partner  must  either  repudiate  or 
abide  by  the  agreement  under  which  alone  he  is  entitled  to 
any  share  of  the  profits,  (i)1 

Time  for  avoidance  of  infant's  contract. —  An  infant 
partner  may  avoid  the  contract  into  which  he  has  entered, 
either  before  or  within  a  reasonable  time  after  he  has  come 
of  age.  (k)  If  he  avoids  the  contract,  and  has  derived  no 
benefit  from  it,  he  is  entitled  to  recover  back  any  money 
paid  by  him  in  part  performance  of  it;  (I)  but  he  cannot  do 
this  if  he  has  already  obtained  advantages  under  the  con- 
tract, and  cannot  restore  the  party  contracting  with  him 
to  the  same  position  as  if  no  contract  had  been  entered 
into,  (m)2 

(g)  Ex  parte  Jones,   18  Ch.   D.  (ty  Co.  Lit.  380&;  Newry  &  En- 

109;  Ex  parte  Henderson,  4  Ves.  niskillen  Rail.  Co.  v.  Coombe,  3  Ex. 

163;  Ex  parte  Lees,  1  Deac.  705;  565;  Dublin  &  Wicklow  Rail.  Co. 

Belton  v.  Hodges,  9  Bing.  365.  v.  Black,  8  Ex.  181. 

(h)  See  Ex  parte  Watson,  16  Ves.  U)  Corpe   v.   Overton,    10  Bing. 

265;  Ex  parte  Bates,  2  M.  D.  &  D.  253. 

337;    Ex    parte    Unity     Banking  (m)  Holmes  v.  Blogg,  8  Taunt. 

Assoc.  3  De  G.  &  J.  63.  508;  Ex  parte  Taylor,  8  De  G.  M. 

{i)  See  Lon.  &  N.  W.  Rail.  Co.  v.  &  G.  254.     Compare  Mann's  Case. 

McMichael,  5  Ex.    114,  and  other  3  Ch.  459,  and  Curtis'  Case,  6  Eq. 

cases  of  that  class,  in  the  volume  on  455,    where    the    infant   had    sold 

Companies.  some  shares,  but  not  the  rest. 

i  To  the  point  that  an    infant's  2  See  this  subject  considered  and 

ratification  or  avoidance  must  be  the  cases  collected  in  Ewell's  Lead. 

in  toto,  if  at  all,  see  Ewell's  Lead.  Cases  on  Inf.  and  Cov.  Ill,  114, 

Cases,    124,    161,    164,    and    cases  119,  123  et  seq.  p.  76. 
cited. 

159 


*76  CONTRACTS    OF    PARTNERSHIP.  [BOOK   I. 

[*Y6]  ^Ratification  l)y  infant  of  his  contract  —  Holding 
out  after  attaining  twenty-one.—  If,  when  an  infant 
partner  comes  of  age,  he  is  desirous  of  retiring  from  the 
firm,  he  should  express  his  determination  speedily  and  un- 
equivocally.1 It  is  true  that  by  the  Infants'  Eelief  Act, 
1874,  (w)  promises  made  by  a  person  who  has  attained 
twenty-one,  to  pay  debts  contracted  before  that  age,  cannot 
be  enforced;  but  a  person  who  retains  a  share  in  a  partner- 
ship cannot  retain  it  without  its  incidental  obligations;  (o) 
and  the  doctrine  of  holding  out  is  itself  sufficient  to  impose 
liability  upon  an  adult,  although  he  may  not  long  have  at- 
tained his  majority.  This  is  well  exemplified  in  Goode  v. 
Harrison,  (p)  There  an  infant  was  a  member  of  a  firm, 
and  he  was  known  to  be  a  member.  After  he  had  attained 
twenty-one  he  did  not  expressly  either  affirm  or  disaffirm 
the  partnership.  He  was  held  liable  for  debts  incurred  by 
his  copartners  subsequently  to  that  time.  A  person  who,  be- 
fore he  comes  of  age,  represents  himself  as  a  partner,  must, 
when  he  comes  of  age,  take  care  to  notify  that  he  has 
ceased  to  be  a  partner  if  he  desires  to  avoid  liability. 

4.  Lunatics. 

Lunatic  partners. —  If  a  lunatic  enters  into  a  contract 
with  a  person  who  acts  bona  fide,  and  who  does  not  know 
of  the  incapacity  under  which  the  lunatic  labors,  the  lunatic 
is  so  far  bound  by  the  contract  that  if  it  has  been  executed 
he  cannot  avoid  it.  (</) 2     So  if  a  person  bona  fide  contracts 

1  See,  generally,  Ewell's    Lead.  (q)  See  Moltonv.  Camroux,  2  Ex. 

Cases,    1G9,   170;  Tobey  v.   Wood,  487,  and  4  ?d.  17;  Beavan  v.  M'Don- 

123  Mass.  88.  nell,  9  id.  309,  and  10  id.  184. 
(w)  37  and  38  Vict.  ch.  62,  §  2.  2  The  principle  of  Molton  v.  Cam- 
Co)  See  Lon.  &  N.  W.  Rail.  Co.  roux  is  adopted  or    approved    in 

v.  McMichael,  5  Ex.   114;  Cork  &  Campbell  v.   Hooper,  3  Sm.  &  G. 

Bandon  Rail.  Co.  v.  Cazenove,  10  153;  Elliott  v.  Ince,  7  De  G.  M.  & 

Q.  B.  935,  per  Coleridge  and  Erie,  G.  487;  Hassardu  Smith,  6  Ir.  Eq. 

JJ. ;    Ebbett's    Case,    5    Ch.    302.  429 ;  Young  v.  Stevens,   48  N.  H. 

Compare  Baker's  Case,  7  Ch.  115.  133;  McCormick  v.  Littler,  85  111. 

(p)  5  B.  &  A.  147.  62 ;  Behrens  v.  McKenzie,  23  Iowa, 

160 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE   OF    ENTERING.  *77 

with  a  lunatic,  without  knowing  him  to  be  so,  and  performs 
the  contract,  lunacy  affords  no  defense  to  an  action  for  re- 
muneration for  what  has  been  done,  (r)  It  is  not,  therefore, 
possible  to  lay  down  as  a  universal  proposition  that  con- 
tracts entered  into  by  persons  who  are  lunatic  are  void, 
nor  consequently  that  such  persons  are  incapable  of  being 
partners. 

*Any  doubt,  however,  which  might  exist  upon  this  [*77] 
subject  in  point  of  principle  is  removed  by  those  de- 
cisions which  have  settled  that  an  existing  partnership  is  not 
dissolved  by  the  mere  fact  that  one  of  its  members  has  be- 
come lunatic,  and  that,  notwithstanding  his  lunacy,  he  is 
entitled  to  share  the  profits  made  subsequently  by  his  co- 
partners, (s)  To  these  authorities,  which  will  be  examined 
hereafter,  may  be  added  the  case  of  Sadler  v.  Zee,  (t)  in 
which  it  was  held  that,  if  a  member  of  a  going  partnership 
becomes  imbecile,  he  is  nevertheless  responsible  for  the  sub- 
sequent misconduct  of  the  other  members.  It  seems,  there- 
fore, that  by  the  law  of  this  country,  a  lunatic  is  capable  of 
being  a  partner;  but  all  dealings  and  transactions  with  him 
when  his  lunacy  is  known  are  liable  to  be  impeached. 

5.  Married  women. 

Married  women  partners.—  A  married  woman  who  has 
no  separate  estate  is  incapacitated  from  entering  into  any 
contract  binding  on  herself,  (w) 1  except  1,  when  the  husband 

343 ;  Fitzhugh  v.  Wilcox,  12  Barb,  has  been  so  found  by  inquisition, 

237;  Person  v.  Warren,  14  id.  488;  Snook  v.  Watts,  11  Beav.  107. 

Beals  v.  See,  10  Penn.  St.  56 ;  Yon-  (s)  Jones  v.  Noy,  2  M.  &  K.  125. 

ger  v.  Skinner,  14  N.  J.  Eq.  389;  (t)  6  Beav.  324. 

Ballard  v.  McKenna,  4  Rich.  Eq.  (u)  Marshall   v.  Rutton,  8   T.  R. 

358;  Sims  v.   McLure,   8   id.    286;  545. 

Wilder  v.   Weakley,  34    Ind.   81.  xTo  the  point  that  at  common 

See,  also,  E well's  Lead.  Cases,  626.  law  the  contracts  of  a  feme  covert 

(r)  See  Drew  v.  Nunn,  4  Q.  B.  D.  are  void,  see  1  Bish.  Mar.  Worn. 

661;  Baxter  v.  The  Earl  of  Ports-  §  39;     Ewell's    Lead.   Cases,  312, 

mouth,  5  B.  &  C.   170;  Brown  v.  where  the  cases  are  fully  collected. 

Jodrell,  3  C.  &  P.  30.     See,  as  to  Under  the  modern  so-called  married 

the  onus  of  proof  where  the  lunatic  women's  act  the  common  law  has 
Vol.  I— 11                       161 


'77 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


is  a  convicted  felon;  (a?)  2,  when  the  husband  and  wife  are 
judicially  separated ;  (y)  3,  where  the  wife  is  protected  from 
her  husband  by  an  order  obtained  under  the  divorce  acts;  (z) 
4,  when  the  husband  is  an  alien  enemy  and  abroad,  (a)  In 
these  cases  the  wife  is  as  capable  of  contracting  as  if  she 
were  unmarried.  By  the  custom  of  London,  moreover,  a 
married  woman  may  be  a  trader,  and  contract,  as  if  she 
were  not  married,  (b) l  Neglecting  these  exceptions,  it 
seems  clear  that  a  married  woman  without  separate  estate, 
having  no  capacity  to  contract,  cannot  be  a  partner.2    She 

been  changed  to  a  greater  or  less    54  Tex.  16 ;  Haas  v.  Shaw,  91  Ind. 


extent  in  most,  if  not  all,  the  states. 
See  infra,  note. 

(x)  See  Ex  parte  Franks,  7  Bing. 
762. 

(y)  20  and  21  Vict.  ch.  82,  §§  25,  20. 


384;  Huffman  v.  Copeland,  86  Ind. 
224 ;  Carey  v.  Burruss,  20  W.  Va. 
571 ;  Payne  v.  Thompson,  44  Ohio, 
St.  192 ;  Bowker  v.  Bradford,  140 
Mass.  521 ;  Brown  v.  Chancellor,  61 


(z)  20  and  21  Vict.  ch.  85,  §  21,  and    Tex.  445 ;  Mayo  v.  Loyston.  30  Md. 


21  and  22  Vict.  ch.  108,  §§  6-10. 

(a)  Derry  v.  Mazarine,  1  Ld. 
Raym.  147;  Barden  v.  Keverberg,  2 
M.  &  W.  61. 

(6)  See  as  to  this,  Beard  v.  Webb, 
2  Bos.  &  Pul.  93. 


402;  Wilson  v.  Loomis,  55  111.  352; 
Knott  v.  Knott,  6  Oreg.  150 ;  Frank 
v.  Anderson,  13  Lea,  695;  Smith  v. 
Bailey,  66  Tex.  553;  Gwynn  v. 
Gwynn,  4  So.  East.  Rep.  (S.  C.)  229. 
See    further    upon    this    subject, 


1  In  South  Carolina,  by  the  de-    Crane  v.  Winters,  75  Ind.  301 ;  Ed- 
cisions  of  the  courts,  feme  covert    wards  v.  McEnhill,  51   Mich.  160; 


are  allowed  to  become  feme  sole 
traders  after  the  manner  of  the 
custom  of  London.  Newbiggin  v. 
Pillans,  2  Bay,  162;  Surtell  v. 
Brailsford,  id.  333;  Dial  v.  Neuffer, 
3  Rich.  78;  Hobart  v.  Lemon,  id. 
131.     See,  also,  Wallace  v.  Rippon, 

2  Bay,  112;  Rouillier  v.  Wernicki, 

3  E.    D.    Smith,  310;  Wieman  v. 


Kutcher  v.  Williams,  40  N.  J.  Eq. 
436. 

In  New  York  the  question  is  in- 
volved in  conflict.  Favoring  the 
proposition  that  a  woman  may  form 
a  business  copartnership  with  her 
husband,  see  Zimmerman  v.  Er- 
hard,  83  N.  Y.  74;  S.  C.  58  How. 
Pr.  11;  8  Daly,  311;  Graff  v.  Kin- 


Anderson,  42  Pa.  St.  311;  Ewell's    ney,  15  Abb.  N.  C.  399;  S.  C.  37 


Lead.  Cas.  314. 
2  At  common  law  there  is  no  ques- 


Hnn  (N.  Y.),  405;  1  How.  (N.  S.) 
59.     Contra,  Kaufman  v.  Schoef- 


tion  but  that  a  married   woman  fel,   46    Hun,  571;   S.    C.    37  Hun 

cannot  enter    into  a    partnership  (N.    Y.),   140;    Fairle  v.  Blooming- 

with   her    husband,    and    by    the  dale,   67  How.    Pr.   292;  S.   C.  38 

weight  of  authority  even  under  the  Hun  (N.  Y.),  220;  14  Abb.  Pr.  94; 

modern  married  women's  acts  she  Chambovet  v.   Cagney,   35  N.  Y. 

is  under  a  like  disability.     Miller  Super.  Ct.  474. 
v.  Marx,  65  Tex.  131 ;  Cox  v.  Miller,        The  marriage  of  a  woman  dis- 

162 


CF.  III.  SEC.  II.]       PERSONS   CAPABLE   OF    ENTERING. 


•77 


ma}T,  however,  be  the  agent  of  other  people,  and  bind  them 
although  not  herself.  Moreover,  as  in  the  case  of  infants, 
so  in  the  case  of  married  women  having  no  separate  estate, 


solves  the  business  partnership  in 
which  she  is  a  member.  Bassett 
v.  Shepardson,  52  Mich.  31 ;  Brown 
v.  Chancellor,  61  Tex.  437. 

In  the  following  cases,  married 
women,  by  virtue  of  statutes  au- 
thorizing them  to  sell  and  contract 
as  to  their  separate  property,  have 
been  held  capable  of  entering  into 
partnership  with  persons  other  than 
their  husbands:  Silveus  v.  Porter, 
74  Pa.  St.  448 ;  Dupuy  v.  Sheak,  57 
Iowa,  361 ;  Newman  v.  Morris,  52 
Miss.  402;  Abbott  v.  Jackson,  43 
Ark.  212;  Plumer  v.  Lord,  5  Allen, 
460;  Edwards  v.  Thomas,  66  Mo. 
481. 

See,  also,  Atwood  v.  Meredith, 
37  Miss.  635 ;  Penn  v.  Whitehead, 
17  Gratt.  503 ;  Craig  v.  Chandler,  6 
Colo.  543;  Bitler  v.  Rathman,  61 
N,  Y.  512;  Merchants'  Nat.  Bk.  v. 
Raymond,  27  Wis.  569;  Ritten- 
house  v.  Leigh,  57  Miss.  697. 

Contra,  Miller  v.  Marx,  65  Tex. 
131. 

As  to  the  employment  of  their 
husbands  in  such  case,  see  Kutcher 
v.  Williams,  40  N.  J.  Eq.  436 ;  Du- 
puy v.  Sheak,  57  Iowa,  361 ;  Penn  v. 
Whitehead,  17  Gratt.  503;  New- 
man v.  Morris,  52  Miss.  402. 

As  to  the  estoppel  of  a  married 
woman  from  claiming  an  interest 
as  partner  in  a  stock  of  goods 
which  she  had  allowed  her  hus- 
band to  deal  with  as  his  own,  see 
Norris  v.  McCanna,  29  Fed.  Rep. 
757. 

The  separate  estate  of  a  married 
woman  is,  in  Indiana,  subject  to 
sale  under  execution  upon  a  judg- 
ment rendered  against  her  and  an- 


other as  copartners.  Burk  v. 
Piatt,  88  Ind.  283. 

In  Iowa,  when  a  wife  becomes  the 
copartner  in  place  of  her  deceased 
husband,  the  presumption  will  be 
indulged  that  she  becomes  liable 
for  his  partnership  debts,  and  a 
mortgage  executed  therefor  is  upon 
a  good  consideration.  Preusser  v. 
Henshaw,  49  la.  41. 

Husband  and  wife  may  be  liable 
as  partners  to  third  persons.  Noel 
v.  Kinney,  19  Abb.  N.  Cas.  239,  re- 
versing 15  Abb.  N.  Cas.  403.  See, 
also,  Leinkauff  v.  Frenkle,  80  Ala. 
136 ;  Le  Grand  v.  Eufala  Nat.  Bk. 
81  Ala.  123. 

Where  defendants  were  sued  as 
partners,  held,  that,  although  then- 
wives  constituted  the  firm,  defend- 
ants were  liable  for  the  firm  debts 
if  they  permitted  themselves  to  be 
held  out  as  partners,  and  that  under 
Code  of  Alabama  1886,  section  2605, 
providing  that  one  partner  may  be 
sued  for  the  obligation  of  all,  their 
wives  were  not  necessary  parties. 
Rabitte  v.  Orr,  3  So.  Rep.  (Ala.) 
420. 

It  is  competent  for  the  husband 
and  other  partner  to  permit  the 
wife  to  share  in  the  business  which 
in  part  is  carried  on  with  her  sepa- 
rate means ;  and  the  husband  hav- 
ing overdrawn  his  share  of  the 
profits,  which  debt  is  by  agreement 
of  all  the  partners  charged  to  his 
wife's  account,  and  in  consideration 
of  which  he  executes  to  her  an 
agreement  to  convey  to  her  or  their 
daughter  certain  real  estate,  and 
afterwards  being  insolvent  conveys 
to  the  daughter,  such  agreement 


163 


'78 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK 


holding  themselves  out  as  partners  does  not  subject  them  to 
the  responsibilities  which  are  incurred  by  other  persons  who 

act  in  a  similar  way.  (c) ' 
'[*78]  ::  Position  of  married  women  with  separate  es- 
tate.—  But  a  married  women  who  has  separate  estate, 
which  she  is  not  restrained  from  anticipating,  is  as  to  such 
estate  regarded  as  a  feme  sole;  and  debts  and  obligations 
incurred  by  her  either  expressly  or  impliedly  on  the  credit 
of  that  estate  can  be  enforced  against  it,  although  not 
against  her  personally,  (d)     Supposing,  therefore,  that  a 


to  convey  rests  upon  a  valuable 
executed  consideration,  and  the 
conveyance  is  valid  as  against  cred- 
itors of  the  grantor.  Huffman  v. 
Copeland,  86  Ind.  224. 

A  married  woman,  by  contribut- 
ing her  separate  means  to  the  cap- 
ital stock  of  a  partnership,  thereby 
becomes  a  creditor  of  the  concern 
to  tiie  amount  contributed.  Smith 
v.  Bailey,  66  Tex.  553. 

Plaintiff,  a  married  woman,  held 
not  entitled  to  a  verdict  against  co- 
partners for  money  given  her  hus- 
band on  the  day  of  marriage  and 
by  him  put  into  the  firm  business. 
Brock  v.  Brock,  116  Pa.  St.  109; 
S.  C.  19  Weekly  N.  Cas.  356;  9  Atl. 
Rep.  486 ;  8  Cent.  Pep.  150. 

A  married  woman,  in  suing  a 
firm  in  which  her  husband  is  a 
partner,  must  implead  him  as  de- 
fendant if  the  parties  are  not  sev- 
erally liable.  Benson  v.  Morgan, 
50  Mich.  77. 

"Where  the  wife  of  a  surviving 
partner  is  made  a  party  to  pro- 
ceedings, instituted  by  receiver  of 
a  firm,  to  obtain  an  order  to  sell 
real  estate  as  partnership  property, 
she  is  concluded  by  the  judgment, 
and  so  long  as  it  remains  in  force 
cannot  claim  any  portion  of  the 
proceeds  of  the  sale.     In  such  case, 


in  an  action  by  the  wife  for  a  por- 
tion of  such  proceeds,  purchasers 
of  the  property  are  neither  proper 
nor  necessary  parties.  Newcome 
v.  Wiggins,  78  Ind.  306. 

(c)  See  The  Liverpool  Adelphi 
Loan  Assoc,  v.  Fairhurst,  9  Ex.  422. 

1  In  an  action  against  a  partner- 
ship the  coverture  of  a  female 
member  of  the  firm  at  the  time  of 
contract  may  be  given  in  evidence 
to  defeat  the  action.  Brown  v. 
Jewett,  18  N.  H.  230. 

A  wife  may  contract  with  her 
husband  in  her  business,  and  may 
enter  into  a  valid  partnership 
agreement  with  him,  under  the 
laws  of  the  state  of  New  York; 
such  being  the  fact,  the  husband 
may  lawfully  use  the  firm  name 
of  "J.  Zimmerman  &  Co.;"  and 
the  term  "  Co."  legally  represent- 
ing the  wife  does  not  offend  the 
provisions  of  the  act  of  1883  (ch. 
281),  providing  that,  where  the 
designation  "&  Co."  is  used,  it 
shall  represent  an  actual  partner. 
Zimmerman  v.  Erhard,  58  How. 
Pr.  11.  See,  however,  contra, 
Plumer  v.  Lord,  7  Allen,  481. 

(d)  See  45  and  46  Vict.  ch.  75,  §§  1, 
12,  19 ;  Be  Shakespear,  30  Ch.  D. 
169;  Palliser  v.  Gurney,  19  Q.  B.  D. 
519. 


164 


CH.  Ill,  SEC.  II.]      PERSONS   CAPABLE   OF    ENTERING.  *7S 

married  woman  partner  has  such  separate  estate,  it  will  be 
liable  for  the  debts  of  the  partnership;  and  to  that  extent 
she  will  be  a  partner,  (e)  But  her  husband  will  not.  A 
married  woman  having  separate  estate  may  lend  money  to' 
her  husband,  but  if  lent  to  him  for  purposes  of  trade  and 
he  becomes  bankrupt  she  is  postponed  to  his  other  creditr 
ors ;'(/)  but  a  loan  by  her  to  a  partnership  of  which  her 
husband  is  a  member  is  payable  out  of  its  assets  like  any 
other  joint  debt,  (g) 

A  married  woman  having  separate  property  and  carrying 
on  business  separately  from  her  husband  is  liable  to  the 
bankruptcy  laws,  (h)  But  her  position,  if  she  carries  on 
business  in  partnership  with  him,  is  not  defined.  There  is, 
however,  no  reason  why  she  should  not  do  so;  (?*)  her  lia- 
bility to  the  extent  of  her  separate  estate  for  his  contracts 
and  his  liability  for  hers  would,  in  such  a  case,  be  governed 
by  the  principles  of  agency,  (k) 

6.   Corporations  and  companies. 

Corporations,  etc.,  may  foe  partners. —  There  is  no  gen- 
eral principle  of  law  which  prevents  a  corporation  from 
being  a  partner  with  another  corporation  or  with  ordinary 
individuals,  except  the  principle  that  a  corporation  cannot 
lawfully  employ  its  funds  for  purposes  not  authorized 
by  its   constitution.  (I) l     Having   regard,  however,  to  this 

(e)  See  Matthewman's  Case,  3  Eq.  wife's  torts.'  Seroka  v.  Kattenburg, 

781,  where  she  was  held  a  contribu-  17  Q.  B.  D.  177. 

tory.     See  as  to  a  married  woman's  (1)  See  Gill  v.  Manchester,  Shef- 

separate  trade,  Ashworth  v.  Out-  field,  etc.  Rail.  Co.  L.  R.  8  Q.  B. 

ram,  5  Ch.  D.  923.  186,  as  to  one  company  being  the 

(/)  45  and  46  Vict.  ch.  75,  §  3.  agent  of  another,  if  not  its  partner. 

(g)  Ex  parte  Nottingham,  19  Q.  l  Two  firms  may  be  partners  in 

B.  D.  88.  one    conjoint  firm.     Simonton  v. 

(h)  45  and  46  Vict.  ch.  75,  §  1  (5);  McLain,   37  La.  Ann.   663;  In  re 

Ex  parte  Gilchrist,  17  Q.  B.  D.  521 ;  Hamilton,  1  Fed.  Rep.  800. 

Ex  parte  Coulson,  20  Q.  B.  D.  249.  Where    the  charter    of    a  rail- 

(t)  See  Butler  v.  Butler,  16  Q.  B.  road  confers  no  such  power  upon 

D#  374.  it,  it  has  no  authority  to  enter  into 

(ft)  A  husband  is  liable   for  his  a  partnership  with  a  natural  per- 

165 


*79 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


[*79]   ""principle,  it  may  be  considered  as  'prima  facie  ultra 
vires  for  an  incorporated  company  to  enter  into  part- 
nership with  other  persons,  (m) 


son  to  run  a  line  of  boats  and  carry 
passengers.  Guun  v.  Central  R. 
R.  74  Ga.  509 ;  Lidsinger  v.  Central 
Line  Steamers,  75  Ga.  567. 

The  principle  which  prevents  a 
coi-poration  from  being  a  partner 
with  another  corporation  or  a 
natural  person  is  that  in  a  partner- 
ship the  acts  of  one  partner  bind 
the  firm,  while  a  corporation  can 
only  be  bound  by  the  acts  of  its 
officers.  Hackett  v.  Multnomah 
R'y  Co.  12  Or.  124. 

It  is  not  necessary,  in  order  to 
hold  a  corporation  and  an  individ- 
ual liable  as  copartners,  to  prove 
the  existence  of  a  valid  partner- 
ship between  them ;  in  such  case,  if 
it  is  proved  that  goods  were  sold  in 
good  faith  to  defendants,  relying 
upon  the  liability  of  the  corpora- 
tion and  the  individual,  and  that 
they  both  had  the  benefit  of  the 
goods,  and  that  they  had  once  given 
their  note  in  payment  therefor, 
they  will  be  jointly  liable.  Cleve- 
land Paper  Co.  v.  Courier  Co. 
(Mich.)  34  N.  West.  Rep.  556;  S.  C. 
11  West.  Rep.  144. 

The  firm  of  S.  &  Co.,. engaged  in 
the  business  of  making  toys, 
formed  a  copartnership  with  the 
firm  of  B.  &  Co.,  engaged  in  the 
same  business,  for  the  sale  of  their 
goods  in  New  York,  under  the 
name  of  the  American  Toy  Com- 
pany. Afterwards,  in  consequence 
of  the  death  of  a  member  of  the 
firm  of  S.  &  Co.,  the  remaining 


members,  with  the  widow  and 
minor  children  of  the  deceased 
member,  procured  an  act  making 
them  a  corporation,  the  preamble 
stating  that  for  many  years  they 
had  been  engaged  in  the  manufact- 
ure of  skates,  toys,  tools  and  other 
articles  of  wood  or  metal ;  that  it 
had  a  large  amount  of  real  and 
personal  estate  used  in  the  busi- 
ness ;  that  the  business  was  profit- 
able, and  that  it  was  for  the  inter- 
est of  all  concerned  that  it  should 
not  be  discontinued,  and  that  the 
act  of  incorporation  was  sought 
for  the  purpose  of  enabling  the 
petitioners  to  carry  on  the  business 
of  the  late  firm ;  and  the  act  pro- 
viding that  the  corporation  should 
have  power  to  carry  on  the  manu- 
facture of  skates,  toys,  tools,  and 
other  articles  of  wood  or  metal, 
and  engage  in  trade  in  connection 
therewith,  and  that  the  property 
of  the  firm  should  become  vested 
in  the  corporation.  The  business 
of  the  firm  and  its  transactions 
with  the  toy  company  had  been 
the  same  after  the  death  of  the  de- 
ceased member,  and  were  con- 
tinued in  the  same  manner  by  the 
corporation.  Held,  that  the  charter 
of  the  corporation  by  necessary  in- 
tendment authorized  it  to  take  the 
place  of  the  firm  as  a  member  of 
the  toy  company,  and  that  it  had 
become  such  a  member.  Butler  v. 
American  Toy  Company,  46  Conn. 
136. 


(m)  See  the  American  cases,  Sha-  14  Barb.  479.  As  to  holding  out, 
ron  Coal  Corp.  v.  Fulton  Bank,  7  see  Holmes  v.  Old  Colony  R.  R. 
Wend.  412 ;  Catskill  Bank  v.  Gray,     Co.  5  Gray,  58. 

166 


CH.  Ill,  SEC.  II.]       PERSONS    CAPABLE    OF    ENTERING. 


The  business  of  the  firm  of  S.  &    selves  or  the  power  of  such  asso- 
Co.  having  been   continued  after    ciation    to    execute    the     powers 


the  death  of  one  of  its  members 
precisely  as  before,  the  representa- 
tives of  the  deceased  member  tak- 
ing the  benefit  of  his  interest,  the 
firm  was  net  to  be  regarded  as  dis- 
solved by  his  death.  Butler  v. 
American  Toy  Co.  46  Conn.  136. 

Where  a  corporation  and  an  in- 
dividual have  assumed  to  enter 
into  partnership  and  jointly  trans- 
act business  together,  they  may, 
by  reason  of  their  joint  interest, 
recover  upon  obligations  made  to 
them  in  their  partnership  name, 
irrespective  of  their  partnership 
rights  and  duties  as  between  them- 


incident  to  a  partnership.     French 
v.  Donohue,  29  Minn.  111. 

The  relation  between  W.  and  T. 
&  B.  with  two  others  who  to- 
gether organized  a  corporation  for 
the  purpose  of  acquiring  lands  and 
water-rights,  and  of  developing 
and  selling  the  same,  such  corpora- 
tion being  a  mere  agency  for  more 
conveniently  carrying  out  the 
agreements  between  the  parties, 
held,  to  constitute  a  partnership, 
and  the  entire  capital  stock  of  the 
corporation  was  treated  as  partner- 
ship assets.  Sharb  v.  Beaudry,  56 
Cal.  446. 


167 


[*80]  *  CHAPTER  IV. 

OF  THE  EVIDENCE  BY  WHICH  A  PARTNERSHIP  OR  QUASI- 
PARTNERSHIP  MAY  BE  PROVED. 

Evidence  by  which  a  partnership  or  quasi-partnership 
may  be  proved. —  The  contract  of  partnership  is  one  of 
those  which  does  not  require  to  be  entered  into  with  any 
particular  formalities.  By  the  common  law  of  this  country 
a  partnership  may  be  constituted  without  any  official  act, 
such  as  registry,  without  any  instrument  under  seal,  and 
even  without  any  writing  whatever;1  and  this  is  the  law  at 
the  present  time,  except  so  far  as  it  has  been  altered  by  the 
statute  of  frauds,  by  the  acts  relating  to  marine  insur- 
ance, (a)  and  by  the  various  statutes  relating  to  companies. 
But  although  a  partnership  may  be  constituted  without 
any  deed  or  writing,  still  a  person  who  has  entered  into  a 
mere  verbal  agreement  for  a  partnership  with  another  will 
not  be  able  to  sustain  an  action  for  its  breach,  unless  he 
can  prove  the  terms  upon  which  the  partnership  was  to  be 
entered  into,  (b) 

Statute  of  frauds. —  The  only  statutory  enactment  ap- 
plicable to  ordinary  partnerships  is  the  statute  of  frauds, 
the  fourth  section  of  which  enacts,  amongst  other  things: 

"  That  no  action  shall  be  brought  whereby  to  charge  any  person  upon 
any  contract  or  sale  of  lands,  tenements  or  hereditaments,  or  any  inter- 
est in  or  concerning  them,  or  upon  any  agreement  that  is  not  to  be  per- 
formed within  the  space  of  one  year  from  the  making  thereof,  unless 
the  agreement  upon  which  such  action  shall  be  brought,  or  some  mem- 
orandum or  note  thereof,  shall  be  in  writing,  and  signed  by  the  party 

1  Marsh  v.  Davis,  33  Kan.  326;  mutual  marine  insurance  society 
Causler  v.  Wharton,  62  Ala.  358.        which  infringes  these  enactments 

(a)  By  30  Vict.  ch.  23,  §  7,  agree-    is  an  illegal  society.     See  infra, 
ments  for  marine  insurance  must    book  i,  ch.  5,  §  1. 
be  in  writing  and  stamped ;  and  a       (6)  Figes  v.  Cutler,  3  Stark.  139. 

168 


CH.  IV.] 


EVIDENCE. 


*81 


to  be  charged  therewith,  or  some  other  person  thereunto  by  him  law- 
fully authorized." 

Future  partnerships,  etc.— This  enactment  applies  as  well 
to  an  agreement  for  a  partnership  to  commence  more 
than  a  year  from  the  date  of  the  agreement,  (c)  as  to  [*81] 
an  agreement  for  a  present  partnership  to  last  more 
than  a  year  from  its  commencement,  (d) x  But  if  in  either 
case  the  parties  have  acted  on  the  agreement  and  become 
partners  they  must  be  treated  as  such,  and  the  statute  will 
not  be  applicable,  (e) 

Partnerships  iu  land.2— With  respect  to  that  part  of  the 
fourth  section  of  the  statute  of  frauds  which  relates  to 
lands  it  is  held,—  1,  that  a  partnership  constituted  without 


(c)  See  per  Holroyd,  J.,  in  Will- 
iams v.  Jones,  5  B.  &  C.  108. 

(d)  Ibid.  And  see  Britain  v.  Ros- 
siter,  11  Q.  B.  D.  123.  But  see  as 
to  this,  McKay  v.  Rutherford,  6 
Moore,  P.  C.  C.  414,  and  13  Jur.  21. 

1  Morris  v.  Peckham,  51  Conn. 
128. 

A  parol  contract  of  partnership, 
without  any  fixed  time  for  its  con- 
tinuance and  the  business  of  which 
may  be  completed  within  the  year, 
is  not  witbiu  the  statute  of  frauds. 
Jordan  v.  Miller,  75  Va.  442. 

(e)  See  Baxter  v.  West,  1  Dr.  & 
Sm.  173,  where  the  partners  had 
acted  on,  aud  were  held  bound  by, 
an  unsigned  memorandum,  con- 
tinuing a  partnership  for  seven 
years.  See,  also,  Williams  v.  Will- 
iams, 2  Ch.  294,  and  per  Turner, 
L.  J.,  in  Burdon  v.  Barkus,  4 
De  Q.  F.  &  J.  47. 

2  There  may  be  a  partnership  for 
the  buying  and  selling  of  lands. 
Dudley  v.  Littlefield,  21  Me.  418. 
See,  also,  Davis  v.  Cook,  14  Nev. 
265 ;  Kramer  v.  Arthurs,  7  Penn. 
St.  165;  Bissell  v.  Harrington,  18 
Hun,  81 ;  Potts  v.  Waugh,  4  Mass 


424;  Fall  River  Co.  v.  Borden,  10 
Cush.  458;  Smith  v.  Burnham,  3 
Sumn.  C.  C.  435 ;  Chester  v.  Dick- 
inson, 54  N.  Y.  1 ;  Ludlow  v.  Cooper, 
4  Ohio  St.  1 ;  Brady  v.  Calhoun,  1 
Penn.  St.  140;  Smith  v.  Jones,  12 
Me.  332 ;  Olcott  v.  Wing,  4  McLean, 
15. 

So  in  mining  adventures.  Sauntry 
v.  Dunlap,  12  Wis.  364;  Treat  v. 
Hiles,  68  Wis.  344. 

So  for  owning  and  operating  a 
street  railway.  O'Neil  v.  Lamb,  6 
N.  W.  Rep.  59. 

A  particular  agreement  for  the 
purchase  of  land,  held,  not  to  con- 
stitute proof  of  a  general  partner- 
ship. Pulford  v.  Morton,  28  N.  W. 
R.  716.  See  Treat  v.  Hiles,  68  Wis. 
344. 

Where  one  receives  money  from 
another,  to  be  invested  on  their 
joint  account  in  purchasing  real 
estate,  and  in  case  they  make  no 
investment  to  be  returned,  a  part- 
nership is  constituted.  Hall  v. 
Sheibley,  68  Ga.  556. 

Where  C.  and  B.  agree  to  pay 
equally  for  a  tract  of  land,  sell  it 
and  divide  the  proceeds  between 


169 


*81 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


writing  is  as  valid  as  one  constituted  by  writing;  (f)1  and 
2,  that  if  a  partnership  is  proved  to  exist,  then  it  may  be 


them,  they  are  partners  in  the 
speculation.  Canada  v.  Barksdale, 
76  Va.  899.  See,  also,  Bissell  v. 
Harrington,  18  Hun,  81. 

(/)  Essex  v.  Essex,  30  Beav.  449. 

1 A  partnership  for  the  purchase 
and  sale  of  lands  may  be  constituted 
without  writing.  Bissell  v.  Har- 
rington, IS  Hun,  81 ;  Personette  v. 
Pryme,  34  N.  J.  Eq.  26;  Penny- 
packer  v.  Leary,  65  la.  220;  Rich- 
ards v.  Grinnell,  63  la.  44 ;  S.  C. 
50  Am.  Rep.  727 ;  Snyder  v.  Wol- 
ford,  33  Minn.  175 ;  Kilbourn  v. 
Latta,  5  Mack.  (D.  C.)  304;  Treat 
v.  Hiles,  68  Wis.  344. 

In  Everhart's  Appeal,  106  Pa.  St. 
349,  it  was  held  that  where  a  part- 
nership is  formed  for  the  purpose 
of  buying  and  selling  lands,  one  of 
the  partners  cannot  establish  his 
interest  in  such  land  by  parol  evi- 
dence where  the  other  sets  up  the 
statute  of  frauds  requiring  agree- 
ments relating  to  lands  to  be  in 
writing. 

This  rule  does  not  apply,  how- 
ever, to  an  agreement  for  a  division 
of  profits  arising  from  the  sale  of 
lands  so  purchased  by  the  partner- 
ship. Everhart's  Appeal,  106  Pa. 
St.  349. 

As  to  what  constitutes  such  a 
part  performance  of  a  verbal  con- 
tract for  the  formation  and  pur- 
chase of  an  interest  in  a  mining 
partnership  as  to  take  the  con- 
tract out  of  the  statute  of  frauds, 
see  Southmayd  v.  Southmayd,  4 
Mont.  100. 

A  parol  agreement  by  which  a 
person  is  admitted  into  a  partner- 
ship in  a  milling  business,  purchas- 
ing an  equal  share  therein,  and  is 


let  into  possession  of  partnership 
property,  and  where  all  the  parties 
act  on  the  agreement  for  nearly 
eight  years,  is  not  within  the  stat- 
ute of  frauds.  Marsh  v.  Davis,  33 
Kan.  326. 

A  verbal  contract  of  copartner- 
ship to  prospect  for,  locate,  record, 
pre-empt,  develop  and  mine  quartz 
lodes,  each  party  to  have  the  same 
interest  in  the  property,  where  the 
title  is  taken  in  the  names  of  a  part 
of  the  partners,  but  all  work  upon 
and  develop  the  property,  is  not 
within  the  statute  of  frauds,  and 
the  parties  in  whose  name  the  title 
is  taken  may  be  compelled  to  ac- 
count to  the  other  partners.  Hibour 
v.  Reeding,  3  Mont.  15. 

The  plaintiff  entered  into  an 
agreement  with  his  copartners, 
Frederick  H.  and  Edward  A.  Bis- 
sell, by  which  they  agreed  to  pur- 
chase a  farm  for  their  joint  benefit, 
each  to  pay  one-third  of  the  price, 
the  title  to  be  taken  in  the  name  of 
Frederick  H. ;  the  farm  to  be  sold 
in  parcels,  the  money  received  on 
the  sale  to  be  applied  on  the  pur- 
chase price  of  the  farm,  and  each 
to  be  entitled  to  one-third  of  the 
surplus,  if  any,  or  of  the  land  re- 
maining unsold.  This  agreement 
was  carried  into  effect,  and  there- 
after another  lot  was  purchased  and 
the  title  taken  in  the  name  of  Fred- 
erick H.,  and  a  building  was  put 
thereon  with  a  portion  of  the  pro- 
ceeds of  the  sales.  There  was  no 
express  agreement,  either  verbal  or 
otherwise,  on  the  part  of  Frederick 
H.  to  convey  any  part  of  the  farm 
or  of  the  lot  to  his  copartners,  or 
either  of  them.    Subsequently  the 


170 


CH.  IV.] 


EVIDENCE. 


*81 


shown  by  parol  evidence  that  its  property  consists  of  land. 
This  was  first  clearly  laid  down  in  Forster  v.  Hale,  {</)  where 


partnership  between  the  parties 
was  dissolved,  the  plaintiff,  Theron 
E.  Bissell,  verbally  retaining  his 
interest  in  the  real  estate.  Fred- 
erick H.  and  Edward  A.  having 
made  a  general  assignment,  the 
plaintiff  brought  this  action  to  com- 
pel the  assignee  to  convey  to  him 
an  equal  undivided  third  part  of 
the  land.  Held,  that  the  arrange- 
ment was,  in  effect,  a  partnership 
agreement  to  speculate  in  real  es- 
tate. That  as  such  it  was  valid 
though  not  reduced  to  writing. 
And  that  plaintiff  was  entitled 
to  judgment.  Bissell  v.  Harring- 
ton, 18  Hun,  81.  See,  also,  Kil- 
bourne  v.  Latta,  5  Cent.  Rep.  425. 

M.  and  S.  were  partners,  and  the 
former  purchased  a  tract  of  land  of 
R.,  which  was  occupied  by  the  part- 
ners for  the  uses  of  the  firm.  In  a 
suit  against  R.  to  compel  the  lat- 
ter to  execute  a  conveyance  of  the 
land  to  S.,  and  the  heirs  of  M.  after 
his  decease,  held,  that  parol  evi- 
dence was  admissible  to  prove  the 
partnership,  and  that  the  property 
was  purchased  with  the  funds  of 
the  firm,  and  for  the  use  thereof, 
and  in  pursuance  of  the  partner- 
ship agreement.  Scruggs  v.  Rus- 
sell, McCahon(U.  S.  Ct.  Kansas),  39. 

Where  a  proposition  to  form  a 
partnership  for  the  purpose  of  buy- 
ing and  selling  lands  is  accepted 
and  acted  upon,  and  the  contract  is 
fully  executed,  it  is  too  late  to  deny 
the  existence  of  the  contract  or 
complain  of  the  manner  in  which 
it  was  entered  into ;  and  after  hav- 
ing   received    the  full  benefit   of 


the  transaction,  and  availed  him- 
self of  all  the  advantages  arising 
from  the  services  rendered  by  his 
copartner,  the  other  partner  cannot 
be  heard  to  charge  bad  faith  on  the 
part  of  his  copartner  in  making  a 
purchase  of  land.  Hunter  v.  White- 
head, 42  Mo.  524. 

A  copartnership  which  is  entered 
into  and  commenced  immediately 
is  not  invalid,  although  one  of  the 
declared  objects  of  the  copartner- 
ship is  to  purchase  real  estate  for 
the  purposes  of  the  firm,  and  as  a 
site  for  the  transaction  of  its  busi- 
ness. Smith  v.  Tarleton,  2  Barb. 
Ch.  3S6.  See,  further,  upon  the 
general  subject,  Williams  v.  Gil- 
lies, 75  N.  Y.  197. 

On  the  other  hand,  in  several  of 
the  states,  it  has  been  held  that  a 
parol  agreement  of  copartnership 
for  the  purchase,  or  for  the  pur- 
chase and  sale,  of  lands  is  within 
the  statute  of  frauds.  Larkins  v. 
Rhodes,  5  Port.  195 ;  Raub  v.  Smith, 
28  N.  W.  Rep.  676. 

So,  in  California,  a  partnership 
for  the  purchase  and  sale  of  lands 
must  be  evidenced  by  writing.  Gray 
v.  Palmer,  9  Cal.  616. 

In  North  Carolina  it  is  held  that 
a  parol  contract  for  the  formation 
of  a  partnership,  by  which  one  of 
the  partners  agrees  to  sell  lands  to 
the  firm,  is  void  in  toto  at  the  op- 
tion of  either  party.  Clancy  v. 
Craine,  2  Dev.  Eq.  363. 

A  partnership  in  growing  crops 
may  be  formed  and  proved  by 
parol ;  but  not  a  partnership  in  the 
crops  arising  out  of  an  alleged  par- 


te) 5  Ves.  309. 


171 


*82  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

a  person  attempted  to  obtain  an  account  of  the  profits  of  a 
colliery  on  the  ground  that  it  was  partnership  property, 
and  it  was  objected  that  there  was  no  signed  writing  such 
as  the  statute  required.  But  to  this  the  lord  chancellor 
observed: 

"  That  was  not  the  question;  it  was  whether  there  was  a  partnership. 
The  subject  being  an  agreement  for  land,  the  question  then  is  whether 
there  was  a  resulting  trust  for  that  partnership  by  operation  of  law. 
The  question  of  partnership  must  be  tried  as  a  fact,  and  as  if  there  was 
an  issue  upon  it.  If  by  facts  and  circumstances  it  is  established  as  a 
fact  that  these  persons  were  partners  in  the  colliery,  in  which  land  was 
necessary  to  carry  on  the  trade,  the  lease  goes  as  an  incident.  The 
partnership  being  established  by  evidence  upon  which  a  partnership 
may  be  found,  the  premises  necessary  for  the  purposes  of  that  partner- 
ship are  by  operation  of  law  held  for  the  purposes  of  that  partnership." 

The  principle  here  stated  was  carried  to  its  extreme  limit 
by  the  vice-chancellor,  Wigram,  in  Dale  v.  Hamilton,  (h) 
He  held  that  an  agreement  to  form  a  partnership  for  the 
purpose  of  buying  and  selling  land  might  be  proved  by 
parol;  that  it  might  then  be  shown  by  parol  that  cer- 
[*82]  tain  land  had  been  '-bought  for  the  purposes  of  the 
partnership,  and,  consequently,  that  the  plaintiff  was 
entitled  to  a  share  of  the  profits  obtained  by  its  resale. 
The  vice-chancellor  directed  an  issue  as  to  the  fact  of  part- 
nership, but  his  decision  is  an  authority  for  the  proposition 
that  the  statute  of  frauds  does  not  preclude  a  person  from 
establishing  by  parol  an  agreement  to  form  a  partnership 
for  the  purpose  of  buying  and  selling  land  at  a  profit,  (i) 

This  is  certainly  going  a  long  way  towards  repealing  the 
statute  of  frauds.  Dale  v.  Hamilton  was  appealed  from, 
and  the  plaintiff  obtained  a  decree  without  any  issue  as  to 
the  fact  of  partnership. 

Both  in  Forster  v.  Hale  and  in  Dale  v.  Hamilton  there 

ticular  partnership  in   lands  and  810 ;  Benton  v.  Roberts,  4  La.  Ann. 

negroes.     It  is  not  a  partnership  by  216,  as  to  the  rule  in  Louisiana, 
contract,  but  by  consequence  of  an        (h)  5   Ha.  369.     S.  C.  on  appeal, 

alleged  partnership  in  immovables.  2  Ph.  266. 

Ganttv.  Gantt,  6  La.  Ann.  677.  See,        (i)  See,  too,  Cowell  v.  Watt,  2  H. 

also,  Dunbar  v.  Bullard,  2  La.  Ann.  &  Tw.  224. 

172 


CH.  IV.]  EVIDENCE.  *S3 

was  a  signed  writing  showing  a  trust  in  the  plaintiff's 
favor;  and  this  circumstance  was  relied  on  by  Sir  William 
Grant  in  the  former  case,  (J)  and  by  Lord  Cottenham  in 
the  latter;  (k)  but,  curiously  enough,  the  signed  writing  was 
not  made  the  foundation  of  the  decision  of  Lord  Rosslyn 
in  Forster  v.  Hale,  and  was  not  considered  sufficient  by 
Vice-Chancellor  Wigram  in  Dale  v.  Hamilton. 

His  decision  is  difficult  to  reconcile  with  sound  principle, 
or  with  the  more  recent  decision  of  Caddiek  v.  SJridmore.  (I) 
There  the  plaintiff  alleged  that  it  had  been  agreed  between 
him  and  the  defendant  that  they  should  become  partners 
in  a  colliery  and  share  the  profits  equally.  The  plaintiff 
souo-ht  to  enforce  that  agreement.  The  defendant  denied 
the  alleged  agreement,  and  asserted  that  the  true  agree- 
ment was  that  the  plaintiff  and  the  defendant  should  share 
the  royalties  obtained  from  the  collieiy.  The  defendant 
also  set  up  the  statute  of  frauds  as  an  answer  to  the  plaint- 
iff's claim.  In  this  case  no  partnership  in  fact  was  proved; 
and  there  was  no  agreement  for  a  partnership  as  distin- 
guished from  the  agreement  to  share  the  profits  of  the  coll- 
iery in  question.  The  terms  of  that  agreement  were  not 
in  writing  and  wTere  in  dispute.  Under  these  circumstances 
the  statute  of  frauds  was  properly  held  to  be  a  defense  to 
the  action. 

Part  performance. —  In  considering  cases  of  this  [*S3] 
description  the  equitable  doctrines  of  part  perform- 
ance must  be  borne  in  mind.    They  may  enable  a  plaintiff  to 
prove  a  parol  agreement  for  sharing  the  profits  arising  from 
land  notwithstanding  the  statute  of  frauds,  (m) 

Question  of  partnership  or  no  partnership,  a  mixed 
question  of  law  and  fact.—  The  question  whether  a  part- 
nership does  or  does  not  subsist  between  any  particular 
persons  is  a  mixed  question  of  law  and  fact,  and  not  a 

(j)  Forster  v.  Hale,  3  Ves.  696.  Tw.  224,  where  the  plaintiff  suc- 
(k)  Dale  v.  Hamilton,  2  Ph.  266.  ceeded  on  this  point,  although  by 
(0  2  De  G.  &  J.  52.  reason  of  his  laches  he  failed  to 

(m)  See  Cowell  v.  Watts,  2  H.  &    obtain  a  decree. 

173 


•S3 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK   I. 


mere  question  of  fact.1     If  it  comes  before  a  jury  the  ques- 
tion must  be  decided  by  them;  they,  taking  their  own  view 

1What  is  a  partnership  is  a 
question  of  law ;  its  existence  is  a 
question  of  fact.  Beecham  v. 
Dodd,  3  Harr.  485 ;  Gilpin  v.  Tem- 
ple, 4  id.  190 ;  Doggett  v.  Jordan,  2 
Fla.  541;  Drake  v.  Elwyn,  1  Cai. 
184;  Dwinel  v.  Stone,  30  Me.  384; 
King  v.  Frazer,  23  S.  C.  543; 
McDonald  v.  Matney,  82  Mo.  358; 
First  Nat.  B'k  v.  Freeman,  47 
Mich.  408;  Kendrick  v.  Cisco,  13 
Lea,  247;  Dulaney  v.  Elford,  22 
S.  C.  304;  Kahn  v.  Smelting  Co.  2 
Utah,  371 ;  Chamberlain  v.  Jackson, 
44  Mich.  320;  Densmore  v.  Math- 
ews, 58  id.  616 ;  Butler  v.  Fink,  21 
Hun,  210;  Jones  v.  Call,  93  N.  C. 
170 ;  Strecker  v.  Smith,  46  Mich.  14. 

Where  the  question  as  to  whether, 
under  the  circumstances,  a  copart- 
nership existed  is  dependent  upon 
inferences  to  be  drawn  and  is  a 
matter  of  doubt,  the  question  is 
one  of  fact  for  the  jury  upon  proper 
instructions.  Butler  v.  Finck,  10 
N.  Y.  Weekly  Dig.  163 ;  McDonald 
v.  Matney,  82  Mo.  358 ;  Ridenour  v. 
Mayo,  40  Ohio  St.  9. 

The  duration  and  composition  of 
partnership  is  a  question  of  fact 
for  the  jury.  Watterson  v.  Patrick, 
1  Atl.  R.  602. 

Where  two  creditors  claimed  the 
same  fund,  one  as  the  creditor  of 
A.,  B.,  C.  &  Co.  and  the  other  under 
D.  &  C,  and  there  was  evidence 
that  these  firms  were  composed  of 
the  same  persons  and  known  under 
different  names,  it  was  left  to  the 
jury  to  decide  that  fact.  McDuffie 
v.  Bartlett,  3  Pa.  St.  317. 

The  defendant's  evidence  tended 
to  show  that  B.  and  W.  were  not 
members  of  an  association.     Evi- 


dence tending  to  show  that  they 
were  members  was  introduced  by 
the  plaintiffs.  Held,  that  it  was 
properly  submitted  to  the  jury,  as 
a  matter  of  fact,  to  determine 
whether  or  not  they  were  mem- 
bers, and  that,  in  determining  the 
question,  their  intent  and  under- 
standing in  relation  thereto,  at  the 
time  they  were  alleged  to  have 
become  members,  as  gathered  from 
the  evidence,  was  a  material  con- 
sideration for  the  jury.  Smith  v. 
Hollister,  32  Vt.  695. 

Where  the  terms  of  the  agree- 
ment and  the  facts  are  admitted 
it  is  a  question  of  law  whether 
there  was  a  partnership  or  not. 
Everitt  v.  Chapman,  6  Conn.  347; 
Terrill  v.  Richards,  1  Nott  &  M.  20; 
McGrew  v.  Walker,  17  Ala.  824; 
Kingsbury  v.  Tharp,  28  N.  W. 
Rep.  74. 

But  a  witness  who  knows  the 
fact  may,  nevertheless,  state  in  so 
many  words  that  the  parties  were 
partners.  The  party  against  whom 
the  testimony  is  offered,  if  he 
thinks  the  statement  is  founded  on 
opinion  merely,  should  interrogate 
the  witness  as  to  the  sources  of  his 
knowledge.  McGrew  v.  Walker, 
17  Ala.  824 ;  Central  R  R.  Co.  v. 
Smith,  76  Ala.  572. 

It  is  competent  for  the  plaintiff, 
in  an  action  to  charge  the  defend- 
ants as  partners,  to  depose  that  it 
was  his  belief,  at  the  time  of  his 
transaction  with  the  defendants, 
based  upon  their  statements  and 
conduct,  that  they  were  partners 
in  the  transaction.  Seekell  v. 
Fletcher,  53  la.  330. 


174 


CH.  IV.] 


EVIDENCE. 


:'83 


of  the  effect  of  the  evidence  before  them,  are  bound  to  apply 
to  the  facts  established  to  their  satisfaction  those  legal 
principles  which  the  court  may  lay  down  for  their  guid- 
ance, (n) 

In  considering  the  evidence  which  it  is  necessary  to  ad- 
duce in  order  to  establish  the  existence  of  a  partnership, 
two  perfectly  distinct  questions  immediately  suggest  them- 
selves, viz. :  — 

1.  What  is  to  be  proved? 

2.  How  is  it  to  be  proved? 

What  has  to  be  proved  in  order  to  establish  the  exist- 
ence of  a  partnership. —  1.  With  reference  to  the  first 
question,  the  distinction  between  partnerships  and  quasi- 
partnerships  is  all-important,1  for  it  by  no  means  follows 
that  persons  who  are  not  partners  are  not  liable  as  if  they 


(n)See  Fox  v.  Clifton,  9  Bing. 
117.  Formerly  the  court  of  chan- 
cery used  to  direct  an  issue  to  try 
a  disputed  question  of  partnership 
or  no  partnership,  if  there  was 
any  real  difficulty  about  it.  See 
McGregor  v.  Bainbrigge,  7  Ha. 
164,  note,  and  the  cases  there  cited ; 
but  this  is  no  longer  the  practice. 

1  See  Southmayd's  Appeal,  6 
Cent.  Rep.  555 ;  Shriver  v.  McCloud, 
20  Neb.  474. 

To  prove  a  partnership  as  be- 
tween partners  the  evidence  must 
be  stronger  than  in  other  cases. 
Robinson  v.  Green,  5  Harr.  115. 

A  party  to  a  partnership  agree- 
ment who  derives  benefit  from  the 
partnership,  and  while  so  doing 
recognizes  its  existence,  is  estopped 
from  afterwards  denying  it.  Bush 
v.  Bush,  89  Me.  360. 

Special  agreement  with  the  in- 
corporators of  a  company  individ- 
ually, respecting  the  rendition  of 
services,  transfer  of  stock,  etc., 
held  not  to  be  a  contract  of  part- 


nership.    Joslin  v.  Stokes,  23  N.  J. 
Eq.  81. 

In  the  absence  of  any  question 
of  estoppel  to  bind  one  as  a  part- 
ner it  is  necessary  to  show  a  part- 
nership agreement.  Roth  v. 
Kirchoff,  12  Mo.  App.  599. 

The  test  ot  partnership,  as  be- 
tween partners  themselves,  is  their 
intent.     Beecher  v.  Bush,  45  Mich. 
188 ;  S.  C.  40  Am.  Rep.  465 ;  Bush 
v.  Bush,  89  Me.  360;  Kellogg  News- 
paper Co.  v.  Farrell,  88  Mo.  594 
Sitzer  v.   Beale,    19  W.  Va.   274 
McDonald  v.  Matney,  82  Mo.  358 
Couch  v.  Woodruff,  63  Ala.  466 
Tayloe  v.  Bush,  75  Ala.  432;  Halli- 
day  v.  Bridewell,  36  La.  Ann.  238. 
See  ante,  note. 

And  when  the  agreement  has 
been  reduced  to  writing  the  intent 
must  be  collected  from  the  words 
of  the  instrument  construed  in  the 
light  of  the  surrounding  circum- 
stances, occasion  giving  rise  to  it, 
and  the  object  to  be  accomplished. 
Couch  v.   Woodruff,  63  Ala.  466; 


175 


*84r 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


were;  nor  does  it  follow  that  persons  who  are  liable  as  if 
they  were  partners  are  partners  in.  reality.1  This  has  been, 
already  explained;  and,  in  fact,  the  answer  to  the  first  of 
the  above  two  questions  will  be  found  in  that  portion,  of  the 
present  work  in  which  the  nature  of  the  contract  of  part- 
nership was  discussed,  (o) 

Proof  of  such  a  state  of  things  as  is  sufficient  to  establish 

a  quasi-partnershlp  is  prima  facie  evidence  of  a  real 

[*84]  partner-ship,  {p)  but  evidence  wThich  is  sufficient  to 

establish  a  ^wa.si-partnership  must,  a  fortiori,  fail  to 

establish  a  real  partnership  between  the  same  persons. 

Sharing   profits2  is   only  evidence   of  ^^'-partnership 


Tayloe  v.  Bush,  75  id.  432.  See, 
also,  Priest  v.  Chouteau,  85  Mo. 
398 ;  S.  C.  12  Mo.  A  pp.  252. 

1  Where,  in  a  petition,  a  person  is 
charged  as  a  partner,  and  the  proof 
shows  merely  that  he  has  held 
himself  out  as  a  partner,  is  no  vari- 
ance.   Rippey  v.  Evans,  22  Mo.  157. 

(o)  See  ante,  p.  7  et  seq. 
(p)  Peacock  v.  Peacock.  2  Camp. 
45. 

2  When  the  rights  of  third  per- 
sons are  concerned  who  have  dealt 
with  parties  associated  in  business, 
a  partnership  may  arise  by  mere 
operation  of  law  being  implied 
from  a  community  of  profit  and 
loss,  even  in  opposition  to  the  ex- 
press intent  of  the  parties  them- 
selves. Couch  v.  Woodruff,  63  Ala. 
466.  See,  also,  Richardson  v.  Case, 
3  N.  Y.  Civ.  Proc.  295. 

See,  however,  State  v.  Finn,  11 
Mo.  App.  546,  where  it  was  held 
that  participation  in  the  profits  and 
losses  of  a  firm  does  not  necessarily 
vest  in  the  participator  such  an  in- 
terest in  the  firm  property  as  will 
subject  it  to  seizure  under  execu- 
tion for  his  individual  debts.  The 
presumption  arising  from  a  partici- 


pation in  the  profits  and  losses  may 
be  rebutted  by  proof  of  the  real 
agreement  between  the  partners 
and  the  facts  showing  that  the 
debtor  partner  had  no  interest  in 
the  firm  property.  To  the  same 
effect,  see  Clifton  v.  Howard,  89 
Mo.  192. 

If  two  persons  agree,  one  to  fur- 
nish a  yard  for  manufacturing 
brick,  and  the  other  to  furnish  ma- 
terials and  labor  for  making  the 
brick,  which  are  to  be  divided  be- 
tween them  when  made,  but  there 
is  no  agreement  to  divide  the  prof- 
its and  losses  of  the  business,  they 
do  not  become  partners  even  as  to 
third  persons.  La  Mont  v.  Fullam, 
133  Mass.  583. 

As  a  general  rule,  participation 
in  the  profits  of  the  business  con- 
stitutes a  partnership  as  to  third 
persons,  notwithstanding  any  secret 
agreement  between  the  parties. 
Oppenheimer  v.  Clemmons,  18  Fed. 
Rep.  886 ;  Miller  v.  Marx,  65  Tex. 
131 ;  Stevens  v.  Gainesville  Nat. 
Bank,  62  Tex.  499 ;  Haas  v.  Roat, 
26  Hun,  632 ;  S.  C.  16  id.  526 ;  Cleve- 
land v.  Anderson,  2  Tex.  App.  (Civ.) 
138. 


176 


CH.  IV.] 


EVIDENCE. 


*84 


where  agency  may  be  inferred,  and  where  the  recent  act  of 
28  and  29  Victoria,  chapter  86,  does  not  apply,  (g) 

The  distinction  between  existing  and  contemplated  part- 
nerships must  not  be  overlooked;  and  it  is  obvious  that  if, 
in  attempting  to  establish  a  ^wasi-partnership,  a  real  part- 
nership should  be  shown  to  exist,  the  liability  of  the  per- 
sons sought  to  be  charged  will  only  be  established  the  more 
completely. 

Means  of  proof. —  2.  "With  reference  to  the  means  of 
proof,  it  is  the  province  of  a  writer  on  evidence  to  discuss 
the  method  by  which  facts  to  be  established  may  be  proved; 
and  it  is  not  consistent  with  the  plan  of  this  work  to  ex- 
amine the  principles  relative  to  the  production  or  admissi- 
bility of  evidence.  At  the  same  time,  a  few  observations 
on  some  points  of  practical  importance  with  respect  to  the 
mode  of  proving  the  existence  of  a  partnership  are  laid 


Participation  in  the  profits  of  a 
business  does  not  in  all  cases,  how- 
ever, make  the  participant  a  part- 
ner as  to  third  persons ;  to  have  that 
effect  the  participation  must  be  in 
the  profits  as  such,  under  circum- 
stances which  give  him  a  proprie- 
tary right  as  principal  trader  in 
such  profit  before  division.  Bur- 
nett v.  Snyder,  81  N.  Y.  550;  S.  C. 
37  Am.  Rep.  527;  S.  C.  76  N.  Y. 
344;  Oppenheimer  v.  Clemmons, 
supra;  "Wild  v.  Davenport,  48  N.  J. 
L.  129;  Vinson  v.  Beveridge,  3 
MacArth.  597;  S.  C.  36  Am.  Rep. 
113;  Citizens'  Bank  v.  Hine,  49 
Conn.  236.  See  Le  Fevre  v.  Cas- 
tagnio,  5  Colo.  564. 

Or  as  net  profits,  not  as  gross. 
Oppenheimer  v.  Clemmons,  supra. 

It  is  not  material  that  the  party 
sharing  in  the  profits  as  such  has 
no  interest  in  the  capital.  McDon- 
nell v.  Battle  House  Co.  67  Ala. 
90;  S.  C.  42  Am.  Rep.  99. 

Merely  sharing  in  profits,  where 


third  persons  have  not  been  legiti- 
mately led  to  believe  that  there  was 
a  partnership,  does  not  create  one 
as  to  them  unless  there  was  one  in 
fact.  Colwell  v.  Britten,  26  N.  W. 
R.  538. 

An  agreement  between  two  mem- 
bers of  a  firm  and  a  third  person, 
with  the  knowledge  and  assent  of 
the  other  partner,  that  the  third 
person  should  share  in  a  certain 
proportion  in  the  profits  and  losses 
of  the  two  contracting  partners, 
does  not  make  such  third  person  a 
partner  or  liable  for  partnership 
debt.  Burnett  v.  Snyder,  81  N.  Y. 
550 ;  S.  C.  37  Am.  Rep.  527 ;  S.  C. 
76  N.  Y.  344. 

Evidence  that  an  arrangement 
for  carrying  on  business  for  a  share 
of  the  profits  was  entered  into  un- 
der an  advertisement  for  a  partner 
tends  to  show  a  partnership.  Wil- 
cox v.  Matthews,  44  Mich.  192. 

(q)  See  as  to  this,  ante,  p.  31. 


Vol.  1—12 


177 


*84 


CONTRACTS    OF   PARTNERSHIP. 


[book 


before  the  reader,  in  the  hope  that  they  may  be  found  of 


use. 


Where  there  is  no  writing.—  As  partnerships,  even  for 
long  terms  of  years,  very  often  exist  in  this  country  without 
any  written  agreement,1  the  absence  of  direct  documentary 
evidence  of  any  agreement  for  a  partnership  is  entitled  to- 
very  little  weight.2    As  between  the  alleged  partners  them- 


1  In  an  action  against  the  members 
of  a  partnership  the  original  arti- 
cles are  admissible  as  against  one 
becoming  a  member  of  such  firm 
subsequent  to  its  formation. 
Strecker  v.  Conn,  90  Ind.  469. 

Where  a  person  has  not  in  any 
manner  been  held  out  to  the  com- 
munity as  a  partner  in  business, 
and  a  plaintiff,  seeking  neverthe- 
less to  charge  him  as  such  a  partner, 
produces  a  written  agreement 
between  the  parties  to  prove  such 
partnership,  the  whole  of  the  agree- 
ment must  be  read  together.  The 
plaintiff  cannot  be  permitted  to  use 
such  parts  of  the  agreement  as 
tend  to  establish  a  partnership,  and 
reject  such  parts  as  tend  to  show 
the  contrary.  Manhattan  B.  Mfg. 
Co.  v.  Sears,  1  Sweeny,  426. 

2  No  written  articles  are  neces- 
sary to  constitute  a  copartnership 
which  is  to  take  effect  immediately. 
Smith  v.  Tarlton,  2  Barb.  Ch.  336; 
Randell  v.  Yates,  43  Miss.  685 ; 
Buff  urn  v.  Buff  urn,  49  Me.  108; 
York  v.  Clemens,  51  Ind.  358.  See, 
also,  Buckner  v.  Rees,  34  Mo.  357 ; 
Villa  v.  Jonte,  17  La.  Ann.  9. 

In  order  to  create  a  partnership 
it  is  not  even  necessary  that  there 
be  an  express  agreement  providing 
for  a  partnership  as  such.  Kayser 
v.  Maugham,  8  Colo.  232. 

A  written  agreement  may  be 
necessary  to  bind  the  parties  to 
enter  into  a  future  copartnership 


which  is  not  to  commence  until 
after  the  expiration  of  'a  year. 
Smith  v.  Tarlton,  supra.  But  even 
where  there  is  a  parol  agreement  to 
enter  into  a  copartnership  at  a  fut- 
ure day,  and  specifying  the  terms 
of  such  copartnership,  it  seems  that 
if  the  parties  go  into  copartnership 
at  the  prescribed  time,  without 
agreeing  upon  any  new  terms,  the 
former  parol  agreement  may  be 
presumed  to  constitute  the  terms 
upon  which  such  copartnership 
was  entered  into  and  carried  on- 
Smith  v.  Tarlton,  supra. 

The  fact  of  partnership  and  who 
compose  it  may  be  proved  by  parol 
evidence  that  the  alleged  partners 
severally  admitted  the  fact,  or  held 
themselves  out  as  such,  although 
it  appear  on  the  trial  that  there 
was  a  written  agreement  and  no 
notice  to  produce  it  is  proved.  Bryer 
v.  Weston,  16  Me.  261 ;  Anderson 
v.  Levan,  1  Watts  &  S.  334;  Griffin 
v.  Doe,  12  Ala.  783;  Dixon  v.  Hood, 
7  Mo.  414;  Widdifield  v.  Widdi- 
field,  2  Binn.  245 ;  Gilbert  v.  Whid- 
den,  20  Me.  367;  King  v.  Ham,  4 
Mo.  275 ;  Field  v.  Tenney,  47  N.  H. 
513;  Robinson  v.  Green,  5  Ham 
115.  See,  however,  Cochran  v. 
Perry,  8  Watts  &  S.  262 ;  McEvoy 
v.  Bock,  34  N.  W.  Rep.  740. 

Some  authorities,  however,  re- 
quire a  notice  to  produce  the  writ- 
ing, or  an  excuse  for  its  non-pro- 
duction, before  parol  evidence  will 


178 


CH.  IV.] 


EVIDENCE. 


>84 


selves  the  evidence  relied  on,  where  no  written  agreement 
is  forthcoming,  is  their  conduct,  the  mode  in  which  they 


be  received.  Bonnafee  v.  Fenner, 
14  Miss.  20;  Hastings  v.  Hopkin- 
son,  28  Vt.  108;  Price  v.  Hunt,  59 
Mo.  263 ;  Field  tt  Tenney,  47  N.  H. 
513. 

Iu  an  action  to  charge  two  per- 
sons as  partners  upon  a  note  exe- 
cuted by  one  of  them  in  the  firm 
name,  parol  evidence  is  admissible 
to  show  that  at  the  time  of  their 
executing  a  contract  with  the 
plaintiff,  on  which  such  note  was 
based,  it  was  understood  between 
the  parties  that  no  partnership  was 
formed,  but  not  to  show  that  one 
of  them  was  not  to  be  bound  by 
the  performance  of  the  contract. 
Piano  Mfg.  Co.  v.  Frawley,  68  Wis. 
577;  S.  C.  32  N.  West.  Kep.  768. 

W.  entered  into  a  parol  contract 
of  copartnership  with  defendants, 
but  when  the  articles  were  pre- 
pared the  son  of  W.  was,  at  his 
request,  permitted  to  sign  them, 
upon  his  assurance  that  he  was  to 
remain  the  real  party  to  the  agree- 
ment, the  name  of  the  son  being 
used  only  to  conceal  his  association 
with  the  firm  from  public  knowl- 
edge. The  conditions  of  the  parol 
contract  were  fully  performed, 
while  the  son's  connection  with  the 
partnership  was  in  fact  treated  as 
a  nullity.  Held,  that  W.  was  liable 
as  a  partner.  Wilson  tt  Lovelace, 
49  Iowa,  558. 

Mere  general  reputation,  rumor  or 
hearsay  is  inadmissible  to  prove  the 
existence  of  a  partnership  or  mem- 
bership therein.  Sager  v.  Tupper, 
38  Mich.  258 ;  Taylor  v.  Webster,  39 
N.  J.  L.  102 ;  Tomlin  v.  Goldsmith, 
40  Ga.  221 ;  Southwick  tt  McGov- 
ern,  28  Iowa,  533 ;  Sinclair  v.  Wood, 


3  Cal.  98;  Brown  v.  Crandall,  11 
Conn.  92 ;  Earl  v.  Hard,  5  Blackf . 
248;  Grafton  Bank  v.  Moore,  13 
N.  H.  99 ;  McGuire  tt,  O'Hallaran, 
Hill  &  D.  Supp.  85 ;  Inglebright  v. 
Hammond,  19  Ohio,  337;  Scott 
v.  Blood,  16  Me.  192;  Halliday  v. 
M'Dougal,  20  Wend.  81 ;  Lockridge 
v.  Wilson,  7  Mo.  560;  Carter  v. 
Douglass,  2  Ala.  499;  Smith  v. 
Griffith,  3  Hill,  333;  Joseph  v. 
Fisher,  3  Scam.  137;  Carlton  v. 
Ludlow  Woolen  Mills,  27  Vt.  496 ; 
Bowen  v.  Rutherford,  60  111.  41; 
Central  R.  R.  Co.  v.  Smith,  76  Ala. 
572;  Humes  v.  O'Bryan,  74  id.  64; 
Cleveland  v.  Duggan,  2  Tex.  App. 
(Civ.)  65 ;  White  tt  Whaley,  1  id. 
41;  Waldo  v.  Beckwith,  1  New 
Mex.  97 ;  Boyd  v.  Ricketts,  60  Miss. 
62;  Cook  tt  Slate  Co.  36  Ohio  St. 
135;  S  C.  38  Am.  Rep.  568  (reports 
of  mercantile  agency  inadmissible) ; 
Brown  v.  Rains,  53  la.  81;  Buz- 
ard  v.  Jolley,  6  So.  West.  Rep. 
(Tex.)  422;  Marble  v.  Lypes,  82 
Ala.  322;  Rabbitte  v.  Orr,  3  S.  W. 
Rep.  (Ala.)  420;  Wilson  v.  Colman, 
1  Cranch,  C.  C.  408.  See,  also, 
Campbell  v.  Hastings,  29  Ark.  512; 
Turner  v.  Mcllhaney,  8  Cal.  575. 
See,  however,  Halliday  v.  McDou- 
gall,  22  Wend.  264. 

However,  in  Benjamin  v.  Covert, 
47  Wis.  375;  S.  C.  55  id.  157,  it  was 
held  that,  in  an  action  to  charge 
two  persons  as  partners,  if  plaintiff 
shows  that  a  partnership  existed 
between  them  at  a  certain  time, 
and  was  known  to  the  public  at 
the  place  of  business  of  the  firm, 
and  that  no  notice  of  dissolution 
was  ever  given,  he  may  further 
show  that,  at  the  time  oftthe  trans- 


179 


'8± 


CONTRACTS   OF   PARTNERSHIP. 


[book  I. 


have  dealt  with,  each  other,  and  the  mode  in  which  each 
has,  with  the  knowledge  of  the  other,  dealt  with  other  peo- 
ple. This  can  be  shown  by  books  of  account,  by  the  testi- 
mony of  clerks,  agents  and  other  persons,  by  letters  and 
admissions,  and,  in  short,  by  any  of  the  modes  by  which 
facts  can  be  established,  (r) l 


action  in  question,  such  partner- 
ship, to  plaintiff's  knowledge,  was 
generally  reputed  to  continue,  and 
that  the  debt  was  contracted  in  the 
firm  name,  and  upon  the  credit  of 
the  firm,  though  after  a  dissolution 
in  fact,  it  being  then  for  the  jury- 
to  determine  whether  the  retiring 
partner  had  so  acted  after  the  dis- 
solution as  to  hold  himself  out 
as  still  a  partner,  and  has  thus 
rendered  himself  liable.  So  held 
where  the  firm  name  was  the  same 
as  the  individual  name  of  the  per- 
son who  continued  the  business, 
and  where  the  plaintiff  had  never 
done  business  with  the  firm  during 
its  actual  existence.  See,  also, 
Gaffney  v.  Hoyt,  10  Pac.  Rep.  34; 
Humes  v.  O'Bryan,  74  Ala.  74; 
Rizer  v.  James,  26  Kan.  221 ;  Boyd 
v.  Ricketts,  60  Miss.  62. 

While  evidence  of  general  repu- 
tation may  not  be  admissible  to 
prove  a  partnership,  still  it  may  be 
competent  upon  the  issue  as  to 
whether  a  member  of  a  firm  is  a 
dormant  partner.  Metcalf  v.  Offi- 
cer, 2  Fed.  Rep.  640. 

The  reports  of  a  commercial 
agency  are  not  admissible  to  prove 
a  partnership,  unless  knowledge, 
or  means  of  knowledge,  of  them  is 
brought  home  to  the  party  at- 
tempted to  be  charged.  Cook  v. 
Slate  Co.  36  Ohio  St.  135 ;  S.  C.  38 
Am.  Rep.  568;  Campbell  v.  Hast- 
ings, 29  Ark.  512 ;  Bonnell  v.  Cham- 
berlain, 26  Conn.  487. 


Evidence  that  a  person  was  fre- 
quently seen  in  the  counting-house 
of  another,  transacting  business  as 
principal,  and  that  he  was  gener- 
ally supposed,  believed  and  under- 
stood to  be  a  partner  in  the  house 
of  such  other,  was  held  insufficient 
to  prove  that  he  was  a  partner  with 
such  other  person.  Bryden  v.  Tay- 
lor, 2  Har.  &  J.  396. 

Evidence  that  it  was  not  gener- 
ally known,  in  the  place  of  the 
partnership,  that  the  defendant 
was  a  partner  of  a  certain  house 
is  admissible  to  the  jury,  where  the 
question  is  whether  the  plaintiff 
knew  that  the  defendant  was  a 
partner,  in  order  to  make  him 
liable.  Bernard  v.  Torrance,  5  Gill 
&  J.  383. 

(r)  As  to  the  presumption  arising 
from  the  joint  retainer  of  solicitors, 
see  Robinson  v.  Anderson,  20  Beav. 
98,  and  7  De  G.  Mc.  &  G.  239; 
Webster  v.  Bray,  7  Ha.  159; 
McGregor  v.  Bainbrigge,  id.  164. 
And  for  cases  in  which  a  partner- 
ship has  been  inferred  from  a  num- 
ber of  circumstances,  see  Nerot  v. 
Burnand,  4  Russ.  247,  and  2  Bli.  N. 
S.  215 ;  Jacobsen  v.  Hennekinius,  5 
Bro.  P.  C.  482 ;  Nicholls  v.  Dowding, 
1  Stark.  81 ;  Peacock  v.  Peacock,  2 
Camp.  45.  See,  as  to  obtaining  evi- 
dence from  the  solicitors  of  the  al- 
leged partners,  Williams  v.  Mudie, 
1  Car.  &  P.  158. 

1  The  books  of  a  firm  are  evidence 
of  the  partnership  as  between  the 


180 


OH.  IV.] 


EVIDENCE. 


*85 


^Informal  documents. —  An  agreement  for  a  part-  [*85] 
nership   may  be  evidenced  by  informal  documents; 

members.     Feick    v.    Barbour,   64    lar  time,  it  will  be  presumed  to  con- 


Pa.  St.  120;  McCall  v.  Moscowitz, 
10  N.  Y.  Civ.  Proc.  107;  South- 
mayd's  Appeal,  6  Cent.  Rep.  555. 
So  in  an  action  by  creditors  against 
the  partners.  Champlin  v.  Tilley, 
1  Brunner,  71;  S.  C.  3  Day,  303. 
See,  however,  Robbins  v.  Warde, 
111  Mass.  244,  where,  however,  the 
suit  was  by  a  creditor. 

The  sign  upon  a  store  in  which 
the  business  of  an  alleged  firm  was 
done  was  "  S.  &  Co.,"  and  an  en- 
try in  the  books  of  S.,  reciting  the 
formation  of  a  partnership,  was 
made  by  his  alleged  partner  with- 
out the  knowledge  or  consent  of  S. 
Held,  insufficient,  as  against  S.,  to 
sustain  a  finding  that  a  partner- 
ship existed.  Lindsay  v.  Guy,  57 
Wis.  200. 

When  an  administratrix  of  one 
estate  brought  a  claim  against  an- 
other estate,  and  the  defense  gave 
evidence  tending  to  show  that  the 
decedents  were  in  partnership, 
and  that  defendant's  intestate  kept 
the  accounts,  a  book  of  accounts 
in  the  latters  handwriting,  and 
containing  entries  purporting  to 
have  been  made  in  the  presence  of 
the  other  partner,  was  held  ad- 
missible as  tending  to  prove  the  co- 
partnership and  the  condition  of 
the  accounts.  Howard  v.  Patrick, 
38  Mich.  796.  See,  also,  Hale  v. 
Brennan,  23  Cal.  511. 

The  books  of  a  firm  may  be  given 
in  evidence  to  fortify  or  discredit  a 
witness  who  swears  to  the  part- 
nership. Moyes  v.  Brumeaux,  3 
Yeates,  30. 

The  existence  of  a  partnership 
having  been  proved  at  the  particu- 


tinue  until  a  dissolution  is  proved, 
and  to  have  been  on  equal  terms 
until  the  contrary  is  shown.  Rey- 
bold  v.  Dodd,  1  Harr.  401;  Irbey  v. 
Brigham,  9  Humph.  750;  Butler  v. 
Henry,  3  S.  W.  Rep.  878 ;  Mann  v. 
Clapp,  1  Tex.  App.  (Civ.)  249. 

In  an  action  upon  a  note  an 
issue  arose  whether  a  partnership 
existed  between  the  defendants. 
Partnership  articles  were  offered 
in  evidence.  Held,  that  they  were 
not  admissible,  because  they  only 
showed  that  a  partnership  ex- 
isted in  January,  1857,  when  the 
note  was  made  in  October,  1858,  as 
it  was  proper  that  the  jury  should 
have  the  articles  before  them  that 
they  might  decide  when  the  part- 
nership terminated.  Pursley  v. 
Ramsey,  31  Ga.  403. 

Where  one  was  a  partner  in  a 
firm  in  1855  and  1857,  but  alleged 
that  in  1856  he  was  not  a  partner, 
and  that  his  withdrawal  was  evi- 
denced by  a  deed  which  was  lost, 
and  it  turned  out  that  the  deed  had 
been  destroyed  by  himself,  and  he 
answered  delusively  about  it,  and 
it  appeared  that  he  had  acquiesced 
in  certain  acts  of  his  partner,  treat- 
ing him  as  a  partner,  held,  that 
he  was  to  be  considered  as  a  part- 
ner for  the  year  1856  also.  Clem- 
ents v.  Mitchell,  6  Jones'  Eq.  171. 

Upon  the  question  whether  the 
defendants  are  partners  here,  evi- 
dence that  they  were  partners  in 
Europe  is  not  so  entirely  irrelevant 
that  its  admission  vitates  the  ver- 
dict. Martin  v.  Ehrenfels,  24  111. 
187. 

Evidence  that  A.  was  a  partner 


181 


*85 


CONTRACTS    OF    PARTNERSHIP. 


[book 


as,  for  example,  an  unsigned  memorandum  or  draft  agree- 
ment acted  on  by  the  partners,  (*) l  or  a  series  of  letters. 


in  a  certain  company  in  September, 
and,  as  such,  signed  contracts  re- 
citing a  contract  made  by  the  com- 
pany in  March,  is  not  competent  in 
order  to  charge  him  upon  a  debt 
contracted  by  the  company  in  July. 
Butler  v.  Henry,  3  S.  W.  R.  878. 

The  existence  of  a  partnership 
does  not  depend  upon  the  fact  that 
each  partner  has,  in  all  things, 
complied  with  his  agreement;  if 
the  contract  has  been  made,  prop- 
erty and  labor  contributed,  and 
the  partnership  business  com- 
menced, there  is  a  partnership 
until  legally  dissolved.  Cogswell 
v.  Wilson,  11  Oreg.  371. 

Evidence  to  show  a  continuance 
of  a  partnership  after  it  has  been 
dissolved,  with  notice  to  the  par- 
ties, must  be  as  satisfactory  as  that 
required  to  show  its  establishment. 
Alcott  v.  Strong,  9  Cush.  323. 

Proof  that  alleged  partners  acted 
as  such  before  and  after  the  date 
of  a  note  is  proper  evidence  to  be 
left  to  the  jury  in  determining  the 
fact  of  partnership  at  that  time. 
Gilbert  v.  Whidden,  20  Me.  367. 

"Where  it  is  sought  to  be  proved 
in  au  action  that  a  certain  part- 
nership existed  at  a  given  time, 
evidence  of  its  existence  some 
three  months  after  that  time  is  ad- 
missible in  connection  with  other 
evidence,  and  will  be  considered. 
Fleshman  v.  Collier,  47  Ga.  253. 

See,  however,  Ruhe  v.  Burnell, 
121  Mass.  450,  where  it  was  held 
that,  on  the  issue  whether  two  per- 
sons were  partners  at  the  date  of  an 
alleged  sale  of  goods  to  them,  evi- 
dence of  writings  thereafter  exe- 
cuted between  them,  and  of  one's 


declaration  to  the  other,  is  inad- 
missible. 

Persons  entering  into  an  agree- 
ment in  carrying  on  a  plantation 
may  afterwards  modify  or  rescind 
it ;  but  a  rescission  or  modification 
of  it  cannot  be  proven  by  loose 
declarations  or  conversations,  es- 
pecially when  their  subsequent  con- 
duct accords  with  their  original 
contract.  Autrey  v.  Frieze,  59 
Ala.  587. 

(s)  Baxter  v.  West,  1  Dr.  &  Sm. 
173 ;  Worts  v.  Pern,  3  Bro.  P.  C. 
548  (vol.  i,  p.  270,  in  folio  edit.); 
Williams  v.  Williams,  2  Ch.  294. 
See,  as  to  mutual  insurance  socie- 
ties, ante,  p.  80,  note  (a). 

1 A  written  agreement  which 
alone  would  not  constitute  a  part- 
nership may  yet  be  put  in  evi- 
dence, together  with  proof  that 
the  parties  have  considered  it  to 
constitute  one,  and  have  acted  ac- 
cordingly. Williams  v.  Soutter,  7 
Iowa,  435. 

A  contract  is  not  competent  evi- 
dence to  fix  the  liability  of  one  as 
a  partner,  unaccompanied  by  evi- 
dence that  the  plaintiff  knew  of 
its  existence  and  gave  credit  upon 
the  face  of  it.  Denithorne  v.  Hook, 
112  Pa.  St.  240;  S.  C.  17  Weekly 
Not.  Cas.  369. 

Notice  of  dissolution  and  of  the 
continuance  of  the  business  by  one 
partner  is  admissible  to  show  who 
conducted  the  business  after  dis- 
solution and  in  whose  possession 
the  firm  property  remained.  Kelly 
v.  Murphy,  70  Cal.  560;  S.  C.  12 
Pac.  Rep.  467. 

In  a  suit  against  four  defend- 
ants as  copartners  it  is  the  privi- 


182 


OH.  IV.] 


EVIDENCE. 


*85 


Moreover,  an  agreement  between  A.  and  B.  may  disclose  a 
trust  for  C,  and  be  evidence  for  him  and  show  him  to  be  a 
partner,  (t) 

A  prospectus  or  advertisement  issued  by  one  person  and 
assented  to  b}r  another  is  abundant  evidence  of  a  contract 
upon  the  terms  contained  in  the  prospectus  or  advertise- 
ment, (u) 

Acts  of  iilleged  copartner. —  When  it  is  sought  to  make 
a  person  liable  as  if  he  were  a  partner,  evidence  must  be 
adduced  of  his  acts,  or  of  what  has  been  done  by  other 
people  with  his  knowledge  or  with  his  consent,1  and  the 

lege  and  duty  of  the  plaintiffs  to 
establish  the  connection  of  each 
one  of  the  defendants  with  the 
firm,  and  for  this  purpose  an  un- 
signed partnership  agreement  be- 
tween the  defendants,  and  in  the 
handwriting  of  one  of  them,  is 
admissible  against  him.  Beall  v. 
Poole,  27  Md.  645. 

After  receiving  the  services  of 
one  as  a  partner,  and  recognizes 
him  as  such  for  several  years,  it  is 
too  late  to  set  up  either  the  non- 
payment of  his  portion  of  the 
capital  stock,  or  the  non-execution 
of  articles  of  partnership,  as  proof 
that  no  partnership  existed.  Camp- 
bell v.  Whitley,  39  Ala.  172. 

In  an  action  against  several  as 
copartners,  parol  evidence  to  show 
that  articies  of  copartnership  ex- 
ecuted by  them  were  to  go  into 
operation  only  upon  a  contingency 
was  held  inadmissible.  Dix  v.  Otis, 
5  Pick.  38. 

The  fact  that  C  &  S.  entered 
into  a  written  contract  with  F.  & 
P.  to  excavate  a  certain  tunnel  is 
not  conclusive  evidence  that  S. 
was  a  member  of  the  association 
known  as  C.  &  Co., who  did  actually 
prosecute  the  work  on  the  tunnel ; 
C.  &  Co.  may  have  been  subcon- 


tractors under  C.  &  S.    Sargent  v. 
Collins,  3  Nev.  260. 

In  proving  articles  of  associa- 
tion, where  there  is  no  provision  or 
condition  as  to  the  number  who 
shall  sign  it  to  make  it  valid,  it  is 
sufficient  to  prove  the  signatures 
of  those  associates  who  are  parties 
to  the  suit  against  whom  it  is  of- 
fered in  evidence.  Beach  v.  Van- 
dewater,  1  Sandf.  265. 

(t)  As  in  Dale  v.  Hamilton,  2  Ph. 
266.  See,  also,  Murray  v.  Flavell,  25 
Ch.  D.  89 ;  Page  v.  Cox,  10  Ha.  163. 

(w)  Fox  v.  Clifton,  6  Bing.  797,  8. 

1  A  partnership  between  the  de- 
fendants may  be  implied  from  cir- 
cumstances. 

The  manner  in  which  the  busi- 
ness is  conducted,  authority  exer- 
cised by  an  alleged  partner  in  buy- 
ing and  selling,  and  all  the  facts 
and  circumstances,  are  admissible 
in  proof  of  partnership.  Wood  v. 
Samuels,  1  Tex.  App.  (Civ.)  519; 
Manville  v.  Parks,  7  Colo.  128;, 
Kelleher  v.  Tisdale,  23  111.  495;  Gil-1 
pin  v.  Temple,  4  Harr.  190;  Whit- 
ing v.  Leakin,  66  Md.  255.  See 
Ligare  v.  Peacock,  109  111.  94. 

Where,  in  an  action  against  a 
partnership,  the  existence  of  the 
partnership  may  be  inferred  from 


183 


*85 


CONTKACTS    OF   PAKTNEKSHIP. 


[BOOK   I. 


plaintiff  must  prove  a  holding   out  to  himself.  (%)     The 
statements  and  acts  of  the  defendant's  alleged  copartners 


indirect  evidence,  a  finding  of  that 
fact  will  not  be  disturbed  for  want 
of  direct  evidence  thereof.  Hen- 
shaw  v.  Root,  60  Ind.  220. 

Plaintiff  seeking  to  establish  co- 
partnership by  parol  with  one  de- 
ceased will,  however,  be  held  to 
strict  proof.  Kelly  v.  Devlin,  47 
N.  Y.  Super.  Ct.  555 ;  S.  C.  58  How. 
Pr.  487. 

The  fact  that  persons  conduct 
business  jointly  as  copartners  is 
prima  facie  evidence  of  the  exist- 
ence of  a  copartnership  between 
them.  Forbes  v.  Davison,  11  Vt. 
660;  Winslow  v.  Cheffelle,  1  Harp. 
Eq.  25;  McMullan  v.  Mackenzie,  2 
G.  Greene,  368;  Bonner  v.  Camp- 
bell, 48  Pa.  St.  286. 

Evidence  of  specific  acts  of  inter- 
meddling in  the  affairs  of  a  firm  is 
admissible  to  prove  a  partnership ; 
but  the  general  evidence  that  a 
person  has  intermeddled  is  not  ad- 
missible.    Lewis  v.  Post,  1  Ala.  65. 

Partnership  or  joint  liability  be- 
tween two  persons  living  together 
upon  a  farm  may  be  inferred  from 
evidence  that  one  of  them  has  been 
in  the  habit  of  ordering  goods  for 
their  common  use,  labor  and  ma- 
terials for  the  improvement  of 
buildings  in  their  joint  occupancy, 
and  mechanic's  work  ordinarily  in- 
cident to  farming  operations,  and 
that  the  debts  contracted  by  him 
have  in  various  instances  been  paid 
by  the  products  of  the  farm,  in  the 
sale  of  which  both  participated; 
and  from  the  admission  of  one  of 
them  that  on  some  occasions  the 
other  had  authority  to  act  for  both, 
although  he  reserved  the  right  to 


disavow  such  acts  as  he  might 
deem  disadvantageous.  Farr  v. 
Wheeler,  20  N.  H.  569. 

On  the  trial  of  an  action  against 
B.,  upon  an  issue  as  to  whether 
one  W.  and  B.  were  partners,  there 
was  evidence  that  W.  and  B.  were 
together,  and  had  certain  stock  to- 
gether; that  B.  carried  a  note  to 
bank  to  be  discounted,  with  a 
written  request  from  W.  that  it 
should  be  done;  that  B.  said  that 
the  money  was  for  himself  and  W. ; 
that  they  were  buying  stock  to- 
gether, and  that  the  money  was  to 
be  used  in  buying  stock;  that  B. 
afterwards  referred  to  the  debt  he 
and  W.  owed  in  bank,  etc.  Held, 
that  the  jury  were  warranted  in 
finding  that  a  partnership  existed 
between  W.  and  B.  Dobson  v. 
Chambers,  78  N.  C.  334. 

In  an  action  against  a  member 
of  an  unincorporated  company  to 
recover  for  services  rendered  to  the 
company  from  August  10  to  De- 
cember 12,  1868,  there  was  evidence 
that  the  articles  of  association  of 
the  company  provided  that  none 
but  stockholders  should  be  trustees ; 
that  in  1867  the  defendant  was 
chosen  trustee,  and  subsequently 
acted  as  such;  that  he  had  said 
that  he  had  an  interest  in  the  com- 
pany, having  subscribed  for  stock 
in  the  name  of  a  firm  of  which  he 
was  a  member,  and  paid  an  assess- 
ment on  this  stock;  that  he  was 
"off  and  on"  at  the  office  of  the 
company ;  that  the  company  began 
business  in  August,  1868;  that  in 
December,  1868,  the  defendant  said 
he  was  an  officer  of  the  company, 


(a;)  Dickinson  v.  Valpy,  10  B.  &  C.  140,  ante,  p.  42. 

184 


CH.  IV.] 


EVIDENCE. 


*85 


are  no  evidence  against  him  until  he    and  they  are  shown 
to  have  been  connected  in  some  way  with  each  other; x  and 


authorized  to  make  contracts  for 
it;  and  that  in  November  and  De- 
cember, 1868,  he  wrote  to  one  of 
the  original  subscribers  of  the  com- 
pany as  to  what  "we"  wanted  to 
do  about  the  affairs  of  the  com- 
pany. The  defendant  did  not  offer 
any  testimony  to  explain  this  evi- 
dence. Held,  that  a  jury  would 
be  warranted  in  finding  that  the 
defendant  was  a  member  of  the 
company  at  the  time  the  plaintiff's 
services  were  rendered.  Taft  v. 
Warde,  111  Mass.  518.  See,  also, 
Scranton  iu  Rentfrow,  29  Ga.  341. 

In  an  action  by  A.  against  B.  & 
C,  as  the  owners,  in  partnership, 
of  a  race-course,  for  work  done  on 
the  course,  C.  denied,  under  oath, 
the  partnership;  and  after  proof  of 
a  written  agreement  between  B. 
&  C.  for  the  construction  of  the 
course  at  joint  expense  and  profit, 
A.  offered  to  prove  that  although 
he  was  employed  by  B.  to  do  the 
work,  yet  that  C.  was  often  pres- 
ent, giving  orders  and  directions 
concerning  it,  and  shared  the 
profits  of  the  course  after  it  was 
completed.  Held,  that  the  proof 
was  admissible  as  tending  to  estab- 
lish the  partnership,  and  their  joint 
liability  as  partners  for  the  work. 
Perry  v.  Randolph,  14  Miss.  335. 

Evidence  that  one  was  often  in 
the  store  conducted  in  the  name  of 
another;  that  he  bought,  sold  and 
bartered  goods  there ;  inspected  the 
books  and  made  charges,  and  went 
to  Boston  and  bought  goods  for  the 
store, —  is  evidence  to  prove  that 
he  was  a  partner,  he  having  for- 
merly been  a  partner,  and  the  old 
sign    of  the  firm  still  remaining 


upon  the  building.     State  v.  Wig- 
gin,  20  N.  H.  449. 

Where  a  party  has  been  a  mem- 
ber of  a  defendant  firm,  but  has 
erased  his  name  from  the  articles, 
it  is  competent  for  plaintiff  to  show 
that  without  pretense  of  agency  he 
continued  active  in  the  business, 
sued  out  a  writ  in  the  name  of  all 
the  defendants  for  injury  to  their 
joint  property,  and  swore  to  a  sim- 
ilar bill  in  chancery,  and  held  a 
deed  of  an  undivided  portion  of  the 
partnership  mill.  Carlton  v.  Lud- 
low, 28  Vt.  504. 

Where  two  persons,  as  intended 
partners,  purchase  a  stock  of  goods, 
and  agree  to  give  their  notes  there- 
for, and,  on  receiving  the  goods  at 
the  time  fixed,  one  of  them,  the 
other  being  absent,  signs  and  de- 
livers the  notes  in  their  joint 
names,  the  notes  thus  given  are 
firm  notes,  and  the  agreement  and 
its  consummation  present  a  strong 
prima  facie  case  of  partnership  in 
an  action  against  them  on  a  con- 
tract made  by  one  of  them  with  an- 
other party  in  the  name  of  the  firm. 
Drennan  v.  House,  41  Pa.  St.  30. 

In  an  action,  in  which  it  was 
sought  to  charge  defendants  as 
partners  owning  a  mill,  the  plaint- 
iff introduced  evidence  tending  to 
show  that  one  of  them  exercised 
authority  about  the  mill.  Held, 
that,  by  waj"  of  rebutting  the  infer- 
ence that  he  was  interested  as  a 
copartner,  it  was  proper  to  show 
that  others  gave  like  directions; 
but  not  to  prove  his  statements  dis- 
claiming such  interest.  Sager  v. 
Tupper,  38  Mich.  259. 
iSee  Campbell  v.   Hastings,  29 


185 


*85 


CONTRACTS    OF   PARTNERSHIP. 


[book  I. 


it  is  obviously  reasoning  in  a  circle  to  infer  a  partnership 
from  acts  of  theirs,  unless  he  and  they  can  be  connected  by 
other  evidence  admissible  against  him.  (y) 


Ark.  512;  Gay  v.  Fretwell,  9  Wis. 
186 ;  Hudson  v.  Simon,  6  Cal.  453. 

In  an  action  of  assumpsit  against 
several  persons  as  partners,  a  part 
of  the  defendants  filed  a  plea  deny- 
ing the  partnership;  and  on  the 
trial  the  court  permitted  to  be  read 
in  evidence  a  paper  in  the  hand- 
writing of  a  former  clerk  of  the 
association,  purporting  to  contain  a 
list  of  stockholders  in  a  mercantile 
association,  in  which  list  the  names 
of  the  defendants  appeared.  No 
proof  was  offered  that  the  defend- 
ants had  any  knowledge  of  such 
paper,  or  that  it  was  in  the  hand- 
writing of  the  clerk  of  the  defend- 
ants. Held,  that  the  paper  was  in- 
admissible in  evidence.  Yocum  v. 
Benson,  45  111.  435. 

In  a  suit  against  F.  &  S.,  two 
millers,  as  partners,  to  recover  for 
wheat  sold  them,  F.  offered  to  show 
by  sundry  witnesses,  who  were  cus- 
tomers at  the  mill,  that  they  were 
in  the  habit  of  selling  grain  to  S., 
but  that  they  never  knew  that  F. 
had  anything  to  do  with  buying 
the  grain,  or  that  the  partnership 
extended  to  that  business.  Held, 
that  this  evidence  was  inadmissible. 
Folk  v.  Wilson,  21  Md.  538. 

Where  a  partnership  was  at- 
tempted to  be  proved  between  two 
persons  as  innkeepers,  etc.,  by  the 
admission  of  one  of  the  alleged 
partners,  and  by  the  course  and 
circumstances  of  their  business, 
and  their  joint  use  of  the  property 
connected  with  the  tavern-house, 


held,  that  an  assignment  of  the 
tavern  furniture  and  accounts,  by 
the  other  alleged  partner  to  a  third 
person,  for  the  payment  of  the  as- 
signor's debts,  might  be  given  in 
evidence,  as  tending  to  rebut  the 
testimony  on  the  part  of  the  plaint- 
iff, and  to  show  that  the  alleged 
partners  had  not  been  in  the  joint 
receipt  of  the  alleged  income  of 
the  tavern.  Callender  v.  Sweat,  14 
Vt.  160. 

When  it  was  proved  that  A.  was 
in  a  store  and  sold  goods  for  cash 
and  on  credit,  in  order  to  raise  the 
presumption  that  A.  was  a  partner, 
held,  that  it  was  proper  to  ask  wit- 
ness if  it  is  not  customary  for 
clerks  to  sell  in  this  way  as  well 
as  principals.  Perry  v.  Butt,  14 
Ga.  699. 

When  a  witness  has  stated  what 
he  has  seen  and  heard  which 
tended  to  show  the  existence  of  a 
partnership,  he  may  be  asked  what 
he  has  seen  and  heard  to  the  effect 
that  there  was  no  partnership,  in 
order  to  prove  negatively  that  he 
had  no  information  or  knowledge 
that  there  was  no  partnership. 
Conklin  v.  Barton,  43  Barb.  435. 

The  possession  of  a  note  by  one 
of  two  joint  payers  is  not  evidence 
that  the  payers  are  partners,  but  is 
simply  prima  facie  evidence  of 
the  title  disclosed  upon  the  face  of 
the  note.  Eyhiner  v.  Feickert,  92 
111.  305. 

Two  persons  signing  a  note 
jointly  is  no  evidence  of  a  partner- 


fa)  See  1  Tay.  Ev.  §  753,  edit.  8; 
Edmundson  v.   Thompson,  2  Fos. 


&  Fin.  564,  and  8  Jur.  N.  S.  235; 
Grant  v.  Jackson,  Peake,  268. 


186 


CH.  IV.]  EVIDENCE.  *86 

Registers,  etc.— Upon  this  principle  it  has  been  held 
that  the  registers  of  ships  are  no  evidence  of  ownership  ex- 
cept as  against  the  persons  upon  whose  affidavit  the  entries 
in  the  registers  were  made;  (3)  that  entries  in  the  office  in 
Somerset  House  for  licensing  stage-coaches  are  no  evi- 
dence to  prove  that  the  persons  named  in  the  license  are 
the  owners  of  the  coach ;  (a)  and  that  the  acts,  letters  and 
statements  of  one  promoter  of  a  company  are  no  evidence 
against  another,  who  cannot  be  shown  to  have  authorized 
them,  (b) 

*It  need  scarcely  be  observed  that  the  principle  now  [*86] 
under  discussion  does  not  apply  to  exclude  the  testi- 
mony of  a  person  deposing  to  the  existence  of  a  partner- 
ship between  himself  and  another.  Such  testimony  was 
not  excluded  even  before  the  alteration  of  the  law  relating: 
to  the  competency  of  witnesses,  (c)  and  there  is  no  pretense 
for  excluding  such  testimony  now.  If  a  partnership  is 
alleged  to  exist  between  A.  and  B.,  and  A.  is  called  to  prove 
it,  and  he  denies  it,  then,  although  the  person  calling  A.  as 
a.  witness  cannot  adduce  evidence  to  show  that  his  testi- 
mony is  generally  unworthy  of  credit,  yet  such  person  may 

ship  between   them.     Hopkins  v.  fraudulently,  and  for  the  purpose 

Smith,  11  Johns.  161.  of  covering  the  property  of  one 

Evidence  that  legal  services  were  from  his  creditors,  is  not  ad  mis- 
rendered  in  the  joint  names  of  an  sible.  Thomas  v.  Moore,  71  Pa.  St. 
attorney-at-law  and  another  per-  193. 

son   is  not    sufficient  to  prove  a  (z)  Tinkler  v.  Walpole,  14  East, 

partnership    between    them,    and  226 ;  Flower  v.  Young,  3  Camp.  240. 

thus  defeat  an  action  for  such  serv-  And  see  Mclver  v.  Humble,  16  East, 

ices  brought  by  the  attorney  alone.  174. 

Bishop  v.  Hall,  9  Gray,  430.  (a)  Str other  v.  Willan,  4  Camp. 

Evidence  that  a  person  was  "in-  24 ;  Weaver  v.  Prentice,  1  Esp.  369. 

terested"  in  a  certain  business  is  (b)  See  Drouet  v.  Taylor,  16  C.  B. 

not  sufficient  to  prove  a  partner-  671;  Burnside  v.  Dayrell,  3  Ex.  224; 

ship.     Levy  v.  McDowell,  45  Tex.  Watson  v.  Charlemont,   12  Q.  B. 

220.  856.     This  will  be  again  alluded  to 

In  a  question  of  partnership  evi-  in  a  subsequent  chapter, 

dence  that  the  connection  between  (c)  Hall  v.  Curzon,  9  B.  &  C.  646 ; 

alleged  partners  had  been  formed  Blackett  v.  Weir,  5  id.  385. 

187 


*87  CONTRACTS   OF   PARTNERSHIP.  [BOOK    I. 

adduce  other  evidence  to  show  that  the  partnership  denied 
by  the  witness  does  in  point  of  fact  exist,  (d) 

Acts  of  copartners  after  prima  facie  evidence  of  part- 
nership has  been  given. —  Further,  it  is  to  be  observed  that, 
notwithstanding  the  principle  above  stated,  after  sufficient 
evidence  has  been  given  to  raise  a  presumption  that  several 
persons  are  partners,  then  the  acts  of  each  of  those  persons 
are  admissible  as  evidence  against  the  others  for  the  pur- 
pose of  strengthening  the  prima  facie  case  already  estab- 
lished. Thus,  in  Norton  v.  Seymour,  (e)  in  order  to  prove  a 
partnership  between  the  defendants  Seymour  and  Ayres, 
the  plaintiff  called  a  witness  who  deposed  that  Ayres  had  in 
conversation  admitted  the  partnership,  and  then  the  plaintiff 
gave  in  evidence  a  circular  and  invoice  issued  by  Seymour, 
and  headed  Seymour  &  Ayres,  and  stating  that  the  busi- 
ness would  in  future  be  carried  on  in  those  names.  Ayres 
objected  to  the  admissibility  of  this  document,  there  being, 
as  she  contended,  no  evidence  to  connect  her  with  it;  but 
the  court  held  it  to  be  admissible;  for,  before  the  document 
was  put  in,  evidence  of  a  partnership  had  been  given,  and 
the  document  tended  to  confirm  that  evidence.  So,  in 
Nicholls  v.  Dowding,  (/)  prima  facie  evidence  of  a  part- 
nership having  been  given,  the  declarations  of  one  of  the 
defendants  were  inquired  into  for  the  purpose  of  binding 
the  others,  and  it  was  held  that  such  evidence  was  admissi- 
ble, a  foundation  for  it  having  been  previously  laid,  (g) 
[*87]  *Proof  of  articles,  etc.,  not  necessary. —  A  person 
may  be  made  liable  as  if  he  were  a  partner  without 
the  proof  of  any  partnership  articles  or  deed  which  he  may 
have  executed,  (h)  And  although,  in  order  to  prove  an 
actual  partnership,  it  may  be  necessary  by  the  law  of  some 

(d)  Ewer  v.  Ambrose,  3  B.  &  C.        (h)    Alderson  v.  Clay,    1  Stark. 
746.  405,  where  a  person  was  proved  to 

(e)  3  C.  B.  792.  be  a  member  of  a  company  with- 
(/)  1  Stark.  81.  out  the  production  of  the  com- 
(<7)  See,  too,  Alderson  v.  Clay,  1    pany's  deed. 

Stark.  405. 

188 


CH.  IV.]  EVIDENCE.  *87 

other  country  to  show  that  some  formality  has  been  ob- 
served, the  non-observance  of  that  formality  will  not  pre- 
vent persons  who  in  fact  trade  as  partners  from  being  so 
treated  in  this  country  in  questions  arising  between  them 
and  third  parties,  (i) 

Admissions. —  An  admission  made  by  any  one  that  he  is 
a  member  of  a  particular  partnership  is  evidence  of  that 
fact  against  him;  (&)1  and  such  an  admission  renders  it  un- 

(t)  Shaw  v.  Harvey,  Moo.  &  Mai.  22;  Thornton  v.  Kerr,  6  Ala.  823; 

526 ;  Maudsley  v.  Le  Blanc,  2  C.  &  Teller  v.  Patten,  20  How.  125 ;  Reed 

P.  409,  note.  v.  Kremer,  111  Pa.  St.  482;  S.  C.  17 

(k)    Sangster    v.    Mazarredo,    1  Weekly  Not.  Cas.  233;  Central  R. 

Stark.  161 ;  Studdy  v.  Saunders,  2  R  Co.  v.  Smith,  76  Ala.  572 ;  Bever- 

D.  &Ry.  347;  Clay  v.  Langslow,  1  idge    v.    Hewitt,    8   Bradw.    467; 

Moo.  &  Mai.  45.  Winchester  v.  Whitney,  138  Mass. 

1  The  separate  admission  or  dec-  549 ;  Filley  v.  McHenry,  71  Mo.  417 ; 

laration    of    each   member  of   an  Flournoy  v.  Williams,  68  Ga.  707; 

alleged  partnership    is  competent  White  v.  Whaley,    1    Tex.    App. 

evidence  against  him  to  prove  the  (Civ.)  41 ;  Johnston  v.  Clements,  25 

partnership,    but    not  against  the  Kan.  376 ;  Rimel  v.  Hayes,  83  Mo. 

other  supposed  members  if  absent  200 ;  Roth  v.  Kirchoff ,  12  Mo.  App. 

at  the  time  it  was  made,  unless  sub-  599 :  Burpee  v.  Smith,  4  Pugs.  &  B. 

sequently  assented  to  or  ratified  by  (N.   B.)  408;    Clark   v.   Taylor,   68 

them.     See  Taylor  v.  Henderson,  17  Ala.  453 ;  Chambers  v.  Groat,  63  la. 

Serg.  &R.  453;  Palmer  v.  Pinkham,  342;  Cleveland  v.  Duggan,  2  Tex. 

33  Me.  32 ;  Thomas  v.  Wolcott,  4  Mc-  App.  (Civ.)  65 ;  Humes  v.  O'Bryan, 

Lean,  365 ;  Fenn  v.  Timson,  4  E.  D.  74  Ala.  64;  Brown  v.  Rains,  53  la. 

Smith,  276;  Wallace  v.  Berger,  14  81 ;  Scull's  Appeal,  19  Weekly  Not. 

Iowa,  183;  Chaffee  v.  Rentfroe,  32  Cas.  70;  S.  C.  5  Cent.  Rep.  869;  7 

Ga.  477;  Vance  v.  Funk,  2  Scam.  Atl.  Rep.  588;  Sanquoit's  Appeal, 

263;  Grafton  Bank  v.   Moore,   14  9  Atl.  Rep.  77 ;  Ackroyd's  Appeal, 

N.  H.   142 ;  Currier  v.  Sillioway,  1  9  Atl.  Rep.  77 ;  Johnston's  Appeal, 

Allen,  19;  Gordon  v.   Bankard,  37  id.  76;    McCall  v.    Moscowitz,   10 

111.  147 ;  Drennen  v.  House,  41  Pa.  N.  Y.  Civ.  Proc.  107 ;  Ford  v.  Ken- 

St.  30;  Cross  v.  Langley,  50  Ala.  8;  nedy,  64  Ga.  537;  Rogers  v.  Suttle, 

Converse  v.    Shambaugh,   4  Neb.  19  Bradw.  163;  First  Nat.  Bank  v. 

376;  Smith  v.    Collins,    115   Mass.  Conway,  67  Wis.  210;  King  v.  Bar- 

388;  Porter  v.  Wilson,  13   Pa.  St.  bour,   70  Ind.  35;  Swann  v.  San- 

641 ;    McPherson    v.    Rathbone,   7  born,  4  Woods,  C.  Ct.  625 ;  Oppen- 

Wend.  216;  Yancey  v.  Mariott,  1  heimer  v.  Clemmons,  18  Fed.  Rep. 

Sneed,  28;  Cowan  v.  Kinney,  33  886;     Bott    v.    Stoner,    2    Penny. 

Ohio  St.  422 ;  Johnson  v.  Gallivan,  (Pa.)  154.    See,  also,  Nicholaus  v. 

52  N.  H.  143;  Smith  v.  Hulett,  65  Thielges,   50  Wis.  491;  McLeod   v. 

111.  495;  Nelson  v.  Lloyd,  9  Watts,  Ballard,  84  N.  C.  515;  Scully's  Ap- 

189 


'87 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


necessary,  for  the  purpose  of  fixing  him  with  the  liabilities 
of  a  partner,  to  show  that  he  executed  any  document 
whereby  he  became  a  partner.  (I) l 


peal,  11  East.  Rep.  (Pa.)  713;  En- 
twistle  v.  Mulligan,  12  Atl.  Rep. 
(Pa.)  766;  Buzard  v.  Jolly,  6  S.  W. 
Rep.  (Tex.)  422.  See,  also,  Jenkins 
v.  Barrows,  35  N.  W.  Rep.  (la.) 
510. 

Signing  of  contracts  by  one  per- 
son in  his  own  name  and  that  of 
another,  as  partners,  incompetent 
as  against  such  other  in  the  absence 
of  knowledge  on  his  part  of  such 
act.  Buzard  v.  Jolly,  6  So.  West. 
Rep.  (Tex.)  422. 

Application  of  certain  members 
of  a  firm  for  a  revenue  license, 
which  purports  to  set  out  the 
names  of  the  members  of  the  firm, 
but  which  is  not  made  in  the  pres- 
ence of  the  other  members,  is  not 
competent  evidence  to  prove  their 
membership.  Boyd  v.  Ricketts,  60 
Miss.  62. 

A  published  notice  of  dissolution 
stating  that  the  party  would  con- 
tinue the  firm  under  a  certain 
name,  admitting  certain  other 
named  parties  to  interests  from 
date,  held,  not  to  warrant  the  in- 
ference that  such  parties  had  been 
admitted  as  partners.  Scully's 
Appeal,  11  East,  Rep.  (Pa.  St.)  713. 

The  acts  and  declarations  of  a 
deceased  person  when  in  possession 
of  goods  in  carrying  on  business, 
so  far  as  they  were  explanatory 
of  his  possession  as  indications 
whether  the  goods  were  his  own  or 
claimed  by  him  as  partner  with 
another,    are    admissible    (not    as 


against  another  alleged  to  be  a 
partner)  as  part  of  the  res  gestae 
in  proof  of  partnership.  Humes 
v.  O'Bryan,  74  Ala.  64. 

Upon  the  issue  of  partnership, 
conversations  and  declarations  of 
the  plaintiff  to  third  persons  in  the 
ordinary  course  of  business,  which 
were  reported  by  the  plaintiff  to 
the  defendants,  are  part  of  the  res 
gestce  and  properly  admissible  in 
evidence.  McCall  v.  Moscowitz,  10 
N.  Y.  Civ.  Proc.  107. 

Declarations  of  a  partner  made 
after  dissolution  are  admissible  to 
rebut  presumption  of  partnership 
arising  from  the  use  of  the  firm 
name.  Nichols  v.  White,  41  Hun 
(N.  Y.),  152. 

The  declarations  of  one  partner 
that  another  person  is  a  partner, 
while  not  admissible  to  establish 
the  fact  of  partnership,  are  admis- 
sible for  the  purpose  of  proving 
that  goods  were  sold  in  the  faith 
that  such  person  was  a  copartner. 
Greenwood  v.  Sias,  21  Hun(N.  Y.), 
391. 

Where  evidence  has  been  given 
sufficient  to  raise  a  presumption  of 
the  continuance  of  the  partnership 
after  an  alleged  dissolution,  the 
acts  and  admissions  of  one  mem- 
ber of  the  firm  are  admissible  as 
against  the  others  to  strengthen  the 
prima  facie  case  so  established. 
Gilchrist  v.  Brande,  58  Wis.  184. 

The  fact  that  on  some  occasions 
one   party  speaks  of  another,  en- 


(Z)  Harvey  v.  Kay,  9  B.  &  C.  356 ;    see  Tredwen  v.  Bourne,  6  M.  &  W. 
Ralph  v.  Harvey,  1  Q.  B.  845.    And    461. 

1  See  Wallace  v.  Berger,  supra. 
190 


CH.  IV.] 


EVIDENCE. 


'87 


Admissions,  however,  are  not  necessarily  conclusive,  and 
little  weio-ht  ought  to  be  attached  to  them  if  it  is  shown 


gaged  by  him  and  paid  for  his  serv- 
ices by  a  share  of  the  profits,  as 
his  partner,  there  being  no  ques- 
tion of  estoppel  involved,  is  not 
conclusive  as  to  question  of  part- 
nership ;  and  other  proof  showing 
clearly  that  there  was  no  partner- 
ship, there  is  no  error  in  court  tak- 
ing that  question  from  the  jury. 
Nicholaus  v.  Thielges,  50  Wis.  491. 
Admissions  by  one  partner  that 
when  certain  mortgages  were 
given  partnership  had  been  termi- 
nated are  no  evidence  of  that  fact 
as  against  the  other  partners. 
Southern  White-Lead  Co.  v.  Haas, 
35  N.  West.  Rep.  (la.)  494;  S.  C.  33 
id.  657. 

One  partner  dealing  in  the  name 
of  a  firm  cannot  deprive  another 
partner  of  his  interest  in  the  firm 
assets  by  representations  to  others 
with  whom  he  deals  that  such  per- 
son is  not  a  member  of  the  firm, 
where  the  latter  neither  authorizes 
nor  knows  of  such  statements. 
Rush  o.  Thompson,  112  Ind.  158. 

Before  the  admissions  of  one  can 
be  received  against  the  other,  inde- 
pendent proof  of  the  partnership 
must  be  made.  Cross  v.  Langley, 
supra;  Converse  v.  Shambaugh, 
supra. 

Such  admissions  to  third  parties 
are  not  admissible  on  the  issue 
whether  the  alleged  partners  rep- 
resented themselves  as  partners  to 
a  person  of  whom  they  were 
alleged  to  have  borrowed  money 
as  such  partners.  Smith  v.  Collins, 
supra.  But  the  successive  acts  and 
declarations  of  each  of  several  de- 
fendants, showing  their  partner- 
ship, are  equivalent  to  a  joint  dec- 


laration to  that  effect  by  all,  and 
may  be  given  in  evidence. 
Haughey  v.  Strickler,  2  Watts  &  S. 
411 ;  Welsh  v.  Speakman,  8  id.  257. 
In  a  suit  against  L.  as  a  partner 
in  a  firm  known  by  the  name  of 
L.  &  B.,  letters  written  in  the 
name  of  the  firm  by  L.,  and  entries 
made  by  him  in  the  books  of  L.  & 
B.,  are  prima  facie  admissible  in 
evidence  to  charge  him  as  partner. 
Lewis  v.  Post,  1  Ala.  65. 

Plaintiffs  advised  defendants  of 
a  purchase  made  by  one  A.  claim- 
ing to  be  a  partner  in  their  firm. 
Defendants  answered,  promising 
to  settle  plaintiff's  account,  saying, 
"  we  will  make  the  arrangement," 
etc. ;  "  we  thought  it  settled  before, 
as  we  sent  the  money  by  A.  last 
winter,"  etc.  Held,  that  these  ad- 
missions, as  tending  to  show  a  part- 
nership, were  sufficient  to  entitle 
the  plaintiffs  to  recover.  Cleghorn 
v.  Johnson,  11  Iowa,  292. 

Although  the  bare  declarations  of 
B.  &  C.  that  A.  was  their  partner 
are  insufficient  to  charge  him, 
their  acknowledgments  that 
articles  of  copartnership  existed 
between  them  and  A.,  which  they 
refused  to  produce  upon  the  trial, 
after  due  notice,  were  held  evi- 
dence from  which  a  jury  might 
reasonably  infer  that,  if  produced, 
they  would  have  shown  the  fact  of 
a  partnership.  Whitney  v.  Ster- 
ling, 14  Johns.  319. 

An  inventory  filed  in  court  by 
one  partner  after  the  death  of  the 
other  partner,  purporting  to  con- 
tain the  assets  of  the  partnership, 
is  no  more  than  an  implied  admis- 
sion of  the  partnership,  made  after 


191 


'87 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


that  they  were  made  under  erroneous  suppositions.     This 
seems  to  have  been  the  true  ground  of  the  decision  in  the 


its  dissolution,  and  is  not  evidence 
either  to  prove  the  partnership  as 
against  the  decedent,  or  to  bind 
the  creditors  of  the  partnership  as 
against  the  individual  creditors  of 
the  decedent.  Bond  v.  Nave,  G2 
Ind.  506. 

If  defendants,  sued  as  copart- 
ners, introduce  in  evidence  a  re- 
ceipt taken  by  them  in  their 
copartnership  name  of  the  plaint- 
iffs, this  is  an  admission  of  the  co- 
partnership. McFarland  v.  Lewis, 
2  Scam.  344. 

In  an  action  on  an  account 
stated,  evidence  that  the  defend- 
ants admitted  that  they  were  doing 
business  as  partners  should  be 
allowed  to  go  to  the  jury,  even  if 
not  specifically  confined  to  the 
time  within  which  the  account 
accrued.  Sager  v.  Tupper,  38 
Mich.  258. 

Where  it  appears  from  the  plead- 
ings that  the  several  defendants 
were  jointly  employed  by  the 
plaintiff,  the  admission  of  one  of 
the  defendants  is  competent  to 
charge  the  other  defendants  as  his 
copartners,  and  it  is  immaterial 
whether  such  admission  is  made  in 
a  judicial  proceeding  or  otherwise. 
And  objection  to  such  evidence  on 
the  ground  of  want  of  previous 
proof  of  partnership  is  removed 
by  subsequent  testimony  tending 
to  prove  that  fact.  Fogerty  v. 
Jordan,  2  Robt.  319. 

The  defendant's  acknowledg- 
ment of  the  partnership  of  the 
plaintiff  i  is  sufficient  evidence  of 
such  partnership.  Bisel  v.  Hobbs, 
6  Blackf.  479. 

In  an  action  against  A.  and  B.  as 


partners,  A.  was  defaulted,  and  B. 
pleaded  the  general  issue.  Held, 
that  letters  written  by  A.,  in  the 
partnership  name,  could  not  be 
read  in  evidence  by  B.,  to  show  that 
he  was  not  a  partner  with  A.,  but 
that  the  letters  of  the  plaintiff 
were  good  evidence  to  show  that 
he  did  not  consider  B.,  as  a  partner. 
Champlin  v.  Tilley,  3  Day,  303; 
S.  C.  1  Brunner,  71. 

In  determining  whether  a  part- 
nership as  to  third  persons  exists, 
all  the  declarations,  by  word  or  act, 
of  the  supposed  partners,  the 
rights  they  have  exercised,  and 
every  circumstance  attending  the 
transaction,  may  be  proved  by 
third  persons,  and  must  be  consid- 
ered in  determining  what  is  the 
true  relation  between  the  supposed 
partners.  Pierson  v.  Steinmyer,  4 
Rich.  309. 

The  acts  and  declaration  of  a 
person  not  a  partner  are  not  ad- 
missible to  charge  him  as  a  part- 
ner without  showing  that  they 
were  brought  home  to  the  plaint- 
iff's knowledge.  Fitch  v.  Harring- 
ton, 13  Gray,  4G8. 

Where  two  persons  purchased  a 
mill  and  house,  which  they  com- 
menced to  remove,  but,  before  the 
removal,  one  of  them  died,  held, 
that  the  general  declarations  of 
the  deceased  that  they  had  bought 
the  mill  in  partnership,  no  terms 
of  partnership  being  stated,  did 
not  afford  satisfactory  evidence  of 
the  existence  of  a  partnership,  as 
such  declarations  might  well  con- 
sist with  there  being  nothing  more 
than  a  tenancy  in  common.  Greg- 
ory v.  Martin,  78  111.,  38. 


192 


en.  rv.] 


EVIDENCE. 


*88 


much  debated  case  of  Vice  v.  Anson,  (m)  There  the  de- 
fendant supposed  herself  to  be  a  shareholder  in  a  mine; 
she  had  in  private  letters,  and  in  private  society,  written  and 
spoken  of  herself  as  a  shareholder;  she  had  received  cer- 
tificates stating  that  her  name  was  registered  in  the  act- 
book  of  the  mine,  and  that  she  was  entitled  to  share  the 
profits  of  it;  and  lastly,  she  had  paid  deposits  on  her  shares. 
But  Lord  Tenterden  held  that  she  had  not  in  point  of  fact 
any  interest  in  the  mine,  and  that,  as  she  never  represented 
to  the  plaintiff  that  she  was  a  shareholder  therein,  she  could 
not  be  made  liable  to  him  simply  because  of  her  erroneous 
suppositions  and  admissions. 

*The  inconclusive  nature  of  an  admission  was  dis-  [*88] 
tinctly  recognized  in  Ridgway  v.  Philip,  (n)  where 
Parke,  B.,  said:  "It  frequently  happens,  in  cases  where  the 


The  plaintiff  sought  to  charge  a 
party  as  a  partner  in  running  a 
line  of  stages,  and  gave  evidence 
of  his  declaration  at  different 
periods;  at  the  earliest  admitting 
the  partnership,  and  at  the  latter 
denying  it.  The  plaintiff  further 
offered  to  show  that,  at  the  time  of 
the  defendant's  denial,  another  line 
had  been  started  on  the  same  road, 
and  that  in  consequence  of  the 
competition  the  charge  for  passen- 
gers had  been  greatly  reduced. 
Held,  that  this  latter  testimony 
did  not  impair  the  weight  of  the 
declaration  last  made  by  the  de- 
fendant, but,  being  irrelevant,  was 
consequently  rightly  rejected.  An- 
derson v.  Snow,  9  Ala.  247. 

The  testimony  of  a  witness  that 
he  has  paid  notes  to  the  firm,  in 
which  were  the  individual  names 
of  the  members,  and  the  declara- 
tions of  the  members  made  prior  to 
the  institution  of  the  suit,  are  evi- 
dence for  parties  to  show  a  part- 


nership between  them.  Woods  v. 
Quarles,  10  Mo.  170. 

Under  the  plea  of  non  est  factum, 
involving  the  existence  of  a  part- 
nership, the  declaration  of  the  de- 
fendant to  third  persons,  before 
the  execution  of  the  instrument  in 
question,  that  no  partnership  ex- 
isted, is  not  evidence.  What  the 
defendant  said  when  the  note  was 
offered  to  him  for  payment  would 
be  evidence,  such  declaration  being 
a  part  of  the  res  gestae.  England  v. 
Burt,  4  Humph.  399. 

(m)  7  B.  &  C.  409,  and  Moo.  &  M. 
98.  See,  on  this  case,  Owen  v.  Van 
Uster,  10  C.  B.  318,  and  qu.  if  it  is 
law ;  for  though  the  defendant  had 
no  legal  interest  in  the  mine,  was 
she  not  entitled  as  a  partner  to 
share  the  profits  obtained  by  work- 
ing the  mine?  and  what  more  was 
necessary  to  make  her  liable  to  the 
supplier? 

(n)  1  Cr.  M.  &  R.  415. 


Vol.  1  —  13 


193 


*88  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

liability  of  persons  as  partners  comes  in  question,  that  juries 
are  induced  to  give  too  much  effect  to  slight  evidence  of 
admissions.  An  admission  does  not  estop  the  party  who 
makes  it;  he  is  still  at  liberty,  as  far  as  regards  his  own  in- 
terest, to  contradict  it  by  evidence."  In  that  case  one  of 
the  defendants  was  allowed  to  explain  an  admission  made 
by  him  to  the  effect  that  he  was  in  partnership  with  the 
others,  (o)  So  where  the  freighters  of  a  ship  addressed  a 
letter  to  the  captain,  instructing  him,  on  his  arrival  at  the 
Cape,  to  call  upon  th.Mr  managing  partner,  Mr.  W.  G.  An- 
derson, it  was  held  competent  to  the  freighters  to  show  that 
Mr.  Anderson  was  not  a  partner  of  theirs,  (p) 

Even  where  a  person  has  executed  a  deed  describing  him 
as  a  partner  the  admission  is  not  necessarily  conclusive 
against  him.  (q) 

An  admission  by  one  person  that  he  and  another  are 
partners  may  be  open  to  the  explanation  that  they  are 
partners  to  some  limited  extent,  or  with  respect  to  some 
particular  transaction,  but  not  to  the  extent  or  with  respect 
to  the  business  necessary  to  sustain  the  case  made  against 
him.  (/') 

Retrospective  articles,  etc.— Again,  persons  may  agree 
that  as  between  themselves  the  partnership  between  them 
shall  be  deemed  to  have  commenced  at  some  time  before 
its  actual  commencement.  Proof  of  such  an  agreement  as 
this  would  not  enable  a  stranger  to  make  the  parties  to  it 
liable  to  him  as  partners  for  what  took  place  before  the 
partnership  in  point  of  fact  began.     As  to  third  parties 

(o)  See,  too,  Newton  v.  Belcher,  have  been  had  he  been  a  partner. 

12  Q.  B.  921 :  Newton  v.  Liddiard,  See  Mant  v.  Mainwaring,  8  Taunt, 

id.  925,  as  to  the  admissions  made  139 ;  Brown  v.  Brown,  4  id.  752. 

by  promoters  of  companies  as  to  (q)  See   Radcliffe  v.  Rushworth, 

their  liabilities.  33  Beav.  485 ;  Empson's  Case,  9  Eq. 

(p)  Brock  bank    v.   Anderson,   7  597. 

Man.  &  Gr.  295.    The  real  question  (r)  See  Ridgway  v.  Philip,  1  Cr. 

was  whether  Anderson  was  an  in-  M.  &  R.  415;  and  De  Berkom  v. 

terested  witness,  which  he  would  Smith,  1  Esp.  29. 

194 


CH.  IV.] 


EVIDENCE. 


*89 


such  an  agreement  is  res  inter  alios  acta,  which  does  not 
affect  them  in  any  way;  {s)  and  it  is  obvious  that  an 
admission  of  -the  existence  of  a  partnership  might  be  [*89] 
explained  as  true  only  in  this  limited  sense;  in  which 
case  the  admission  might  be  worth  nothing. 

Usual  evidence  of  partnership. —  The  following  is  the 
kind  of  evidence  usually  had  recourse  to  for  the  purpose  of 
proving  the  existence  of  an  alleged  partnership  or  quasi- 
partnership: 

Agreements  in  writing  and  deeds,!  showing  the  right  to  share  profits. 
If  the  signature  to  a  deed  is  proved  its  due  execution  is  inferred,  {t) 


(s)  Wilsford  v.  Wood,  1  Esp.  183; 
Vere  v.  Ash  by,  10  B.  &  C.  288. 
This  subject  will  be  more  fully  ex- 
amined in  book  ii,  ch.  2,  §  3. 

1  A  mortgage  deed  of  a  partner- 
ship relating  to  partnership  busi- 
ness, executed  by  one  of  the  firm, 
in  the  firm  name,  is  evidence  com- 
petent to  be  given  to  prove  the  exist- 
ence of  the  partnership,  though  the 
deed  was  for  a  purpose  foreign  to 
the  particular  transaction  or  con- 
tract in  the  suit,  where  such  evi- 
dence is  sought  to  be  introduced. 
Crow  ell  v.  Western  Eeserve  Bank, 
3  Ohio  St.  406. 

The  defendant  made  a  written 
lease  of  a  stable  to  certain  persons, 
described  in  the  lease  as  "S.  F. 
Ripley  &  Co."  Previous  to  this  the 
plaintiffs,  being  respectively  pro- 
prietors of  separate  lines  of  stage- 
coaches, agreed  to  hire  and  keep  a 
stable  in  common  for  their  coach 
horses ;  they  took  possession  of  the 
stable,  and  furnished  money  in  cer- 
tain agreed  proportions  to  pay  the 
rent  to  the  defendant  and  the 
hostler's  wages.  While  thus  in  pos- 
session of  the  stable  they  made 
certain    repairs    on    it,    under    an 


agreement  with  the  defendant  that 
he  should  pay  for  them.  Held,  that 
there  was  competent  evidence 
that  the  pla'ntiffs  were  partners 
under  the  firm  name  of  S.  F.  Rip- 
ley &  Co.  Held,  also,  that  it  was 
no  objection  to  the  partnership  that 
it  was  limited  to  this  single  trans- 
action; and  that  it  was  no  objec- 
tion to  the  verdict  that  the  court 
declined  to  instruct  the  jury 
whether  the  plaintiffs  would  be 
liable  for  the  rent  in  case  the  stable 
should  be  untenantable.  Ripley  v. 
Colby,  23  N.  H.  438. 

Defendant  G.  and  one  D. ,  in  his 
life-time,  were  equal  copartners  in 
the  hotel  business,  and  valuable 
property  employed  therein,  being 
also,  at  the  death  of  the  latter, 
seized  and  possessed  of  a  leasehold 
interest  in  certain  premises  de- 
mised for  hotel  purposes  for  a  defi- 
nite term  of  years,  which  had  not 
then  expired.  On  the  death  of  the 
decedent  the  partnership  affairs 
were  left  in  an  unsettled  condition, 
with  large  assets  and  liabilities,  the 
former  of  which,  however,  were 
greatly  in  excess  of  the  latter.  De- 
cedent left,  as  next  of  kin,  three 


(t)  Grellier  v.  Neale,  1  Peake,  198. 


195 


*89 


CONTRACTS    OF    PARTNERSHIP. 


[book 


To  prove  who  constituted  a  firm  of  A.  &  Co.,  the  attorney  of  B.  &  Co. 
cannot  be  compelled  to  produce  an  agreement  made  between  A.  & 
Co.  and  B.  &  Co.,  if  he  objects  on  the  ground  of  professional  confi- 
dence, (u) 
Admissions,  (x)  as  to  which,  see  ante,  pp.  87,  83. 


children  and  his  widow,  Mrs.  D., 
the    other    appellant,    defendants 
herein,  who  claimed  an  interest  in 
such  firm  property.     Thereupon  all 
the  defendants  entered  into  a  writ- 
ten agreement  with  each  other  for 
the  purpose,  as  therein  declared,  of 
settling  all  disputes  between  them 
concerning  said  partnership  busi- 
ness and  property,  definitely  fixing 
their  respective  interests  therein, 
and    continuing  said   business    as 
therein  provided,  and  which  con- 
tained mutual  covenants,  stipulat- 
ing among  other  things  in  substance 
as  follows:      That    said    business 
should  be  continued  to  the  end  of 
the  lease  by  said  G.,  as  surviving 
partner  of  the  said  D. ,  using  therein 
the  capital  and  property  employed 
by   the  old   firm,   and   paying  its 
debts;  G.'s  share  and  interest   in 
said    business    and    property   was 
fixed  at  one   undivided  half  part 
thereof,  and  each  of  the  other  ap- 
pellant defendants  at  one  undivided 
eighth  part  thereof.     Mrs.  D.  was 
to  furnish,  to  be  invested  in  said 
business,  some  $14,000,  to  be  reim- 
bursed to  her,  with  interest,  out  of 
the  accruing  profits.     Each  party 
was  to  share  in  the  profits  accord- 
ing to  his  interest  in  the  business 
and  property  as  fixed  by  the  agree- 
ment, and  the  same  were  to  be  di- 
vided and  apportioned    annually. 
Upon  the  termination  of  the  busi- 
ness such  property  and  its  proceeds 
were  to  be  divided  in  like  manner. 
The  business  was  to  be  under  the 
management  and  control  of  said 


G.,  subject  in  part  to  the  counsel 
and  direction  of  Mrs.  D.,  each  of 
whom  was  to  receive  compensation 
therefor.     A  full  inventory  of  all 
the  assets  and  property  of  the  busi- 
ness concern  was  to  be  made.  New 
books  of  account  were  to  be  opened 
and  kept,  showing  all  the  transac- 
tions in  said  business,  and  contain- 
ing a  stock  account, and  showing 
the  amount  of  property  invested 
therein,  and  the  interests  of  the  re- 
spective parties  therein  as  fixed  by 
said    agreement,  and    these   were 
subject  to  inspection  at  all  times 
by  any  of  the  parties,  through  an 
agent  agreed  upon  and  designated. 
Provision  was  also  made  for  the 
renewal   of  furniture  and  for  re- 
pairs,  and  prohibiting    the   with- 
drawal of    any  money  from    the 
business,  except  to  the  extent  and 
upon  the  conditions  therein  men- 
tioned.    Held:  1.  That  the   legal 
effect  of  these  stipulations  was  to 
create  a  partnership  between   the 
defendants  as  to  third  parties  deal- 
ing with  them,  with  knowledge  of 
the  agreement,  and  upon  the  faith 
of  its  provisions.    2.  That  as  to  such 
parties  said  defendants   were  es- 
topped from  denying  the  existence 
of  the  state  of  facts  assumed  by  the 
agreement.      Delaney  v.  Dutcher, 
23  Minn.  373. 

(u)  Harris  v.  Hill,  Dowl.  &  Ry. 
N.  P.  Ca.  17. 

(x)  Sangster  v.  Mazarredo,  1 
Stark.  161 ;  Harvey  v.  Kay,  9  B.  &  C. 
356 ;  Ralph  v.  Harvey,  1  Q.  B.  845 ; 
Clay  v.  Langslow,  1  Moo.  &  M.  45. 


196 


CH.  IV.] 


EVIDENCE. 


*89 


Advertisements,  prospectuses,  etc.,  containing  the  names  of  the  al- 
leged partners,  (y)  and  names  over  doors,  (z)  and  on  carts,  (a)1 


(y)  Lake  v.  Argyll,  6  Q.  B.  477; 
Bourne  if.  Freeth,  9  B.  &  C.  632; 
Maudsley  v.  Le  Blanc,  2  C.  &  P. 
409,  note ;  Reynell  v.  Lewis,  15  M. 
&  W.  517;  Wood  v.  Argyll,  6  Man. 
&  Gr.  928.  In  Ex  parte  Matthews, 
3  V.  &  B.  125,  an  advertisement  of 
dissolution  was  relied  on. 

{z)  Williams  v.  Keats,  2  Stark. 
290.  See,  too,  Pott  v.  Eyton,  3  C. 
B.  32,  ante,  p.  30. 

(a)  Stables  v.  Eley,  1  C.  &  P.  614, 
as  to  which,  see  ante,  p.  47. 

1  An  instruction  to  the  jury  that 
the  presumption  of  a  partnership, 
from  the  use  of  a  name  such  as  is 
commonly  used  where  a  partner- 
ship exists,  is  slight  and  easily 
rebutted,  affords  no  ground  of  ex- 
ception. Charmanv.  Henshaw,  15 
Gray,  293. 

One  not  a  partner  is  not  estopped 
to  deny  that  his  name  was  so  used 
as  to  lead  others  to  suppose  that  he 
was  such,  unless  it  appears  that  his 
name  was  so  used  with  his  knowl- 
edge or  consent.  Cole  v.  Butler, 
24  Mo.  App.  76. 

Proof  of  the  existence  of  a  cer- 
tain sign,  which  it  is  not  shown  the 
plaintiffs  evei*  knew  of  or  saw,  is 
insufficient  to  authorize  a  recov- 
ery by  said  parties  as  partners. 
Cassidy  v.  Hall,  97  N.  Y.  159. 

As  to  what  evidence  is  admis- 
sible to  rebut  the  presumption  of 
partnership  arising  from  the  use 
of  a  firm  name,  see  Nichols  v. 
White,  41  Hun  (N.  Y.),  152. 

It  seems  that,  where  the  exist- 


as  prepared  to  do  a  certain  line 
of  business,  is  admissible  in  evi- 
dence. Yerkes  v.  Rodrock,  15 
Weekly  Not.  Cas.  315. 

A  paragraph  in  a  newspaper, 
which  states  that  a  certain  person 
is  a  member  of  a  certain  partner- 
ship, but  does  not  purport  to  have 
been  inserted  by  the  partnership, 
is  not  admissible  to  charge  him  as 
such,  merely  on  proof  that  he  was 
a  subscriber  to  the  paper  at  that 
time,  and  never  requested  the  ed- 
itor to  deny  any  such  statement. 
Potter  v.  Greene,  9  Gray,  309. 

A.  and  B.  held  themselves  out 
as  partners  by  advertisements.  A. 
purchased  of  one,  who  supposed 
them  to  be  partners,  goods  within 
the  business  of  the  pretended  firm, 
though,  as  matter  of  fact,  A.  did 
not  intend  to  bind  B.  by  the  pur- 
chase. Held,  that  B.  was  liable, 
unless  the  vendor  knew  that  B. 
was  not  concerned  in  the  purchase. 
Booe  v.  Caldwell,  12  Ind.  12. 

To  prove  a  partnership,  parol 
evidence  of  the  contents  of  printed 
cards  cannot  be  given  unless  traced 
to  the  defendants.  Wilson  v.  Col- 
man,  1  Cranch,  C.  Ct.  408.  See, 
also,  Williar  v.  Irwin,  11  Biss.  57. 

When  in  an  action  on  a  note, 
signed  by  a  firm,  the  defense  is 
that  no  such  firm  existed,  the  fact 
that  printed  hand-bills,  with  the 
name  of  the  firm  signed  thereto, 
were  posted  at  various  places  in 
the  town  where  the  defendant  was 
residing,  and  that  one  of  them  was 


ence  of  a  partnership  is  in  issue,  a    posted  on  the  door  of  the  house 
public  advertisement  in  a  news-    where  he   boarded,  is    competent 
paper  in  the  name  of  the  firm,  hold-    evidence 
ing  themselves  out  to  the  public    jury     in 

197 


is 

to  be  submitted  to  the 
determining     the     fact 


>89 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK   I. 


Answers  in  chancery  containing  admissions,  (p) l 

Bills  to  customers2'] 

Circulars  I  containing  the  names  of  the  alleged  partners,  (c) 

Invoices 


whether  or  not  a  partnership  ex- 
isted. Tomlin  v.  Goldsmith,  40 
Ga.  221.  See,  also,  Barcroft  v. 
Haworth,  29  Iowa,  462. 

In  order  to  prove  the  existence 
of  a  partnership  it  is  competent  to 
show  how  the  supposed  firm  made 
out  their  accounts,  kept  their 
books,  and  even  marked  boxes  of 
merchandise;  but,  to  make  such 
proof  available,  it  must  be  shown 
that  the  party  against  whom  it  is 
offered  had  some  agency  in  these 
acts,  or  impliedly  or  expressly  sanc- 
tioned or  approved  them.  McNeill 
v.  Reynolds,  9  Ala.  313. 

In  assumpsit  against  A.,  B.,  and 
C,  as  partners  under  the  firm  of 
A.  &  Co.,  for  goods  sold,  the  ques- 
tion being  whether  B.  and  C.  were 
partners  of  A. ,  who  had  purchased 
the  goods,  and  B,  and  C.  appear- 
ing to  have  had  a  storehouse  in 
another  town,  held,  that  a  wit- 
ness might  be  asked  whether  he 
saw  boxes  of  goods  marked  A.  & 
Co.  at  the  storehouse  of  B.  and  C, 
the  evidence  having  a  connection, 
though  very  slight,  with  the  mat- 
ter in  controversy.  Chapman  v. 
Wilson,  1  Rob.  (Va.)  267. 

In  an  action  of  replevin  for 
goods  attached  under  an  execution 
against  A.,  the  defense  was  that 
the  goods  belonged  to  a  firm  con- 
sisting of  A.  and  the  plaintiff. 
Held,  that  evidence  that  the  ad- 
vertisement of  the  store  in  which 
the  goods  were  found,  the  receipts 
given  and  taken,  and  the  bills 
for  goods,  were   in   the   plaintiff's 


name  alone,  and  that  the  business 
was  conducted  in  his  name  and 
upon  his  credit,  was  sufficient  to 
entitle  him  to  recover,  if  there 
were  no  circumstances  impeaching 
or  rebutting  the  presumption  aris- 
ing from  these  facts.  Davis  v. 
White,  1  Houst.  228. 

(b)  Studdy  v.  Saunders,  2  D.  & 
Ry.  317;  Grants.  Jackson,  1  Peake, 
208. 

1  On  the  trial  of  an  action  brought 
against  several  as  partners,  only 
one  of  whom  has  been  served  with 
process,  on  the  question  who  con- 
stituted the  partnership,  the  record 
of  a  former  action  against  the  de- 
fendant served  with  process,  in 
which  he  pleaded  in  abatement 
the  non-joinder  of  the  present  de- 
fendants, is  competent  evidence. 
McClelland  v.  Lindsay,  1  Watts  & 
S.  300. 

2  See  McNeill  v.  Reynolds,  9  Ala. 
313 ;  Davis  v.  White,  supra,  note  (2). 

Where  a  person  has  tuffered  his 
name  to  be  held  out  to  the  world 
as  a  member  of  a  mercantile  firm, 
and  permitted  persons  to  deal  on 
the  credit  of  the  firm,  he  cannot 
object  to  the  admission  in  evidence, 
as  proof  of  the  partnership,  of 
books  kept  and  accounts  rendered 
in  the  name  of  the  firm.  Chidsey 
v.  Porter,  21  Pa.  St.  390. 

The  books  of  a  firm,  in  the  ab- 
sence of  other  evidence,  are  not  ad- 
missible to  prove  the  connection  of 
a  person  with  the  partnership. 
Bryce  v.  Joynt,  63  Cal.  375 ;  S.  C. 
49  Am.  Rep.   94;  Abbott  v.  Pear- 


(c)  Young  v.  Axtell,  2  H.  Blacks.  212 ;  Norton  v.  Seymour,  3  C.  B.  792. 

198 


CH.  IV.] 


EVIDENCE. 


*S9 


Bills  of  exchange. —  The  mode  in  which  these  have  been  drawn,  ac- 
cepted or  indorsed  has  frequently  been  relied  on  with  success,  (d) 1 

130    Mass.    191.      See,    also,     ments.  which  were  filled  up  by  him 


son, 

McNamara  f.  Draft,  40  la.  413. 

But  evidence  tending  to  show 
his  membership  having  first  been 
introduced,  and  it  appearing  that 
he  had  access  to  the  books  during 
a  considerable  period  covering  the 
dates  of  the  transactions  in  ques- 
tion, and  that  he  examined  them 
on  several  occasions,  as  well  as  bal- 
ance sheets  taken  therefrom,  the 
books  and  entries  in  them  are  com- 
petent evidence  of  his  member- 
ship.    Bryce  v.  Joynt,  supra. 

The  headings  in  a  measurer's  ab- 
stract book,  showing  that  the  de- 
fendant was  charged  for  the  work 
measured,  as  debtor  to  the  plaint- 
iff and  another,  are  inadmissible 
as  evidence  for  the  defendant  for 


to  the  plaintiff,  a  store-keeper,  for 
the  amount  due  laborers  of  B. ,  and 
the  laborers  received  goods  to  the 
amount  from  the  plaintiff.  There 
being  evidence  of  partnership  be- 
tween B.  and  M.,  such  assignments 
dated  afterwards  were  evidence  in 
a  suit  against  the  firm.  Thomas 
v.  Moore,  71  Pa.  St.  193. 

A  person  cannot  be  made  a  part- 
ner in  fact  or  appearance,  so  as  to 
bind  him,  unless  by  his  consent, 
admissions  or  acts.  The  declara- 
tions or  acts  of  others  can  have  no 
such  effect  unless  authorized  or 
ratified  by  him.  Bishop  v.  George- 
son,  60  111.  484. 

To  establish  the  fact  of  an  al- 
leged partnership,  the  manner  in 
the  purpose  of  proving  a  technical  which  the  books  of  a  third  person 
partnership   between  the  plaintiff    seeking  to  charge  one  as  a  partner 


and  such  other  party,  there  being 
no  offer  to  connect  them  with 
other  evidence  going  to  show  the 
existence,  at  any  time,  of  such 
partnership.  Green  v.  Caulk,  16 
Md.  556. 

(d)  Spencer  v.  Billing,  3  Camp. 
310;  Guidon  v.  Robson,  2  id.  302; 
Duncan  v.  Hill,  2  Brod.  &  Bing.  682 ; 
Gurney  v.  Evans,  3  H.  &  N.  122. 

1  Cook  v.  Frederick,  77  Ind.  406 ; 
Thomas  v.  Moore,  71  Pa.  St.  193. 

B.  sold  part  of  a  coal  lease  with 
the  personal  property  to  M.,  who 
constituted  O.  his  attorney ;  orders 
drawn  for  goods  by  B.  on  a  firm, 
''  B.  &  Co.,"  in  favor  of  the  plaint- 
iffs, accepted  by  O.,  and  goods  fur- 
nished accordingly,  were  evidence 
of  partnership  between  B.  and  M. 
Thomas  v.  Moore,  71  Pa.  St.  193. 

B.  when  alone  kept  blank  assign- 


were  kept  is  not  competent  evi- 
dence. McNamara  v.  Draft,  40 
Iowa,  413. 

In  an  action  against  several  per- 
sons, upon  an  account  arising  from 
stock  transactions  claimed  by 
plaintiff  to  have  been  joint  trans- 
actions on  the  part  of  defendants, 
but  claimed  by  one  of  the  defend- 
ants to  have  been  several,  held, 
that  evidence  that  said  defendant 
had  a  private  account  running  at 
the  same  time  was  competent  as  a 
circumstance  tending  to  show  that 
the  other  account  was  joint  and 
not  several.  Quincey  v.  White,  63 
N.  Y.  370. 

In  an  action  against  D.  and  M. , 
where  the  question  of  their  part- 
nership was  in  issue,  held,  that 
bills  of  goods  made  out  against  D. 
alone,  and  found  in  a  drawer  in 


199 


*90 


CONTRACTS    OF   PARTNERSHIP. 


[BOOK   I. 


Drafts  of  agreements  which  have  been  acted  upon,  (e) l 
Letters'*  and  memoranda,  showing  an  intention  to  give  a  person  a 
share  of  profits,  coupled  with  evidence  that  such  intention  was  acted 

on.  (0 
[*90]      *  Usual  evidence  of  partnership. —  Meetings.—  Attending  and 
taking  part  in  them ;  (g)  requiring  them  to  be  called.  (7i) 3 


the  room  where  the  business  was 
carried  on,  were  inadmissible  on 
behalf  of  M.  to  prove  that  no  co- 
partnership existed  between  them. 
McNamara  v.  Draft,  33  Iowa,  385. 
(e)  Worts  v.  Peru,  3  Bro.  P.  C. 
558. 

1  In  an  action  against  P.  and  B. 
as  partners,  evidence  was  intro- 
duced to  show  that  B.  signed  a 
contract  to  do  work  on  a  railroad 
in  the  name  of  P.  &  Company; 
that  a  bill  for  work  on  the  same 
road  was  signed  by  B.  in  the  same 
name;  that  several  receipts  were 
signed  by  B.  at  about  the  same 
period  in  the  same  name,  and 
others  by  P.  in  the  same  name; 
and  that  notes  signed  P.  &  Com- 
pany were  discounted  at  a  bank 
and  paid;  no  proof  being  ad- 
duced that  the  defendants  were 
not  at  one  time  partners  in  the 
business  of  railroad  contracting, 
the  evidence  was  held  sufficient  to 
establish  the  existence  of  a  part- 
nership for  that  purpose.  Holmes 
v.  Porter,  39  Me.  157. 

2  Upon  the  issue  of  the  existence 
of  a  partnership,  letters  written  by 
the  plaintiff  in  the  current  business 
of  the  parties,  after  consultation 
of  one  of  the  defendants,  are  ad- 
missible in  evidence.  McCall  v. 
Moschcowitz,  10  N.  Y.  Civ.  Proc. 
107. 

(/)  Heyhoe  v.  Burge,  9  C.  B. 
431 ;  Baxter  v.  West,  1  Dr.  &  Sni. 
173,  where  a  partnership  for  seven 
years  was  proved  by  an  unsigned 


memorandum  on  which  the  parties 
had  acted. 

(g)  Lake  v.  Argyll,  6  Q.  B.  477, 
and  Wood  v.  Argyll,  6  Man.  &  Gr. 
928 ;  noticed  ante,  p.  41.  See,  also, 
Peel  v.  Thomas,  15  C.  B.  714. 

(h)  Tredwen  v.  Bourne,  6  M.  & 
W.  461. 

3  On  the  issue  whether  A.  and  B. 
were  partners,  in  1875,  in  an  unin- 
corporated lumber  manufacturing 
company,  established  in  1865,  there 
was  evidence  that  the  articles  of 
association  of  the  company  re- 
quired the  election  of  a  president, 
clerk,  treasurer,  and  agent,  the 
two  latter  being  required  to  give 
bonds  to  the  president  for  the  faith- 
ful discharge  of  their  duties,  and 
to  render  accounts  semi-annually ; 
that  the  business  of  the  company 
was  required  to  be  and  was  con- 
ducted by  the  treasurer  and  agent, 
who  received  salaries  and  devoted 
their  entire  time  to  it ;  that  meet- 
ings of  the  members  were  to  be 
called  by  written  notice  from  the 
clerk;  that  meetings  of  the  com- 
pany were  regularly  called,  and 
the  records  of  the  same  kept  by  the 
clerk ;  that  any  member  could  sell 
his  interest  to  a  stranger,  such  sale 
carrying  with  it  the  right  to  mem- 
bership and  to  a  participation  in 
the  future  profits  of  the  business ; 
that  A.  was  regularly  admitted  a 
member;  that  the  treasurer,  who 
was  a  member  of  the  company, 
died  in  1868,  and  a  new  treasurer 
was  immediately  chosen;  that  at 


200 


CH.  IV.] 


EVIDENCE. 


•90 


Payment  of  money  into  court— When,  in  an  action  against  two  per- 
sons as  partners,  they  pay  money  into  court,  this  does  not  amount  to  an 
admission  of  the  partnership  alleged  to  exist  between  them ;  but  only 
of  a  joint  liability  to  the  extent  of  the  amount  paid  in.  (i) 

Recitals  in  agreements,  (k) 

Registers. —  These  do  not  affect  a  person  whose  name  is  in  them  unless 
he  can  be  proved  to  have  authorized  the  use  of  his  name ;  (l)  or  unless 
there  is  some  statute  applicable  to  the  case.  An  entry  in  custom-house 
books,  made  by  one  of  three  alleged  partners,  to  the  effect  that  he  and 
the  other  two  were  jointly  interested  in  certain  goods,  though  conclu- 
sive as  between  them  and  the  crown,  is  not  so  as  between  them  and 
other  persons,  (m) 

Release  executed  by  all  the  alleged  partners,  (w) 

Shares. — The  acceptance  of  shares  in  a  projected  company  is  by  no 
means  conclusive,  even  when  followed  by  the  payment  of  deposits,  (o) 1 


a  subsequent  meeting,  at  which  A. 
was  chosen  clerk,  it  was  voted  that 
the  treasurer  continue  the  business 
of  manufacturing  and  selling  lum- 
ber; that  A.  attended  all  subse- 
quent meetings,  and  recorded  other 
votes  to  hire  money  and  carry  on 
the  business,  and  to  empower  one 
of  the  members  to  close  up  the 
business  in  the  best  manner  for  all 
concerned;  that  B.,  soon  after  the 
death  of  the  treasurer,  purchased 
the  interest  of  an  original  member, 
agreeing  to  assume  all  his  liabili- 
ties; that  B.  was  subsequently 
present  at  a  meeting  of  the  com- 
pany, of  which  he  was  notified  by 
the  clerk,  at  which  it  was  voted  to 
raise  money  to  carry  on  the  busi- 
ness ;  that  B.  called  himself  a  sur- 
viving partner  of  the  deceased 
treasurer  in  an  answer  to  a  bill  in 
equity  brought  by  the  latter's  ad- 
ministrator against  the  other  mem- 
bers and  the  original  member 
whose  interest  he  bought ;  that  B. 
signed  a  note  with  the  other  mem- 
bers to  raise  money  for  the  busi- 
ness, and  also  signed  a  power  of 
attorney,  authorizing  the  agent  to 
sell  real  estate  for  the  benefit  of 


the  company ;  and  that  B.  said  he 
would  like  to  have  the  thing 
settled,  and  would  pay  his  pro- 
portion if  he  could  find  out  what 
it  was.  Held,  that  the  evidence 
would  warrant  a  finding  that  A. 
and  B.  were  partners  in  the  com- 
pany. Machinists'  Nat.  Bank  v. 
Dean,  124  Mass.  82. 

(i)  Charles  v.  Branker,  12  M.  & 
"W.  743. 

(fc)  Leiden  v.  Lawrence,  2  N.  R. 
283. 

(Q  Fox  v.  Clifton,  6  Bing.  776. 
As  to  joint-stock  companies,  see 
the  volume  on  that  subject. 

(in)  Ellis  v.  Watson,  2  Stark.  453. 

(n)  Gibbons  v.  Wilcox,  2  Stark. 
43. 

(o)  See  Vice  v.  Anson,  7  B.  &  C. 
409 ;  Bourne  V.  Freeth,  9  B.  &  C. 
632 ;  Fox  v.  Clifton,  6  Bing.  776 ; 
Pitchford  v.  Davis,  5  M.  &  W.  2. 
Compare  Lawler  v.  Kershaw,  Moo. 
&  M.  93. 

1  Subscribers  for  the  capital  stock 
of  an  unincorporated  joint-stock 
company,  on  proof  of  their  respect- 
ive payments,  without  objection, 
of  assessments  for  the  shares  set 
opposite  their  names,  and  without 


201 


*90 


CONTRA  JTS   OF    PARTNERSHIP. 


[BOOK    I. 


It  becomes  important,  however,  when  coupled  with  other  facts  showing 
an  interference  by  the  sharehplder  with  the  management  of  the  con- 
cern, ip) 

Verdict.— A  verdict  of  a  jury  finding  the  existence  of  a  partnership 
upon  the  trial  of  an  issue  directed  out  of  chancery  was  held  by  Lord 
Kenyon  conclusive  evidence  against  the  partners  in  a  subsequent  action 
brought  against  them  by  a  creditor,  (q) 1 


any  showing  by  whom  their  names 
were  subscribed,  are  liable  as  co- 
partners for  the  debts  of  the  con- 
cern. Tyrrell  v.  Washburn,  6  Allen, 
466;  Spear  v.  Crawford,  14  Wend. 
20 ;  Frost  v.  Walker,  60  Me.  468. 

To  prove  a  partnership,  subscrip- 
tion to  the  stock  of  a  company  in 
the  partnership  name  may  be 
given  in  evidence.  Allen  v.  Ros- 
tain,  11  Serg.  &  R.  362. 

(p)  Tredwen  v.  Bourne,  6  M.  &  W. 
461 ;  Peel  v.  Thomas,  15  C.  B.  714. 
See  the  next  chapter. 

(q)  Whately  v.  Menheim,  2  Esp. 
60S.  Qu.  if  this  can  be  supported? 
See  Coll.  Part.  532,  quoting  Mr. 
Starkie's  comments  on  the  case. 

i  Where  an  action  is  brought 
against  several  persons  as  partners, 
and  they  omit  to  make  any  defense, 
and  allow  judgment  to  be  taken 
against  them  by  default,  the  record 
of  such  judgment,  it  has  been  held, 
is  proper  evidence  of  the  existence 
of  the  partnership  in  another  ac- 
tion afterwards  brought  against  the 
same  persons  by  different  plaintiffs. 
Marks  v.  Sigler,  3  Ohio  St.  358; 
Cragin  V.  Carleton,  21  Me.  492; 
Fogg  v.  Greene,  16  Me.  282;  Ellis 
v.  Jameson,  17  Me.  235. 

But  when  the  action  is  not 
founded  on  an  instrument  of  writ- 
ing purported  to  be  signed  in  firm 
name,  execution  of  which  can  only 
be  denied  by  a  sworn  plea,  and 
the  general  issue  is  pleaded,  or 
other  general  plea  denying  their 


liability,  a  judgment  against  the 
defendants  is  not  admissible  evi- 
dence against  either  of  them,  in  a 
subsequent  action  by  a  third  per- 
son, as  an  admission  of  the  partner- 
ship. Central  R.  R.  etc.  Co.  v. 
Smith,  76  Ala.  572. 

See,  however,  Burgess  v.  Lane,  3 
Me.  165,  where  it  was  held  that  a 
verdict,  and  judgment  thereon,  are 
not  admissible  evidence  of  a  co- 
partnership, even  where  that  fact 
was  expressly  put  in  issue  by  the 
pleadings,  unless  the  action  in 
which  such  evidence  is  offered  is 
between  both  parties  to  the  former 
suit. 

In  an  action  against  parties  as 
partners,  the  record  of  a  foreclosure 
against  one  of  them  in  favor  of  the 
other  is  inadmissible  on  question 
of  partnership.  Cook  v.  Frederick, 
77  Ind.  406. 

In  an  action  by  an  attorney  for 
professional  services,  evidence  that 
the  defendants  were  described  in 
the  writ  in  the  former  suit  as  part- 
ners is  not  sufficient  to  charge 
them  jointly  in  the  present  case, 
without  proof  that  they  had  notice 
of  the  existence  of  the  former  suit 
during  its  pendency.  Prentiss  v. 
Kelley,  41  Me.  436. 

In  a  suit  against  a  firm  on  a 
promissory  note,  purporting  to  be 
signed  by  the  firm  name,  a  co- 
partner pleaded  that  he  was  not  a 
member  of  the  firm  at  the  time 
the  note  bore   date.      Held,  that 


202 


CH.  IV.]  EVIDENCE.  *90 

Use  of  property  by  several  jointly,  (r) 

Witness. —  A  witness  may  be  asked  not  only  who  compose  such  and 
such  a  firm,  but  also  whether  named  individuals  do  so.  (s)  To  prove  a 
partnership  between  A.  in  England,  and  B.  in  Spain,  it  has  been  held 
not  enough  to  show  that  A.  once  dwelt  in  a  town  in  Spain,  and  that  B. 
resides  there  and  carries  on  business  there  under  the  name  of  A.,  B. 
&  Co.,  and  that  there  is  no  one  there  of  the  name  of  A.  (i) 

evidence  of  suits  and  judgments,  369.     See  as  to  co-owners  who  are 

in  which  he  was  joined  as  a  part-  not  partners,  ante,  pp.  58  et  seq. 

ner,  by  and  against  the  copartner-  (s)  Acerro  v.  Petroni,    1    Stark, 

ship,  prior  to  the  date  of  the  note,  100. 

was  inadmissible  to  rebut  this  plea.  {t)  Burgue  v.  De  Tastet,  3  Stark. 

Collier  v.  Cross,  20  Ga.  1.  53. 
(r)  Weaver  v.  Prentice,   1  Esp. 

203 


[*9i]  ^CHAPTER  V. 

OF  ILLEGAL  PARTNERSHIPS. 

Illegal  partnerships. — In  order  that  a  partnership  may- 
result  from  a  contract  such  contract  must  not  be  illegal. 
This  gives  rise  to  two  questions  which  it  is  proposed  to  dis- 
cuss in  this  chapter,  viz.:  1.  What  partnerships  are  illegal; 
and  2.  What  are  the  consequences  of  their  being  so. 

Section  1. —  What  Partnekships  aee  Illegal. 

Illegality  never  presumed. —  Illegality  is  never  pre- 
sumed, but  must  always  be  proved  by  those  who  assert  its 
existence;  and  in  order  to  show  that  a  partnership  is  illegal 
it  is  necessary  to  establish  either  that  the  object  of  the 
partnership  is  one  the  attainment  of  which  is  contrary  to 
law,  or  that,  the  object  being  legal,  its  attainment  is  sought 
in  a  manner  which  the  law  forbids.  But  proof  that  a  firm 
has  been  guilty  of  an  illegal  act  is  not  sufficient  to  bring 
the  firm  within  the  class  of  illegal  partnerships;  for  if  this 
were  enough,  every  partnership  which  does  not  pay  its 
debts,  or  which  commits  any  tort,  or  is  guilty  of  culpable 
negligence,  would  be  illegal,  which  is  obviously  absurd,  (a) 
Neither  does  it  by  any  means  follow  that  because  one  or 
more  clauses  in  a  contract  of  partnership  are  illegal  the 

partnership  is  itself  illegal.  (J)1 
[*92]       "Grounds  of  illegality  —  Public  policy. —  1.  A 

partnership  may  be  illegal  upon  the  general  ground 

(a)  See  Armstrong  v.  Armstrong,  (6)  See  R.  v.  Stainer,  L.  R.  1  Cr. 
3  M.  &  K.  64  and  65;  Sharp  v.  Ca.  Res.  230;  General  Co.  of  Land 
Taylor,  2  Ph.  818;  Brett  v.  Beck-  Credit,  5  Ch.  863. 
with,  3  Jur.  N.  S.  31,  M.  R. ;  Long-  *See  Lane  v.  Thomas,  37  Tex. 
worth's  Ex.  Case,  1  De  G.  F.  &  J.  157;  Pfeifter  v.  Maltby,  38  id.  523. 
17.  See  the  judgment  of  Lord 
Campbell. 

204 


CH.  V 


SEC.  I.] 


ILLEGAL   PARTNERSHIPS. 


*92 


that  it  is  formed  for  a  purpose  forbidden  by  the  current 
notions  of  morality,  religion,  or  public  policy.1     A  partner- 


xSee  Bartle  v.  Coleman,  4  Pet. 
184. 

Partners  may  modify,  alter  or 
dissolve  the  copartnership  contract 
as  between  themselves,  either  in 
whole  or  in  part,  provided  they  do 
not  violate  any  principle  of  law  or 
public  policy.  Solomon  v.  Solo- 
mon, 2  Ga.  18. 

A  partnership  formed  for  legiti- 
mate purposes  will  not  be  held 
illegal  or  immoral  by  reason  of 
6harp  or  fraudulent  practices  em- 
ployed by  the  parties  in  prosecution 
of  such  business.  Shriver  v.  Mc- 
Cloud,  20  Neb.  474. 

One  partner  cannot,  through 
legal  process,  recover  from  another 
a  share  of  gains  made  by  violation 
of  law,  even  though  the  defendant 
was  the  more  immediate  partici- 
pant in  such  fraud.  Currans  v. 
Downs,  7  Mo.  App.  329;  S.  C.  3  id. 
468. 

Thus,  where  two  executors 
united  in  the  misuse  of  funds  in 
their  hands,  one  executor  was  de- 
nied an  account  and  a  decree  for 
proportionate  share  of  the  profits. 
Bowen  v.  Richardson,  133  Mass. 
293. 

A  contract  of  partnership  in  ef- 
fect that  —  the  parties  being  about 
to  bid  for  the  construction  of  a 
public  work  —  the  appellant  should 
withhold  a  lower  bid  than  that 
which  the  appellee  proposed  to 
make,  in  consideration  that  the 
appellant  should  be  taken  in  part- 
nership and  permitted  to  share  in 
the  profits  of  the  contract,  is 
against  public  policy  and  void,  and 
appellant  can  receive  no  aid  from 
the  court  in  forcing  a  division  of 


the  profits.  Hunter  v.  Pfeiffer,  6 
West.  R.  403.  See,  also,  Kelly  v. 
Devlin,  58  How.  Pr.  487 ;  S.  C.  47 
N.  Y.  Super.  Ct.  555. 

After  a  partnership,  confessedly 
against  public  policy,  has  been  car- 
ried out,  and  money  contributed 
by  one  of  the  parties  has  passed 
into  other  forms,  a  partner  in 
whose  hands  the  profits  are,  after 
the  results  of  the  partnership 
enterprise  are  completed,  cannot 
refuse  to  account  for  and  divide  on 
the  ground  of  the  illegal  character 
of  the  original  contract.  Pleuffer 
v.  Maltby,  54  Tex.  454;  S.  C.  38 
Am.  Rep.  631.  See,  also,  Attaway 
v.  National  Bank,  15  Mo.  App.  578. 

Where  partners  successfully  cor- 
nered the  wheat  market,  and  after 
the  close  of  the  deal  the  share  of 
one  was,  by  his  request,  invested 
in  another  enterprise  by  the  other, 
he  must  account  for  the  money, 
although  the  wheat  deal  was  il- 
legal under  the  Illinois  statute. 
Wells  v.  McGeoch,  35  N.  West. 
Rep.  (Wis.)  769. 

The  fact  that  plaintiffs  and  other 
buyers  of  farm  products  at  a  cer- 
tain village  were  combined  in  a 
secret  partnership  is  no»  ground 
for  the  recovery  of  damages  by  one 
who  has  sold  them  produce,  from 
time  to  time,  in  ignorance  of  the 
partnership,  where  it  appears  that 
there  was,  nevertheless,  a  healthy 
competition  in  the  trade  at  such 
village,  and  that  the  plaintiffs  in 
fact  paid  defendant  a  fair  market 
price  (measured  by  the  prices  in 
other  like  places)  for  his  products 
delivered  to  them.  Fairbanks  V. 
Newton,  50  Wis.  628. 


205 


*92  CONTRACTS    OF   PARTNERSHIP.  [l)OOK    I. 

ship,  for  example,  formed  for  the  purpose  of  deriving  profit 
from  the  sale  of  obscene  prints,  or  of  books  reviling  or 
ridiculing  the  established  religion,  or  for  the  procurement 
of  marriages,  or  of  public  offices  of  trust,  would  be  un- 
doubtedly illegal,  (c)  In  the  time  of  Charles  II.  it  seems 
to  have  been  held  that  a  contract  for  sharing  the  profits 
derived  from  the  public  exhibition  of  a  human  monster 
was  illegal;  (d)  but  the  writer  is  not  aware  of  any  modern 
case  to  the  same  effect,  and  the  decision  alluded  to  would 
not  probably  now  be  followed  upon  grounds  of  public 
policy. 

War. —  "Whilst  two  countries  are  at  war  it  is,  by  the  law 
of  each  country,  illegal  for  persons  resident  in  either  to 
have  dealings  with  persons  resident  in  the  other.  A  part- 
nership, therefore,  formed  between  persons  resident  in  this 
country  for  the  purpose  of  trading  with  an  enemy's  country 
is  illegal;  and  a  fortiori  is  such  a  partnership  illegal  if  one 
of  the  members  of  it  is  resident  in  that  country,  and  is 
therefore  an  alien  enemy,  (e) l     But  a  partnership  in  this 

Partners  in  a  lease  of  the  peni-  ton,  9  C.  B.  110;  and  as  to  associa- 

tentiary  can  make  no  contract  for  tious  for  promulgating  irreligious 

the  use  or  hire  of  the  negro  con-  opinions,   see    Pare    v.    Clegg,   29 

victs  except  in  the  employments  Beav.  589;  Thornton  v.   Howe,  8 

required  by  law.     Any  contract,  Jur.  N.  S.  663. 

express  or  implied,  for  any  other  (d)  See  Herring  v.  Walround,  2 

use  is  against  public  policy  and  Ch.  Ca.  110.     The  thing  exhibited 

cannot  be  enforced;  and  all  items  was  a  pair  of  female  children,  hav- 

for  such  services  in  the  liquidation  ing"two   heads,  four  arms,  four 

of  the  partnership  must  be  struck  legs,  and  but  one  belly,  where  their 

from    the    account    between    the  two  bodies  were  conjoined."' 

partners.     Pratt  v.  McHatton,  11  (e)  See  Evans  v.  Richardson,  3 

La.  Ann.  260.  Mer.  469. 

An  agreement  may,  as  to  the  1  Where  in  an  action  by  two  par- 
parties,  be  usurious,  and  yet  make  ties  against  the  defendant,  claim- 
them  liable  as  partners  to  third  ing  an  interest  in  the  profits  of  a 
persons.  Pierson  v.  Steinmyer,  4  contract  for  the  purchase  of  cotton 
Rich.  309.  upon  unprohibited  territory,  dur- 

(c)  See  the  title,  Illegal  Contracts,  ing  the  continuance  of  the  procla- 

in  Chitty's  and  Pollock's  treatises  mation  of  August    16,    1861,    one 

on  the  Law  of  Contracts ;  and  as  party  died  during  the  trial,  and  the 

to  the  sale  of  offices,  Sterry  v.  Clif-  suit  was  continued,  under  order  of 

206 


CII.  V,  SEC.  I.] 


ILLEGAL    PARTNERSHIPS. 


f92 


country  for  running  a  blockade  established  by  one  belliger- 
ent nation  in  the  ports  of  another  is  not  illegal;  for,  subject 
to  the  risk  of  capture,  a  neutral  may  lawfully  trade  with  a 
belligerent,  (f) 

Trading  under  an  assumed  name. —  In  this  country  a 
person  may  legally  carry  on  business  under  a  name  not  his 
own;1  and  when  a  firm  has  an  established  reputation,  and 


the  court,  by  the  other  party,  a 
loyal  citizen,  as  survivor,  held, 
that  the  rights  of  the  latter  were 
protected,  notwithstanding  the  in- 
validity of  the  contract  in  respect 
to  the  deceased  partner  on  account 
of  his  disloyalty,  and  that  he  could 
recover  his  share  of  the  profits. 
Leftwich  v.  Clinton,  4  Lans.  176. 
See  post . 

(/)  Ex  parte  Chavasse,  4  De  G. 
J.  &  Sm.  655 ;  The  Helen,  L.  R.  1 
Ad.  &  Ecc.  1. 

1  Ordinarily  a  firm  must  bind  it- 
self by  its  proper  firm  name,  but 
to  this  there  are  exceptions.  If  the 
firm  has  by  use  adopted  a  name 
somewhat  different  from  that  stip- 
ulated in  the  articles,  and  under 
that  name  borrows  money  for  the 
benefit  of  the  firm,  a  recovery  may 
be  had  against  the  firm  by  the 
name  under  which  it  executed  the 
security  sued  on.  Moffat  v.  McKis- 
sick,  8  Baxter  (Tenn.),  517. 

The  style  of  a  partnership  is 
wholly  conventional,  and  in  the 
absence  of  a  restrictive  statute  a 
firm  may  adopt  any  name  it  sees 
fit.  Where  a  note  is  made  payable 
to  order,  and  the  name  used  is  em- 
ployed as  the  style  or  designation 
of  an  actual  person,  firm  or  com- 
pany, the  payee  is  not  fictitious. 
Edgerton  v.  Preston,  15  Bradw.  23. 

The  provision  of  the  act  of  New 
York  of  1833,  in  reference  to  trans- 
acting   business    under    fictitious 


names,  which  prohibited  a  person 
from  transacting  business  under 
the  name  of  a  partner  not  inter- 
ested in  the  business,  and  which 
requires  that,  where  "&  Co."  is 
used,  it  shall  represent  an  actual 
person,  does  not  apply  to  or  include 
the  use  of  the  real  name  of  an  act- 
ual partner,  although  such  partner 
is  under  a  disability  at  the  time. 
Where,  therefore,  a  firm  is  com- 
posed of  a  husband  and  wife,  the 
latter  being  represented  by  the 
"&  Co."  in  the  firm  name,  in  the 
absence  of  intention  to  impose  upon 
the  public  by  obtaining  undue 
credit,  and  conceding  that  a  mar- 
ried woman  cannot  be  a  partner  of 
her  husband,  this  is  not  a  violation 
of  the  statute.  Zimmerman  v. 
Erhard,  83  N.  Y.  74;  S.  C.  58  How. 
11;  60  How.  Pr.  163;  38  Am.  Rep. 
396;  8  Daly,  311. 

The  intention  of  this  act  was  to 
pi-otect  a  person  giving  credit  on 
the  faith  of  the  fictitious  designa- 
tion, not  to  protect  those  obtaining 
credit  from  such  firm.  To  consti- 
tute a  violation  of  the  act  such 
designation  must  be  used  in  the 
transaction  of  some  business,  and 
although  the  firm  may  be  doing 
business,  generally,  in  violation  of 
the  statute,  a  violation  thereof  may 
not  be  predicated  of  any  transac- 
tion in  which  the  false  designation 
was  not  used.  Where,  therefore, 
in  a  bond  given  to  a  firm  which 


207 


*92 


CONTRACTS   OF   PAKTNEKSUIP. 


[BOOK    I. 


one  of  its  members  dies,  it  is  not  deemed  wrong  for  the 
survivors  to  continue  the  business  under  the  old  name,  al- 

used  the  "&   Co.,"  although  the    rented  a  vacant  portion  of  their 

building,  the  fact  that  one  of  the 
partners  whose  name  appeared  in 
the  firm  name  was  dead  at  the  time 
of  such  lease  does  not  bring  the 
case  within  the  meaning  of  the 
New  York  statute  prohibiting  any- 
one from  transacting  business  in 
the  name  of  a  partner  not  inter- 
ested in  the  firm,  leasing  of  a  part 
of  their  premises  not  being  an  or- 
dinary incident  of  their  business, 
but  done  because  it  happened  to  be 
vacant.  Sparrow  v.  Kohn,  109  Pa. 
St.  359. 

A  note  made  in  a  transaction 
isolated  and  separate  from  the  gen- 
eral business  carried  on  under  a 
name,  the  use  of  which  is  prohib- 
ited by  statute,  does  not  fall  within 
the  purview  of  the  act.  Pollard  v. 
Brady,  48  N.  Y.  Super.  Ct.  4T6. 

Where  the  articles  between 
plaintiff  and  defendant  provided 
that  the  former  should  be  a  secret 
partner,  and  should  employ  one 
Keefe  "  as  his  agent  to  act  for 
him  "  in  all  matters  pertaining  to 
the  partnership,  and  that  the  firm 
name  should  be  Hardy  &  Keefe, 
and  business  is  carried  on  under  this 
agreement  until  the  expiration  of 
the  term  affixed,  when  Hardy  as- 
sumed to  be  the  sole  owner  of  the 
assets,  and  excluded  the  plaintiff 
from  the  business  and  denied  that 
he  had  any  interest  therein,  held, 
in  an  action  for  an  account,  that 
the  agreement  was  not  void  as 
being  in  violation  of  the  statute 
of  1883.  Ryan  v.  Hardy,  26  Hun 
(N.  Y.),  176. 

Where  one  purchases  from  the 
assignee  of  a  firm  the  trade-mark, 


same  represented  no  actual  part- 
ner, to  secure  a  credit  given  by  the 
firm,  names  of  the  actual  partners 
were  stated ;  also,  that  they  alone 
constituted  the  firm,  and  this  was 
known  to  all  the  obligors. — held, 
that  the  case  was  not  within  the 
intent  of  the  statute,  and  that  the 
use  of  the  fictitious  designation 
was  not  a  defense  to  an  action  upon 
the  bond.  Gay  v.  Seibold,  97 
N.  Y.  472 ;  S.  C.  49  Am.  Rep.  533. 

Continuing  the  name  of  a  de- 
ceased partner  in  the  firm  name  is 
a  violation  of  the  statute  providing 
that  no  person  shall  transact  busi- 
ness in  the  name  of  a  partner  not 
interested  in  his  firm ;  and  the  firm 
cannot  recover  for  goods  sold,  al- 
though the  use  of  such  name  was 
without  a  wrongful  intent,  the  ex- 
ecutors having  carried  on  the  busi- 
ness in  conjunction  with  the 
surviving  partners  in  obedience  to 
the  requirements  of  the  will.  Lane 
v.  Arnold,  13  Abb.  N.  C.  73;  re- 
versing S.  C.  63  How.  Pr.  40. 
See,  also.  Arnstaedt  v.  Blumenfeld, 
13  Daly,  354. 

The  New  York  statute  of  1833 
forbidding,  under  a  penalty,  the 
transaction  of  business  in  the  name 
of  a  partner  not  interested  in  the 
firm,  being  highly  penal  in  its 
character,  is  to  be  strictly  con- 
strued and  not  extended  beyond  its 
plain  and  obvious  meaning  so  as  to 
include  a  transaction  which  is  not 
an  ordinary  incident  of  the  busi- 
ness in  which  the  firm  is  engaged. 
Sparrow  v.  Kohn,  109  Pa.   St.  359. 

Where  a  Philadelphia  firm,  hav- 
ing a  branch  house  in  New  York, 


208 


CH.  V,  SEC.  I.] 


ILLEGAL   PARTNERSHIPS. 


*92 


though,  perhaps,  the  reputation  of  the  firm  may  have  been 
due  mainly,  if  not  entirely,  to  the  ability  and  integrity 


good-will,  etc.,  of  the  business, 
such  purchase  does  not,  in  view  of 
the  statute  against  doing  business 
in  fictitious  names,  confer  on  the 
purchaser  the  right  to  do  business 
under  the  name  of  the  former  firm, 
but  only  as  the  successor  of  that 
firm.  Hegeman  v.  Hegeman,  8 
Daly,  1. 

Where,  upon  the  dissolution  of  a 
firm,  the  defendant  bought  the 
plaintiff's  interest  in  the  firm  prop- 
erty, and  became  the  assignee  of 
the  unexpired  term  of  the  lease  of 
the  rooms  occupied  by  the  firm,  in 
which  he  continued  the  business, 
using  signs  bearing  his  name,  fol- 
lowed by  the  words  "Successor  to 
Morgan  &  Schuyler,"  the  former 
firm  name,  and  there  was  nothing 
in  the  agreement  of  dissolution 
prohibiting  the  plaintiff  from  en- 
gaging in  business,  and  it  was 
understood  that  he  was  to  open 
an  office  for  that  purpose  in  an- 
other part  of  the  city,  which  he 
did,  lield,  in  an  action  to  restrain 
defendant  from  using  plaintiff's 
name,  that  the  defendant  did  not 
acquire  by  agreement  of  dissolu- 
tion any  good-will  in  the  business, 
except  such  as  was  incident  to  his 
sole  ownership  of  the  partnership 
property  and  his  exclusive  right  to 
occupy  the  rooms  of  the  late  firm. 
That  he  was  not  authorized  to  use 
the  firm  name,  nor  to  declare  him- 
self successor  to  the  late  firm.  It 
seems,  however,  that  the  defend- 
ant would  have  the  right  to  de- 
scribe his  rooms  as  those  formerly 
occupied  by  Morgan  &  Schuyler, 
and  himself  as  formerly  or  late  of 
that    firm.     Morgan  v.   Schuyler, 


79  N.  Y.  490;  S.  C.  34  Am.  Rep. 
543. 

The  provisions  of  this  statute  do 
not  apply  to  a  contract  made  in  an- 
other state.  Stoddart  v.  Key,  63 
How.  Pr.  137. 

Neither  do  they  apply  to  com- 
mercial copartnerships  located  and 
doing  business  in  foreign  countries, 
which  are  permitted  to  use  their 
st37les  or  firms  of  their  houses  in 
this  state.  Ross  v.  Wigg,  34  Hun 
(N.  Y.),  192. 

Under  the  statute  it  is  not  enough 
that  the  partnership  had  business 
relations  with  foreign  countries,  or 
had  for  the  period  of  five  years  or 
upwards  carried  on  business  in  this 
state  under  the  name  which  is  con- 
tinued ;  but  the  requirement  of  the 
statute  in  respect  to  filing  and 
publishing  certificate,  etc.,  must 
also  be  complied  with.  Lunt  v. 
Lunt,  8  Abb.  N.  C.  76. 

The  use  of  such  names  as  the 
"  Alderney  Manufg.  Co."  or  "  Eu- 
reka Mfg.  Co."  is  not  prohibited 
by  the  statute.  Lauferty  v. 
Wheeler,  11  Daly,  194;  Gay  v.  See- 
bold,  97  N.  Y.  472. 

The  use  of  a  fictitious  name  will 
not  work  a  forfeiture  in  any  case. 
Wood  v.  Erie  R.  R.  Co.  72  N.  Y. 
196.  See,  also,  generally,  Pollard 
v.  Brady,  48  N.  Y.  Super.  Ct.  476 ; 
Thompson  v.  Gray,  11  Daly,  183; 
Sparrow"  v.  Kohn,  109  Pa.  St.  359. 

A  similar  statute  exists  in  Loui- 
siana. See  sees.  2668  and  2669,  Rev. 
Code  La. ;  Kent  v.  Mojonier,  36  La. 
Ann.  259. 

In  Massachusetts  the  use  of  the 
name  of  a  retired  partner  or  of  the 
representatives  of  a  deceased  part- 


VOL.  1  —  14 


209 


*93 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


[*93]  of  *tbe  deceased  partner.     The  legal  view  of  such 
conduct  is  in  accordance  with  established  usage,  and 


ner  without  their  written  consent 
is  prohibited.  See,  generally, 
Morse  v.  Hall,  109  Mass.  409; 
Rogers  v.  Taintor,  97  id.  291; 
Sohrer  v.  Johnson,  111  id.  238. 

Upon  the  retirement  of  a  partner 
whose  name  formed  a  part  of  the 
firm  name,  he  consented  that  the 
remaining  partners  might  use 
the  same  name  "  under  which  to 
trade  in  the  future."  Held,  that  this 
did  not  amount  to  a  consent,  within 
section  6,  Public  Statutes,  chapter 
76,  that  a  person  who  afterwards 
became  a  member  of  the  firm  might 
use  the  same  name  on  his  becom- 
ing the  sole  member.  See,  gen- 
erally, as  to  what  amounts  to  a 
consent  under  said  statute,  Lodge 
v.  Wild,  139  Mass.  499. 

A  record  in  some  public  office  of 
the  names  of  the  partners  is  re- 
quired by  statute  in  some  states  as 
a  condition  precedent  to  the  main- 
taining of  any  action  by  the  firm, 
or  preventing  the  effects  of  non- 
joinder where  the  firm  is  sued. 
See,  generally,  as  to  the  effect  of 
these  statutes,  Sweeney  v.  Stan- 
ford, 67  Cal.  635 ;  Cheney  v.  New- 
berry, id.  126;  Byers  v.  Bourret, 
64  id.  73;  McCord  v.  Scale,  56  id. 
262 ;  Ralph  v.  Lockwood,  61  id.  155 ; 
Fabian  v.  Callahan,  56  id.  159; 
Tucker  v.  Adams,  63  N.  H.  361; 
S.  C.  1  New  Eng.  Rep.  241 ;  Pinker- 
ton  v.  Ross,  33  U.  C.  Q.  B.  508. 

The  certificate  required  by  the 
Civil  Code  of  California,  section 
2466,  as  to  doing  business  under  a 
fictitious  name,  may  be  executed 
by  a  person  acting  under  proper 
power  of  attorney,  although  such 
power  of  attorney   was  executed 


prior  to  the  enactment  of  said  stat- 
ute. Goldtree  v.  Swinford,  16  Pac. 
Rep.  (Cal.)  493. 

Provisions  of  General  Laws, 
chapter  117,  sections  1  and  2,  re- 
quiring every  firm  to  file  with  the 
town  clerk  a  certificate  of  their 
names  and  residences,  do  not  affect 
a  suit  against  a  partner  upon  a 
cause  of  action  not  arising  out  of 
the  affairs  of  his  firm.  Tucker  t\. 
Adams,  63  N.  H.  361;  S.  C.  1  N. 
Eng.  241. 

The  sections  of  the  Civil  Code 
prohibiting  persons  doing  business 
as  partners  from  maintaining  any 
action  upon  or  on  account  of  con- 
tracts or  transactions  in  their  part- 
nership name  until  they  have  filed 
and  published  a  certificate  showing 
the  names  and  residences  of  all  the 
partners  do  not  preclude  the  as- 
signee of  such  partners  from  main- 
taining an  action  thereon.  Wing 
Ho  v.  Baldwin,  70  Cal.  194. 

By  the  California  statute  every 
partnership,  except  commercial 
and  banking  partnerships  estab- 
lished and  transacting  business  in 
a  place  without  the  United  States, 
transacting  business  in  the  state 
under  a  fictitious  name  or  a  desig- 
nation not  showing  the  names  of 
the  partners,  is  required  to  file 
with  the  clerk  of  the  county  in 
which  its  principal  place  of  busi- 
ness is  situated  a  certificate  stating 
the  names  in  full  of  all  the  part- 
ners and  their  places  of  residence, 
and  publish  the  same,  etc.  As  to 
the  necessary  allegations  in  the 
pleadings  in  a  suit  by  such  part- 
nerships, see  Sweeney  v.  Stanford, 
67  Cal.  635. 


210 


CH.  V,  SEC.  I.] 


ILLEGAL    PARTNERSHIPS. 


*93 


it  has  been  accordingly  held  not  to  be  illegal  for  surviving 
partners  to  continue  to  carry  on  business  under  the  old 
name,  (g) 

Speaking  generally,  and  excluding  cases  especially  pro- 
vided for  by  statute,  (h)  a  partnership  is  not  illegal  simply 
because  it  carries  on  business  under  a  name  which  does  not 
disclose  its  members,  e.  g.,  under  such  a  name  as  "  The  City 
Investment  and  Advance  Company."  (i)  It  is  indeed  said 
that  it  is  illegal  at  common  law  for  persons  not  incorporated 
to  assume  to  act  as  if  they  were,  and  that  to  trade  under 
such  a  name  as  the  above  is  assuming  to  act  as  a  corpora- 
tion ;  but  even  if  assuming  to  act  as  a  corporation  is  an 
offense  at  common  law,  which   is  very  doubtful,  (k)  the 


Section  2468  of  the  code,  requir- 
ing partners  doing  business  under 
a  fictitious  name  to  file  and  publish 
a  certificate  of  copartnership  before 
they  can  maintain  an  action  on 
the  partnership  demands,  does  not 
prevent  an  assignment  by  them  of 
a  valid  partnership  claim,  although 
they  have  not  filed  or  published 
the  required  certificate.  Cheney 
v.  Newberry,  67  Cal.  126. 

The  name  on  a  business  sign  on 
the  front  of  a  house  in  which  a 
mercantile  business  is  conducted 
does  not  per  se  fix  conclusively  the 
ownership  of  the  goods  in  him 
whose  name  appears  on  the  sign, 
to  make  them  liable  for  his  debts 
under  section  1300,  code  of  1880. 
Wolf  v.  Kahn,  62  Miss.  814. 

The  effect  of  section  1300,  code  of 
Mississippi  of  1880,  is  to  make  all 
the  property  used  or  acquired  in 
the  business  transacted  by  one  as 
a  trader  or  otherwise,  with  the 
addition  of  the  words  "agent," 
"factor,"  or  "and  company,"  the 
property  of  him  who  transacts 
such  business,  and  liable  for  his 
debts,  without  regard  to  the  sign 


under  which  the  business  is  con- 
ducted, unless  by  a  proper  sign,  in 
letters  easy  to  be  read,  etc.,  the 
name  of  the  owner  or  partner  in 
the  business  is  disclosed.  Loab  v. 
Morton,  63  Miss.  280. 

Under  said  section  1300,  property 
used  in  a  bar  and  billiard-room 
conducted  under  the  sign  only  of 
"Empire  Saloon"  is  liable  to  exe- 
cution on  a  judgment  against  em- 
ployee for  part  of  the  profits,  who 
conducts  the  business  under  a 
written  contract  with  the  owner 
that  it  should  be  carried  on  under 
the  name  of  employee  "&  Co.,"  in 
which  name  the  city  license  is  ob- 
tained. Quinn  v.  Myles,  59  Miss.  375. 

(g)  See  Buun  v.  Guy,  4  East,  190; 
Aubin  v.  Holt,  2  K.  &  J.  66;  Lewis 
v.  Langdon,  7  Sim.  421;  and  com- 
pare Thornbury  v.  Bevill,  1  Y.  & 
C.  C.  554. 

(7i)  See,  as  to  pawnbrokers,  infra. 

(i)  See  Maughan  v.  Sharpe,  17 
C.  B.  N.  S.  443 ;  Garrard  v.  Hardey, 
5  Man.  &  Gr.  471 ;  Ex  parte  Grise- 
wood,  4  De  G.  &  J.  544. 

(k)  See  6  Man.  &  Gr.  107,  and  the. 
volume  on  companies. 


211 


*91 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


offense  is  not  committed  by  trading  under  a  name  which  is 
by  usage  as  applicable  to  an  unincorporated  as  to  an  incor- 
porated body.  (I) 

Profits  of  crime.— 2.  A  partnership  is  illegal  if  formed 
for  the  purpose  of  deriving  profit  from  a  criminal  offense, 
e.  g.,  from  smuggling,  robbery,  theft,  etc.  (m)  A  curious 
instance  of  a  partnership  between  two  highwaymen  is  said 
to  have  come  before  the  courts  in  the  last  century,  and  to 
have  been  referred  to  by  Lord  Kenyon.  As  the  case  is  not 
to  be  found  in  the  reports,  an  abridged  note  of  it  is 
[*94]  given  below;  (ra)  but  there  *is  some  doubt  whether  it 


(Z)  See  the  cases  in  the  last  note 
but  one.  An  unincorporated  society 
was  held  to  have  no  right  to  be 
provisionally  registered  under  7  and 
8  Victoria,  chapter  110,  under  a 
name  which  necessarily  denoted  a 
corporation,  e.  g.,  the  Sea,  Fire, 
etc.,  Insurance  Corporation.  R.  v. 
Whitmarsh,  14  Q.  B.  803. 

(m)  See  Biggs  v.  Lawrence,  3  T. 
R.  454 ;  and  Stewart  v.  Gibson,  7 
CI.  &  Fin.  707,  as  to  smuggling. 
The  last  case  is  instructive  on  ac- 
count of  the  care  taken  to  conceal 
the  true  nature  of  the  illegal  trans- 
actions. 

{n)  Everet  v.  Williams  (2  Pothier 
on  Obligations,  by  Evans,  p.  3,  note 
citing  Europ.  Mag.  1787,  vol.  2, 
p.  360)  is  said  to  have  been  a  suit 
instituted  by  one  highwayman 
against  another  for  an  account  of 
their  plunder.  The  bill  stated  that 
the  plaintiff  was  skilled  in  dealing 
in  several  commodities,  such  as 
plate,  rings,  watches,  etc. ;  that  the 
defendant  applied  to  him  to  become 
a  partner ;  that  they  entered  into 
partnership,  and  it  was  agreed  that 
they  should  equally  provide  all 
sorts  of  necessaries,  such  as  horses, 
saddles,  bridles,  and  equally  bear 


all  expenses  on  the  roads  and  at 
inns,    taverns,  alehouses,  markets 
and  fairs ;  that  the  plaintiff  and  the 
defendant  proceeded  jointly  in  the 
said  business  with  good  success  on 
Hounslow  Heath,  where  they  dealt 
with  a  gentleman  for  a  gold  watch ; 
and  afterwards  the  defendant  told 
the  plaintiff  that  Finchley,  in  the 
county  of  Middlesex,  was  a  good 
and  convenient  place  to  deal  in, 
and   that  commodities  were  very 
plenty  at  Finchley,  and  it  would  be 
almost  all  clear  gain  to  them ;  that 
they  went  accordingly,  and  dealt 
with  several  gentlemen  for  divers 
watches,  rings,  swords,  canes,  hats, 
cloaks,  horses,  bridles,  saddles,  and 
other  things ;  that  about  a  month 
afterwards  the  defendant  informed 
the  plaintiff  that  there  was  a  gen- 
tleman at  Blackheath,  who  had  a 
good  horse,  saddle,  bridle,  watch, 
sword,  cane,  and  other  things  to 
dispose  of  which  he  believed  might 
be  had  for  little  or  no  money ;  that 
they  accordingly   went    and   met 
with  the  said  gentleman,  and  after 
some  small  discourse  they  dealt  for 
the  said  horse,  etc. ;  that  the  plaint- 
iff and   the    defendant  continued 
their  joint  dealings  together  until 
212 


CH.  V,  SEC.  I.] 


ILLEGAL    PARTNERSHIPS. 


*94 


actually  occurred.     Real  or  fictitious,  it  is  a  good  illustra- 
tion of  an  illegal  partnership  of  the  class  in  question,  (o) 

Partnerships  illegal  by  special  statutes.—  3.  A  partner- 
ship is  also  illegal  if  formed  for  a  purpose  forbidden  by  stat- 
ute, although  independently  of  the  statute  there  would  be 
no  illegality.1  At  one  time  a  distinction  was  taken  between 
mala  prohibita  and  mala  in  se;  but  this  distinction  has  very 
properly  long  ceased  to  be  recognized  as  of  any  value  for 
legal  purposes.  A\That  judicial  tribunals  have  to  regard  is 
the  law  they  are  called  on  to  administer;  and  what  is  for- 


Michaelinas,  and  dealt  together  at 
several  places,  viz.,  at  Bagshot, 
Salisbury,  Hampstead,  and  else- 
where to  the  amount  of  2.000Z.  and 
upwards.  The  rest  of  the  bill  was 
in  the  ordinary  form  for  a  partner- 
ship account.  The  bill  is  said  to 
have  been  dismissed  with  costs  to 
be  paid  by  the  counsel  who  signed 
it;  and  the  solicitors  for  the  plaint- 
iff were  attached  and  fined  50?. 
apiece.  The  plaintiff  and  the  de- 
fendant were,  it  is  said,  both 
hanged,  and  one  of  the  solicitors  for 
the  plaintiff  was  afterwards  trans- 
ported.   See  20  Eq.  230,  note. 

(o)  The  case  was  referred  to  by 
Jessel,  M.  R.,  in  11  Ch.  D.  195. 

1  Where  the  city  ordinance  pro- 
vided that  every  proposal  for  work 
for  the  city  should  contain  the 
names  of  all  persons  who  are  inter- 
ested, and  prohibited  any  secret 
agreement  or  understanding  that 
any  one  not  named  should  become 
interested  in  any  contract,  held, 
Xhi.t  a  secret  partnership  made  by 
two  persons,  that  they  were  to  be 
equally  interested  in  the  contract 
for  work  obtained  by  one  of  the 
two  partners,  was  illegal,  being 
against  public  policy  and  contrary 


to  positive  law.     Kelly  v.  Devlin, 
58  How.  Pr.  487. 

Where,  with  the  consent  of  both 
partners,  one  of  whom  was  town- 
ship treasurer,  the  public  funds 
were  deposited  to  the  firm's  credit 
with  their  own  funds  and  checked 
out  indiscriminately,  held,  that, 
as  the  two  partners  were  particeps 
criminis  in  this  transaction,  the 
law  would  aid  neither  of  them  as 
against  the  other;  and  upon  a  dis- 
solution of  the  firm,  one  partner 
having  paid  the  liability  of  the  firm 
to  the  township  partly  out  of  firm 
assets  and  partly  out  of  his  own 
means,  leaving  a  large  balance  in 
his  favor,  the  assets  being  insuffi- 
cient for  that  purpose,  held,  that 
the  illegal  transaction  being  con- 
summated he  had  no  right  to  a  con- 
tribution from  his  copartner  for  the 
money  so  advanced.  And  that,  on 
the  other  hand,  his  copartner  hav- 
ing parted  with  all  his  interest  in 
the  partnership  by  the  contract  of 
dissolution,  reserving  only  a  right 
to  one-half  the  surplus,  was  not  en- 
titled to  an  account  which  rejected 
such  payments  made  by  his  co- 
partner. Davis  v.  Gelhaus,  44  O. 
St.  69. 
213 


*95  CONTRACTS    OF   PARTNERSHIP.  [BOOK   I. 

bidden  by  that  law  is  illegal,  whether  it  is  also  forbidden 
by  the  laws  of  morality  and  religion  or  not.  (p) 

Observations  on  such  acts. —  Whether  a  partnership  is 
illegal  by  virtue  of  any  particular  statute  obviously  depends 
upon  the  construction  of  the  statute  in  question.  With  ref- 
erence, however,  to  those  statutes  which  prohibit  un- 
[*95]  qualified  persons  from  carrying  on  certain  trades  *or 
businesses,  it  may  be  observed  that  such  statutes  are 
not  infringed  by  an  unqualified  person  who  does  nothing 
more  than  share  the  profits  arising  from  those  trades  or 
businesses,  if  they  are  in  fact  carried  on  by  persons  who  are 
duly  qualified.  The  unqualified  person  is  not  within  the 
mischief  of  the  statutes  in  question,  and  the  partnership  of 
which  he  is  a  member  is  not  therefore  illegal,  (q) 

Prohibitory  and  penal  acts. —  Again,  although  a  statute 
may  in  terms  apparently  prohibit  an  act  or  omission,  and 
affix  a  penalty  in  case  of  disobedience,  it  does  not  neces- 
sarily follow  that  all  transactions  to  which  the  penalty  at- 
taches are  illegal.  They  are  so  if  the  statute  is  really 
prohibitory ;  (r)  but  they  are  not  so  if  the  true  construction 
of  the  statute  is  that  the  penalty  is,  as  it  were,  the  price  of  a 
license  for  doing  what  the  statute  apparently  forbids,  (s) 
Therefore,  it  was  held  in  Brown  v.  Duncan,  (t)  that  a  firm 
of  distillers  was  not  illegal,  although  one  of  the  firm  carried 
on  business  as  a  retail  dealer  in  spirits  within  two  miles  of 
the  distillery  (contrary  to  4  Geo.  4,  ch.  94,  §§  132, 133),  and 
was  not  registered  as  one  of  the  firm  in  the  excise  books 
(as  required  by  6  Geo.  4,  ch.  81,  §  7).     It  may,  however,  be 

(p)  See  Aubert  v.  Maze,  2  Bos.  &  Crowland  Gas  &  Coke  Co.  10  Ex. 

P.  371.  293. 

(q)  See  Raynard  v.  Chase,  1  Burr.  (s)  Smith  v.  Mawhood,  14  M.  & 
2,  and  infra  under  the  heads  of  W.  452 ;  Swan  v.  The  Bank  of  Scot- 
Medical  Practitioners,  Solicitors.  land,  2  Mon.  &  Ayr.  661 ;  Johnson 

(r)  Mellissr.  Shirley  Local  Board,  v.  Hudson,  11  East,  180. 

16  Q.    B.    D.   446 ;   Cope  v.    Row-  (t)  10  B.  &  C.  93.     And  see  Smith 

lands,  2  M.  &  W.  149 ;  Bartlett  v.  v.  Mawhood,  14  M.  &  W.  452. 
Vinor,  Carth.   252;  Taylor  v.  The 

214 


<3H.  V,  SEC.  I.]  ILLEGAL   PARTNERSHIPS.  *96 

doubted  whether  the   statutes  in  question  were  properly 
■construed  by  the  court,  (u) 

The  most  important  instances  of  partnerships  rendered 
illegal  by  statute  are  as  follows :  (a?) 

Attorneys  and  solicitors.1  —  See  infra,  Solicitors. 

Bankers.—  By  7  and  8  Victoria,  chapter  32,  section  21,  (y) 
all  bankers  are  required  on  the  1st  day  of  January,  in  every 
year,  to  make  a  return  to  the  stamp  office  of  their  names, 
residences  and  occupations,  or,  in  the  case  of  a  company  or 
partnership,  of  the  name,  residence  and  occupation 
of  every  member  of  the  *company  or  partnership,  and  [*96] 
in  default  a  penalty  of  501.  is  inflicted.  Upon  this  act 
a  question  might  arise  as  to  the  legality  of  a  banking  part- 
nership, or  company,  composed  in  part  of  members  whose 
names  are  not  returned. 

By  two  statutes,  which  have  since  been  considerably 
modified,  it  was  made  unlawful  for  banking  firms  of  more 
than  six  members  to  issue  in  London,  or  within  sixty-five 
miles  thereof,  notes  payable  on  demand  or  within  six 
months  after  date,  (z) 

(u)  See  Pawnbrokers,  infra.  and  parts  of  sections  9  and  23  are 

(x)  For  a  list  of  trades,  etc.,  regu-  repealed  by  37  and   38  Victoria, 

lated  by  statute,   see  Pollock   on  chapter  96. 

Contracts,  ed.  4,  App.  F.  note.  (z)  39  and  40  Geo.  3,  ch.  28,  §  15; 
1  There  is  nothing  in  the  nature  7  Geo.  4,  ch.  46.  See  further,  as  to 
or  essence  of  a  partnership  which  the  issue  of  notes,  9  Geo.  4,  ch.  23 ; 
requires  that  it  should  be  confined  3  and  4  Win.  4,  ch.  83,  and  ch.  98; 
to  ordinary  trade  and  commerce  or  7  and  8  Vict.  ch.  32;  A.-G.  v.  Birk- 
to  dealings  in  personal  property,  beck,  12  Q.  B.  D.  605;  Broughton 
It  may  exist  between  attorneys,  v.  Manchester  &  Salford  Water- 
conveyancers,  mechanics,  owners  works  Co.  3  B.  &  A.  1 ;  Bank  of 
of  a  line  of  stage-coaches,  artisans,  England  v.  Anderson,  3  Bing.  N.  C. 
or  farmers,  as  well  as  between  589 ;  Bank  of  England  v.  Booth,  2 
merchants  and  bankers,  and  it  may  Keen,  466.  And  on  appeal,  Booth 
exist  between  dealers  and  specu-  v.  Bank  of  England,  6  Bing.  N.  C. 
lators  in  real  estate,  without  be-  415,  and  7  CI.  &  Fin.  509.  The 
coming  void  by  operation  of  the  joint  effect  of  the  above  enactments 
statute  of  frauds.  Chester  v.  Dick-  seems  to  be  that:  (1)  The  Bank 
•erson,  45  How.  Pr.  325;  54  N.  Y.  1.  of  England  can  issue,  in  London, 
(y)  Sections  8  and  29  of  this  act  or  within  three  miles  of  it,  notes 

215 


*97  CONTRACTS    OF   PARTNERSHIP.  [BOOK    I. 

Upon  these  statutes  it  was  held  that  a  banking  company 
of  more  than  six  persons  associated  for  the  purpose  of  issu- 
ing notes  payable  on  demand,  or  within  six  months  after 
date,  was  not  illegal  unless  it  was  proved  that  the  company 
issued  such  notes  within  sixty-five  miles  of  London,  {a)  Upon 
a  similar  statute  relating  to  Ireland,  (b)  it  was  held  that  in 
order  to  establish  the  illegality  of  a  banking  company  upon 
the  ground  that  its  houses  of  business  had  been,,  from  the 
time  of  the  formation  of  the  company  until  the  commence- 
ment of  the  suit,  and  then  were,  at  places  in  Ireland  within 
fifty  miles  of  Dublin,  it  was  necessary  to  prove  the 
[*97]  existence  of  a  place  of  business  *within  that  limit  for 
the  whole  time  alleged,  (c)  The  statutes  in  ques- 
tion, moreover,  have  been  held  only  to  affect  partnerships 
formed  for  the  purpose  of  carrying  on  the  business  of  a 
banker,  and  not  to  interfere  with  the  issue  of  notes  by  firms 
not  carrying  on  such  business. 

Brokers. —  The  statutes  imposing  penalties  upon  brokers 
who  acted  as  such  in  the  city  of  London  without  being  duly 
admitted  so  to  do  by  the  mayor  and  aldermen  have  been 
repealed  by  47  Victoria,  chapter  3.  Although  unqualified 
brokers  could  not  recover  their  commission,  (d)  yet  they 
could  recover  from  their  principals  money  paid  for  them 

payable    to    bearer    on    demand,  tween  the  Bank  of  England  and 
(2)  Beyond  that  limit    such  notes  banking  firms  of  less  than  six  mem- 
may  be    issued    by  bankers    who  bers,  lawfully  issuing  notes  before 
were  lawfully  issuing  them  before  May,    1844.     (3)  The  district  more 
May,  1844,  under  a  license,  but  by  than  sixty-five  miles  from  London, 
no  other  bankers ;  and  not,  there-  in  which  the  monopoly  is  divided 
fore,  by  any  banking  firm  of  more  between  the  Bank  of  England  and 
than  six  persons  carrying  on  the  banking  firms  of  six  or  more  or  less 
business  of  bankers  within  sixty-  members,    lawfully  issuing    notes 
five  miles  of  London.      In  other  before  May,  1844. 
[words  there  are  three  limits:    (1)  (a)  Ransford  v.  Copeland,  6  A.  & 
London   and    three    miles    round,  E.  482. 
in  which  the  Bank  of  England  has  (6)  6  Geo.  4,  ch.  42,  §  10. 
an  exclusive  monopoly.     (2)    The  (c)  Hughes  v.  Thorpe,  5  M.  &  W. 
district  more  than  three,  but  within  656. 

sixty-five,   miles    of    London,    in  (d)  Cope  v.  Rowlands,  2  M.  &  "WV 

which  the  monopoly  is  divided  be-  149. 

216 


CH.  V,  SEC.  I.]  ILLEGAL    PARTNERSHIPS.  *93 

by  their  directions  or  in  conformity  with  the  usages  of  the 
share  market,  (e) 

Discovery  by  unlicensed  brokers. —  Liability  to  penalties 
under  the  repealed  statutes  did  not  protect  a  broker  from 
answering  interrogatories  relating  to  his  dealings  and  trans- 
actions if  he  was  sued  in  respect  of  them  by  his  princi- 
pal. (/) 

Marine  insurers. —  By  a  statute  now  repealed  it  was 
made  unlawful  for  any  society  or  partnership  (except  the 
two  corporations  mentioned  in  the  act)  to  carry  on  the 
business  of  maritime  insurance  or  to  lend  money  on  bot- 
tomry, {g)  This  enactment  gave  rise  to  numerous  decisions 
which  are  frequently  referred  to  as  illustrating  the  conse- 
quences resulting  from  an  illegal  contract  of  partnership; 
and  they  will  be  noticed  hereafter  when  those  consequences 
are  examined.  In  the  present  place,  however,  it  is  not  nec- 
essary to  do  more  than  collect  them  in  a  note  for  facility  of 
reference,  (h) 

The  marine  policy  stamp  act,  30  Victoria,  chapter  23, 
prevents  marine  insurances  being  effected  otherwise 
than  by  written  policies  *duly  stamped,  (i)  Conse-  [*98] 
quently,  if  the  members  of  a  mutual  insurance  com- 
pany insure  each  others'  ships  without  any  policies,  the 
insured  has  no  remedy  against  the  insurers  in  case  of  a 
loss,  (k) 

(e)  Smith  v.  Lindo,  4  C.  B.  N.  S.  rison  v.  Millar,  id.  340,  note;  Everth 

305,  and  5  id.  587 ;  Pidgeon  v.  Bur-  v.   Blackburne,   2    Stark.    66 ;    Ex 

slem,  3  Ex.  465 ;   Jessopp  v.  Lut-  parte  Bell,  1  M.  &  S.  751 ;  Aubert 

wyche,  10  Ex.  614.  V.  Maze,  2  Bos.  &  P.  371 ;  Watts  v. 

(/)  Green  v.  Weaver,  1  Sm.  404;  Brooks,   3  Ves.   612;   Knowles   v. 

Robinson  v.  Kitchin,  8  De  G.  Mc.  Haughton,  11  id.  168. 

&  G.  88,  and  21  Beav.  365.  (i)  They  can   now    be   stamped 

(g)  6  Geo.  1,  ch.  18,  repealed  by  5  after  their  execution  on  payment 

Geo.  4,  ch.   114,  §  1,  as  to  insur-  of  a  penalty  (39  Vict.  ch.  6,  §  2); 

ances.  but  a  written  policy  is  still  neces- 

(h)  The  following  are  the  decis-  sary. 

ions    on    the     above     enactment :  (k)  See    Edwards    v.    Aberayron 

Mitchell  v.  Cockburn,  2  H.  Blacks.  Mutual  Soc.   1  Q.  B.  D.  563;  Ex 

379;  Booth  v.   Hodgson,   6  T.  R.  parte  Hargrove,  10  Ch.  542 ;  Fisher 

405;  Lees  v.  Smith,  7  id.  338;  Har-  v.  Liverpool  Marine  Insur.  Co.  L, 

217 


*99  CONTRACTS    OF   PARTNERSHIP.  [BOOK   I. 

Medical  'practitioners. —  By  55  George  3,  chapter  194, 
section  14,  unqualified  medical  men  are  prohibited  from 
practicing;  and  by  the  medical  act,  1858,  (I)  it  is  enacted 
(§  32)  that  no  person  shall  be  entitled  to  recover  any  charge 
in  any  court  of  law  for  any  medical  or  surgical  advice,  at- 
tendance, or  for  the  performance  of  any  operation,  or  for 
any. medicine  which  he  shall  have  both  prescribed  and  sup- 
plied, unless  he  shall  prove  upon  the  trial  that  he  is  regis- 
tered under  the  act.  By  the  same  act  (§  40)  penalties  are 
inflicted  on  all  persons  who  wilfully  and  falsely  pretend  to 
be,  or  take,  or  use,  the  name  or  title  of  a  physician,  doctor 
of  medicine,  licentiate  in  medicine  and  surgery,  bachelor  of 
medicine,  surgeon,  general  practitioner  or  apothecary,  or 
any  name,  title,  addition  or  description  implying  that  he  is 
registered  under  the  act,  or  is  recognized  by  law  as  a  physi- 
cian, etc. 

Upon  the  above  acts  it  has  been  decided  that  agreements 
contrary  to  55  George,  3  are  illegal  and  cannot  be  en- 
forced; (m)  but  that  a  medical  practitioner  may  maintain 
an  action  for  attendances,  etc.,  although  not  registered 
when  they  took  place,  it  being  sufficient  that  he  should  be 
registered  at  the  time  of  the  trial ;  (n)  and  there  is  nothing 
illegal  in  one  member  of  a  firm  being  registered  in  one 
character  and  another  in  another;  nor  in  their  respectively 
attending  to  their  appropriate  branches  of  the  profession ; 
nor  in  their  jointly  suing  in  respect  of  the  services  ren- 
dered by  each  in  his  own  branch,  (o)  It  has  also 
[*99]  *been  intimated  by  high  authority,  that,  if  only  one 
member  of  a  firm  is  duly  registered,  the  requisitions 
of  the  statute  are  complied  with;  (p)  but  the  unregistered 

R.  9  Q.  B.  418;  Smith's  Case,  4  Ch.  Soc.  v.  Lon.  Supply  Assoc.  5  App. 

611 ;  Brett  v.  Beckwith,  3  Jur.  N.  Ca.  857. 

S.    31;    Bromley    v.   Williams,    32  (m)  Davies  v.  Makuna,  29  Ch.  D. 

Beav.  177.     "With  these  cases  com-  596. 

pare  Martin's  Case,  14  Eq.  148.  (n)  Turner  v.   Reynall,  14  C.  B. 

(I)  21  and  22  Vict.  ch.  90.     As  to  N.  S.  327. 

chemists  and  druggists,  see  31  and  (o)  Ibid. 

32  Vict.  ch.  121,  and  Pharmaceutical  (p)  Per  Erie  C.  J.,  id.     Compare 

218 


CH.  V,  SEC.  I.]  ILLEGAL    PARTNERSHIPS.  *99 

partner  cannot  lawfully  act  as  a  physician,  surgeon  or 
apothecary,  (q) 

Newspaper  proprietors. —  By  44  and  45  Victoria,  chapter 
60,  section  8,  the  titles  of  newspapers,  and  the  names,  occupa- 
tions and  residences  of  their  proprietors,  are  required  to  be 
registered  with  the  registrar  of  joint-stock  companies,  and 
penalties  are  payable  on  default. 

Patentees. —  Prior  to  1852  a  patent  for  an  invention  con- 
tained a  proviso  to  the  effect  that  the  patent  should  be  void 
if  more  than  twelve  persons  became  interested  in  it  as  part- 
ners. (/')  But  now  there  is  no  limit  placed  upon  the  num- 
ber of  persons  who  may  be  interested  in  a  patented 
invention. 

Pawnbrokers. —  By  35  and  36  Victoria,  chapter  93,  section 
13,  ever}'  pawnbroker  is  required  to  have  his  name  legibly 
printed  over  the  door  of  every  shop  or  place  where  he  car- 
ries on  his  business.  Under  the  previous  act,  39  and  40 
George  3,  chapter  98,  an  agreement  to  carry  on  a  pawn- 
broking  business  in  partnership  was  illegal  if  it  was  part  of 
the  agreement  that  the  names  of  some  of  the  partners 
should  be  concealed,  or,  in  other  words,  if  it  was  part  of  the 
agreement  that  some  of  the  partners  should  be  dormant,  (s) 
Whether  these  decisions  apply  to  the  present  act  is  open  to 
some  doubt  (see  §  51),  but  they  probably  do.  It  is  con- 
ceived, however,  that  pawnbroking  may  be  legally  carried 

the  cases  in  the  next  note.  See,  fur-  (r)  Hindmarch    on  Patents,   66. 

ther,  De  la  Eosa  v.  Prieto,  16  C.  B.  See  Duvergier  v.  Fellowes,  5  Bing. 

N.  S.  578;  and  as  to  pretending  to  248;  and  on  appeal,  10  B.  &  C.  826, 

be  a  legally  qualified  practitioner,  and  1  CI.  &  Fin.  39. 

see  Pedgrift  v.  Chevallier,  8  C.  B.  (s)  See   Lewis  v.   Armstrong,    3 

N.  S.  240  and  246;  Ellis  v.  Kelly,  6  M.  &  K.  53;  Armstrong  v.   Lewis, 

H.  &  N.  222.     The  cases  decided  2  Cr.  &  M.  274 ;  Gordon  v.  Howden, 

upon  the  Apothecaries  Acts,  55  Geo.  12  CI.  &  Fin.  237 ;  Fraser  v.  Hill,  1 

3,  ch.  194,  and  6  Geo.  4,  ch.  133,  M'Queen,  392.     Compare  Brown  v. 

will  be  found  in  1  Chitty's  Statutes.  Duncan,  10  B.  &  C.  93,  where  one 

(q)  Howarth  v.  Brearley,  19  Q.  B.  of  a  firm  of  distillers  was  not  li- 

D.  303 ;  Davies  v.  Makuna,  29  Ch.  censed  as  required  by  the  excise 

D.    596;    Pharmaceutical    Soc.    v.  laws. 
Lon.  Supply  Assoc.  5  App.  Ca.  857. 

219 


*100 


CONTRACTS    OF    PARTNERSHIP. 


[book 


on  by  a  registered  company,  if  the  name  of  the  company  is 

properly  painted  up. 
[*100]       '^Solicitors.1 — By  several  statutes  it  has  long  been 

unlawful  for  any  person,  not  duly  qualified,  to  act 
by  himself  or  another  as  a  solicitor,  or  to  suffer  his  name  to 
be  made  use  of  upon  the  account,  or  for  the  profit,  of  an 
unqualified  person,  (t)  Upon  these  statutes  questions  have 
arisen  as  to  how  far  it  is  lawful  for  a  qualified  solicitor  to 
share  the  profits  of  his  business  with  a  person  who  is  not 
qualified ;  and  it  has  been  held  that  there  is  no  illegality  in 
this  where  the  non-qualified  person  does  not  share  the  prof- 
its in  consideration  of  his  acting  in  any  manner  as  a  solic- 
itor, (u)  For  example,  there  is  nothing  illegal  in  an 
agreement  that  a  surviving  partner  of  a  firm  of  solicit- 


1  A  partnership  for  the  practice 
of  the  law  is  legal,  and,  as  in  other 
partnerships,  the  act  of  one  partner 
in  the  professional  business  is  the 
act  of  all  the  partners.  Every  re- 
sponsibility incident  to  other  part- 
nerships in  general  attaches  to 
legal  partnerships,  as  well  as  cor- 
responding rights.  Smith  v.  Hill, 
13  Ark.  173.  See,  also,  Livingston 
v.  Cox,  6  Pa.  St.  360. 

Partnership  may  exist  between  a 
counselor-at-law  and  an  attorney 
in  their  professional  business,  but 
the  attorney  must  have  the  sole 
and  entire,  superintendence  of  the 
attorney's  business,  for  which  he  is 
responsible ;  and  no  person  on  the 
ground  of  such  copartnership  can 
take  any  part  in  the  conduct  of  a 
suit  whose  office  is  at  a  different 
place  from  that  of  the  attorney. 
"Woodward's  Case,  4  John.  289. 

In  New  Jersey,  under  a  statute 
declaring  that  no  man  should  pros- 
ecute his  suit  except  by  himself  or 
by  a  licensed  attorney-at-law,  it 
was  held  that  a  party  could  not 


prosecute  by  two  or  more  attorneys 
in  partnership,  since  they  could  not 
bring  themselves  within  the  de- 
scription and  make  one  licensed 
attorney-at-law.  Wilson  v.  Wil- 
son, 5  N.  J.  Law,  791. 

In  New  York,  where  a  partner- 
ship exists  between  two  attorneys, 
and  a  suit  is  prosecuted  by  one  of 
them  in  the  name  of  one  of  the 
partners  only  as  the  attorney  of 
record,  an  action  may  be  main- 
tained in  their  joint  names  against 
their  client  for  the  recovery  of  the 
costs  of  the  suit.  Warner  v.  Gris- 
wold,  8  Wend.  665. 

(t)  See  6  and  7  Vict.  ch.  73,  §§  2, 
26,  32;  23  and  24  Vict.  ch.  127,  §  26; 
and  37  and  38  Vict.  ch.  68,  §  12.  See 
as  to  partnerships  between  town 
clerks  and  other  solicitors,  Hughes 
v.  Statham,  4  B.  &  C.  187 ;  and  as 
to  prosecutions  by  partners  of 
clerks  of  the  peace,  see  5  and  6  Will. 
4,  ch.  76,  §  102,  and  R.  v.  Fox,  1  E. 
&  E.  729. 

(u)  Scott  v.  Miller,  Johns.  220,  is 
a  strong  case  on  this  head. 


220 


CH.  V,  SEC.  I.]  ILLEGAL    PARTNERSHIPS.  *101 

ors  shall  share  his  profits  with  the  widow  of  a  late  part- 
ner, {x) 

But  an  agreement  for  a  partnership  in  the  ordinary  sense 
of  the  word  between  a  person  duly  qualified  and  one  who 
is  not  is  clearly  illegal;  (y)  and  if  the  agreement  is  in 
writing,  and  is  for  a  present  partnership,  parol  evidence 
cannot  be  admitted  to  show  that  it  was  not  to  take  effect 
until  both  parties  were  qualified,  (z)  But  an  agreement  be- 
tween a  solicitor  and  his  articled  clerk  that  the  latter,  when 
a  solicitor,  shall  become  a  partner  with  the  former  and 
share  his  profits  retrospectively,  is  not  illegal,  (a)  However, 
the  statutes  cannot  be  evaded  by  an  agreement  to  the  effect 
that  the  unqualified  person  shall  receive  a  share  of  the 
profits  as  a  salary,  and  that  he  shall  not  be  a  partner  with, 
the  other,  (b)  Nor  can  a  solicitor's  clerk  (unless  him- 
self qualified)  act  as  a  solicitor  under  cover  of  his 
*princi  pal's  name,  (c)  It  was,  however,  held  that  a  [*101] 
person  who  had  been  duly  examined,  sworn  and  ad- 
mitted, but  who-  had  not  taken  out  his  annual  certificate, 
was  not  unqualified  within  the  meaning  of  the  act  of 
George  2;  (d)  and  since  the  act  6  and  7  Victoria,  chapter 
46,  it  has  been  held  not  unlawful  for  a  qualified  solicitor  to 
act  upon  the  usual  agency  terms  as  the  solicitor  of  another 
solicitor  who  has  not  taken  out  his  certificate,  (e) 

It  is  illegal  for  two  persons,  one  qualified  and  the  other 
unqualified,  to  hold  themselves  out  as  partners,  and  to  put 
both  their  names  to  bills  of  costs  and  other  documents  in 

(x)  Candler  v.  Candler,  Jac.  225,  145 ;  Re  Jackson,  1 B.  &  C.  270.  See, 

and  6  Madd.  141 ;  Sterry  v.  Clifton,  too,  Re  Clark,  3  D.  &  R.  260 ;  Hop- 

9  C.  B.  110.    And  see  Aubin  v.  Holt,  kinsonu.  Smith,  1  Bing.  13.  Quaere, 

2  K.  &  J.  66.     See  also  ante,  Med-  the  effect  on  these  cases  of  the  act 

ical  Practitioners.  28  and  29  Vict.  ch.  86,  ante,  pp.  35 

(y)  Williams  v.  Jones,  5  B.  &  C.  et  seq. 

108.      See  Scott  v.   Miller,   Johns.  (c)  Hopkinson  v.  Smith,  1  Bing. 

220.  13 ;  Re  Palmer,  2  A.  &  E.  686. 

(z)  Williams  v.  Jones,  5  B.  &  C.  (d)  Re  Hodgson,  3  A.  &  E.  224. 

108.  And  see  Hodgkinson  v.  Mayer,  6 

(a)  Ex  parte  Joyce,  4  Ch.  D.  596.  A.  &  E.  194 

(p)  Tench  v.   Roberts,  6   Madd.  (e)  Ex  parte  Foley,  11  Beav.  456. 

221 


*102  CONTRACTS   OF   PAKTNEKSHIP.  [liOOK   I. 

which  their  names  ought  not  to  appear,  unless  they  are 
qualified  solicitors,  (f) 

Theatrical  representations. —  By  several  statutes  now  re- 
pealed (g)  it  was  unlawful  to  act  any  play  for  gain  except 
under  certain  restrictions.  Partnerships,  therefore,  for 
sharing  profits  to  be  derived  from  acting  plays  otherwise 
than  in  accordance  with  these  acts  were  illegal,  (h) 

Unincorporated  joint-stock  companies  with  transferable 
shares.1  —  The  question  whether  unincorporated  companies 
with  transferable  shares  were  illegal  at  common  law  or 
under  the  Bubble  Act  of  1719  (6  Geo.  1,  ch.  18)  will  be  found 
discussed  in  the  volume  on  Companies.  The  question  has 
now  onlv  a  historical  interest. 

Unregistered  partnerships,  etc. —  By  the  Companies  Act, 
1862,  section  4,  all  banking  partnerships  of  more  than  ten 
members,  and  all  other  partnerships  of  more  than  twenty 
members  formed  after  the  2d  of  November,  1862,  {%)  must 
be  registered  under  that  act  unless  formed  in  pursuance 
of  some  special  act,  charter  or  letters  patent,  or  for  work- 
ing mines  in  the  Stannaries;  and  any  partnership 
[*102]  required  to  be  registered,  and  not  registered,  is 
illegal,  (k)  This  subject  will  be  found  more  fully 
examined  in  the  volume  on  Companies. 

(/)  Edmonson  v.   Davis,  4  Esp.  Boisgerard  v.  Wall,  1  Smed.  &  M. 

14.  Ch.  404. 

(g)  10  Geo.  2,  ch.  28 ;  25  id.  ch.  36  A    partnership    may    own    and 

(made  perpetual  by  28  id.  ch.  19) ;  operate  a  street  railway  as  well  as 

and  28  Geo.  3,  ch.  30;  repealed  by  a  corporation.     O'Neil  v.  Lamb,  6 

6  and  7  Vict.  ch.  68.     As  to  what  is  N.  W.  Rep.  59. 

a  theater  within  this  act,  see  Davys  (i)  See,  as  to  this,  Shaw  v.  Sim- 

v.  Douglas,  4H.&K  180.  mons,  12  Q.  B.  D.  117;  and  as  to 

(7i)  Ewing  v.  Osbaldiston,  2  M.  &  what  associations  need  not  be  reg- 

Cr.  53 ;  De  Begnis  v.  Armistead,  10  istered,  Smith  v.  Anderson,  15  Ch. 

Bing.  107.  D.  247. 

1  See  last  chapter  of  this  work.  (k)  Jennings  v.  Hammond,  9  Q. 

An  unincorporated  body  of  men,  B.  D.  225;  Shaw  v.  Benson,  11  id. 

associated  for  the  purpose  of  bank-  563 ;  Ex  parte  Poppleton,  14  Q.  B. 

ing,  is  but  a  partnership,  the  mem-  D.  379 ;  Padstow  Total  Loss  Assoc, 

bers  having  the  same  rights  and  20  Ch.  D.  137;  Sykes  v.  Beadon,  11 

subject    to    the    same    liabilities.  Ch.  D.  170,  although  overruled  by 

222 


CH.  V,  SEC.  II.]  ILLEGAL   PARTNERSHIPS.  *103 


Section  II. —  Consequences  of  Illegality. 

Consequences  of  illegality. —  If  a  partnership  when  it 
is  formed  will  be  illegal  any  contract  to  form  it  must  be 
illegal  also.  Upon  this  ground  it  was  held,  in  Duvergier  v. 
Fellovjes,  (I)  that  a  bond  for  the  payment  of  money  upon 
the  formation  by  the  obligee  of  an  illegal  company  was 
invalid;  and  in  Williams  v.  Jones,  (m)  that  no  action  lay 
for  the  recovery  of  a  premium  agreed  to  be  paid  by  the 
defendant,  on  being  taken  into  partnership  with  the  plaint- 
iff, and  which  partnership  was  illegal. 

Enforcing  agreement. —  An  agreement  for  an  illegal 
partnership  will  not  be  enforced  even  if  it  has  been  partly 
performed.  Ewing  v.  Osbaldiston  (n)  is  a  good  instance  of 
this.  There  the  plaintiff  and  the  defendant  agreed  to  be- 
come partners  in  a  theater.  The  plaintiff  advanced  part  of 
the  money,  and  the  defendant  applied  it  in  part  payment 
for  a  lease  of  the  theater.  The  lease  was  afterwards  as- 
signed to  him  alone.  The  defendant  did  not  perform  his 
part  of  the  agreement,  and  the  plaintiff  accordingly  filed  a 
bill  against  him.  The  bill  prayed  that  it  might  be  declared 
that  the  plaintiff  and  the  defendant  were  partners  in  the 
theater  and  in  the  lease  thereof,  and  that  the  agreement 
made  between  the  plaintiff  and  the  defendant  might  be  per- 
formed, and,  if  necessary,  that  the  partnership  might  be 
dissolved  and  the  usual  accounts  taken.  The  agreement, 
however,  was  illegal,  by  10  George  2,  chapter  28,  and  the 
bill  was  dismissed.  It  was  decided,  on  appeal,  that  the 
agreement  being  illegal  it  was  impossible  for  the  court  to 
decree  its  specific  performance;  and  that  if  the 
plaintiff  sought  to  recover  back  *the  money  he  had  [*103] 
paid,  he  could  not  do  so  in  that  suit,  as  (even  if  he 

Smith  v.  Anderson,  15  Ch.  D.  247,  (I)  5  Bing.  248;  10  B.  &  C.  826; 

on  the  necessity  of    registration,  and  1  CI.  &  Fin.  39. 

would  have  been  rightly  decided  if  (m)  5  B.  &  C.  108. 

the  association  had  required  regis-  (n)  2  M.  &  Cr.  53. 

tration. 


*103  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

bad  a  lien  on  the  property  for  the  money,  which  the  court 
denied)  the  bill  did  not  seek  to  enforce  such  lien. 

Actions  by  an  illegal  partnership. —  If  a  partnership  is 
illegal  its  members  cannot  maintain  any  action  in  respect 
of  any  transaction  tainted  with  the  illegality.1  For  exam- 
ple, if  a  partnership  is  formed  for  selling  smuggled  goods, 
it  cannot  recover  the  price  of  any  smuggled  goods  which  it 
may  have  sold,  (p)  So  an  illegal  loan  society  cannot  re- 
cover money  it  has  lent,  {p)  But  an  illegal  partnership 
can  prosecute  a  person  stealing  its  property,  (q) 

Actions  against  an  illegal  partnership. —  The  illegality 
of  a  partnership  affords  no  reason  why  it  should  not  be 
sued.  It  cannot  indeed  be  effectually  sued  by  any  person 
who,  being  aware  of  all  the  facts,  seeks  to  enforce  a  demand 
arising  out  of  a  transaction  tainted  with  the  illegalit}'  which 
affects  the  firm;  (r)  but  the  illegality  of  the  firm  does  not 
per  se  afford  any  answer  to  a  demand  against  it,  arising 
out  of  a  transaction  to  which  it  is  a  party,  and  which  trans- 
action is  legal  in  itself.  Unless  the  person  dealing  with  the 
firm  is  particeps  criminis  there  can  be  no  turpis  causa  to 
bring  him  within  the  operation  of  the  rule  ex  turpi  causa 
non  oritur  actio;  and  he,  not  being  implicated  in  any  ille- 
gal act  himself,  cannot  be  prejudiced  by  the  fact  that  the 
persons  with  whom  he  has  been  dealing  are  illegally  asso- 
ciated in  partnership,  (s) 

So,  if  a  partnership  or  company  has  been  established  by 

1  Where  persons  enter  into  a  co-  (p)  Shaw  v.  Benson,  11  Q.  B.  D. 

partnership  with    the    fraudulent  563;  Jennings  v.  Hammond,  9  id. 

purpose  of  hindering  or  delaying  225. 

the  creditors  of  one  of  the  parties  (q)  See  R.  v.  Frankland,  L.  &  C. 

in  the  collection  of  their  debts,  such  276;  9  Jur.    N.    S.    388;   32  L.  J. 

persons  cannot  maintain  an  action  M.  C.  69. 

of  trespass  quare  clausum  f  regit  (r)  Re     South    Wales     Atlantic 

jointly  against  a  person  who  forci-  Steamship  Co.  2  Ch.  D.  763. 

bly  enters  the  storehouse  and  seizes  (s)  See  the  judgment  of  Mellish, 

the  goods.     McPherson  v.  Pember-  L.  J.,  in  the  last  case,  and  Brett  v. 

ton,  1  Jones,  L.  378.  Beck  with,  3  Jur.  N.  S.  31,  M.  R. 

(o)  See  Biggs  v.  Lawrence,  3  T.  R. 
454. 

224 


CH.  V,  SEC.  11.]  ILLEGAL    PARTNERSHIPS.  *10± 

fraud,  and  persons  have  been  induced,  to  join  it  by  false  and 
fraudulent  representations,  still  the  fraud  so  perpetrated 
affords  no  answer  to  a  creditor  of  the  firm,  (t)  unless  that 
creditor  has  himself  been  party  to  the  fraud,  (u)  Moreover, 
where  a  company  has  been  established  by  fraud,  and  where 
it  has  been  engaged  in  illegal  transactions,  the  inno- 
cent shareholders  *are  nevertheless  liable  amongst  [*1(M] 
themselves  to  contribute  if  necessary  to  the  payment 
of  the  debts  of  the  company;  for  such  shareholders  are 
not  so  in  delicto  as  to  preclude  any  one  of  them  from  call- 
ing on  the  others  to  share  the  losses  to  which  he  and  they 
are  liable,  (a?) 

Actions  for  contribution,  etc. —  Waiver  of  illegality. — 
The  most  important  consequence,  however,  of  illegality  in 
a  contract  of  partnership  is  that  the  members  of  the  part- 
nership have  no  remedy  against  each  other  for  contribution 
or  apportionment  in  respect  of  the  partnership  dealings  and 
transactions.1  However  ungracious  and  morally  reprehen- 
sible it  may  be  for  a  person  who  has  been  engaged  with 
another  in  various  dealings  and  transactions  to  set  up  their 
illegality  as  a  defense  to  a  claim  by  that  other  for  an  ac- 
count and  payment  of  his  share  of  the  profits  made  thereby, 
such  a  defense  must  be  allowed  to  prevail  in  a  court  of  jus- 
tice. Were  it  not  so,  those  who  —  ex  hypothesi  —  have  been 
guilty  of  a  breach  of  the  law  would  obtain  the  aid  of  the 
law  in  enforcing  demands  arising  out  of  that  very  breach ; 
and  not  only  would  all  laws  be  infringed  with  impunity, 
but,  what  is  worse,  their  very  infringement  would  become 

(t)  Henderson  v.  The  Royal  Brit,  and  on  settlement  one  partner  is 

Bank,  7  E.  &  B.  356.  charged  the  price  of  them,  and  au- 

(m)  See  Batty  v.  M'Cundie,  3  C.  &  thorized  to  pay  certain  debts  in- 

P.  203.  curred  in  their  purchase,  the  other 

(x)  See    Longworth's  Ex.    Case,  partner,  when  sued  for  contribu- 

Johns.  465,  affirmed  1  De  G.  F.  &  tion,  cannot  set  up  the  liquor  law 

J.  17.  in  defense  of  the  items  paid   for 

1  Where  articles  of  partnership  such  debts.    McGunn  v.  Hamlin, 

contemplate  the  sale  of  liquors,  and  29  Mich.  476. 
stock  on  dissolution  contains  them, 

Vol.  1  —  15  225 


*105  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

a  ground  for  obtaining:  relief  from  those  whose  business  it 
is  to  enforce  them.  For  these  reasons,  therefore,  and  not 
from  any  greater  favor  to  one  party  to  an  illegal  transac- 
tion than  to  his  companions,  if  proceedings  are  instituted 
by  one  member  of  an  illegal  partnership  against  another  in 
respect  of  the  partnership  transactions,  it  is  competent  to 
the  defendant  to  resist  the  proceedings  on  the  ground  of 
illegality,  (y)  There  are  indeed  some  old  cases  in  which 
this  defense  was  not  allowed  to  prevail;  (z)  but  they  have 
-been  long  overruled,  (a)  Moreover,  if  the  illegality  is 
brought  to  the  notice  of  the  court,  it  will  of  its  own  accord 
decline  to  interfere  between  the  parties,  although  there  may 
be  no  desire  on  their  part  to  urge  such  an  objection,  (b) 

Illegality  a  defense  at  law.—  When  partnerships 
[*105]  of  marine  insurers  were  illegal,  it  was  *held  that  if 
one  member  of  a  firm  of  such  insurers  paid  all  the 
losses  sustained  by  the  firm  he  could  not  recover  any  part 
of  the  money  paid  from  his  copartners;  (c)  and  that  if  the 
premiums  were  received  by  one  only,  the  others  could  not 
obtain  their  shares  from  him.  (d)  So,  where  there  was  an 
express  covenant  to  pay  such  shares,  the  covenant  was  held 
to  be  invalid  by  reason  of  the  illegality  which  tainted 
it;  (e)  and  even  where  an  arbitrator  had  awarded  what  was 
to  be  paid  by  one  partner  to  the  other,  it  was  held  that  the 
award  could  not  be  enforced.  (/)  These  cases  are  of  un- 
doubted authority,  and  are  always  referred  to  as  such. 
although  the  particular  ground  of  illegality  on  which  they 
rested  no  longer  exists.  It  has  indeed  been  held,  in  one  or 
two  cases  of  illegal  partnership,  that  if  one  partner  has 
paid  losses  at  the  special  request  of  the  other,  who  promised 
to  pay  his  share  afterwards,  an  action  for  such  share  may 

(y)  SeeSykea  v.  Beadon,  11  Ch.  D.  (b)  Evans  v.  Richardson,  3  Mer. 

170;  Holnian  v.  Johnson,  1  Cowp.  469. 

341 ;  Thomson  v.  Thomson,  7  Ves.  (c)  Mitchell   v.   Cockburn,   2   H. 

470;  Cousins  v.  Smith,  13  Ves.  544.  Blacks.  380. 

(z)  Dover  v.  Opey,  2  Eq.  Ca.  Ab.  (d)  Booth  v.  Hodgson,  6  T.  R.  403. 

7;  Watts  v.  Brooks,  3  Ves.  611.  (e)  Lees  v.  Smith,  7  T.  R.  338. 

(a)  See  the  cases  cited  infra.  (/)  Aubert  v.  Maze,  2  Bos.&  P.  371. 

226 


CII.  V,  SEC.  II.]  ILLEGAL    PARTNERSHIPS.  *106 

be  sustained;  (g)  but  these  cases  cannot  be  reconciled  with 
others,  and  must  be  taken  to  be  overruled.  In  De  Begnis 
v.  Armisfead,  (A)  the  plaintiff  and  the  defendant  entered 
into  an  illegal  agreement  for  bringing  out  an  opera  and 
dividing  the  profits  arising  from  it.  By  the  agreement  the 
plaintiff  was  to  pay  the  singers,  and  the  defendant  was  to 
provide  a  theater  and  pay  the  dancers.  This  was  done; 
but  instead  of  profits  there  were  losses,  and  on  the  whole 
account  a  balance  was  found  due  to  the  plaintiff.  A  bill 
for  the  balance  was  given  by  the  defendant,  and  it  was 
proved  that  the  balance  was  made  up  of  different  sums  paid 
by  the  plaintiff  at  the  defendant's  request.  It  was  never- 
theless held  that,  the  original  agreement  being  illegal,  the 
plaintiff  could  not  recover  the  balance  in  question,  either 
on  the  bill  or  the  common  money  counts. 

Illegality  a  defense  to  an  account. —  Nor  can  an  action 
for  an  account  be  sustained  bv  one  member  of  an  illegal 
partnership  against  another  in  respect  of  its  dealings 
and  transactions,  (i) 1     Thus  if  an  association  is  *ille-  plOG] 

(g)  See  Petrie  v.  Hannay,  3  T.  R.  Parties  in  Brownsville,  in  1864, 

418;  Faikney  v.  Reynous,  4  Burr,  made  a  partnership  for  purpose  of 

2070.  shipping  merchandise  from  Mata- 

(?i)  De  Begnis  v.  Armistead,  10  moras,  in  Mexico,  to  Texas,  with  a 

Bing.  107.     See  Fisher  v.  Bridges,  view  to  obtaining  cotton.     In  1866 

3  E.  &  B.  643,  reversing  S.  C.  2  id.  the  parties  on  settlement  adjusted 

118.  their  accounts,  one  executing  his 

(i)  Knowles  v.  Haughton,  11  "Ves.  notes  to  the  others.    Held,  that  the 

168;  Armstrong  v.  Armstrong,  3  M.  vice  of  illegality  would  not  follow 

&  K.  45 ;  Harvey  v.  Collett,  15  Sim.  into  the  notes,  nor  be  a  defense  to 

332.  an    action  thereon.      De  Leon  v. 

1  After    a    partnership    contract  Trevino,  49  Tex.  89. 

confessedly  against    public  policy  If  a  part  of  a  partnership  busi- 

has  been  carried  out,  and  money  ness  be  legal  and  a  part  illegal,  the 

contributed  by  one  of  the  partners  court,  in  an  action  to  settle  the  af- 

has  passed  into  other  forms,  a  part-  fairs  of  the  partnership,  may  take 

ner,  in  whose  hands  the  profits  are,  charge  of  that  which  is  legal,  and 

cannot  refuse  to  account  for  and  appoint  a  receiver  therefor.     An- 

divide  them,  on  the  ground  of  the  derson  v.  Powell,  44  Iowa,  20. 

illegal    character   of  the    original  One  cannot    sustain    an    action 

contract.    Brooks  v.  Martin,  2  Wall,  against  his  partner  for  an  account 

70.     See  Crescent  Ins.  Co.  v.  Baer,  and  recovery  of  profits   made  in 

1  So.  Rep.  318.  Confederate    money  transactions; 

227 


*106  CONTRACTS  OF  PARTNERSHIP.         [COOK  I. 

gal  by  reason  of  non-registration  under  the  Companies 
Act,  1862,  an  action  cannot  be  sustained  by  its  members 
against  its  trustees  for  the  execution  of  their  trust,  nor  to 
make  them  responsible  for  losses  arising  from  breaches  of 
trust,  (k) 

Concealed  illegality. —  Moreover,  if  it  can  be  shown  that 
the  purpose  with  which  a  partnership  was  formed  was  ille- 
gal, the  consequences  of  illegality  will  follow,  however 
skilfully  the  true  purpose  may  have  been  concealed;  {I)  and 
parol  evidence  may  be  given  to  show  the  existence  of  the 
illegality,  however  formally  the  partnership  agreement 
may  have  been  drawn  up,  and  however  successful  the  par- 
ties may  have  been  in  making  that  agreement  legal  on  the 
face  of  it.  (m) 

Illegality,  when  not  a  defense. —  In  order,  however,  that 
illegality  ma}7  be  a  defense,  it  must  affect  the  contract  on 
which  the  plaintiff  is  compelled  to  rely,  in  order  to  make 
out  his  right  to  what  he  asks.1  It  by  no  means  follows, 
from  the  circumstance  that  money  has  been  obtained  in 
breach  of  some  law,  that  therefore  whoever  is  in  possession 
of  such  money  is  entitled  to  keep  it  in  his  own  pocket. 

Effect  of  illegality  on  the  right  to  recover  back  sub- 
scriptions.—  If  money  is  paid  by  A.  to  B.  to  be  applied  by 

nor  can  such  an  action  be  sustained  707 ;  Armstrong  v.  Armstrong,  3  M. 

in  respect  of  profits  which  may  &  K.  53. 

have  been  realized  on  dealings  of  (m)  See  Collins  v.  Blantern,  2 
a  lawful  character,  when  the  latter  Wils.  341,  and  1  Sm.  L.  Ca.,  and 
were  so  blended  with  Confederate  the  notes  there, 
money  dealings  that  it  is  impossible  1  When  one  partner,  without  the 
to  so  separate  the  one  class  from  knowledge  of  the  other,  borrows 
the  other  as  to  give  effect  to  the  money  at  usurious  interest,  and  ex- 
legal  transactions  alone.  Zane  v.  ecutes  a  note  in  the  name  of  the 
Thomas,  37  Tex.  157.  See,  how-  firm,  and  afterwards  pays  the  usu- 
ever,  to  the  contrary,  Pfeiffer  v.  rious  interest,  and  the  other  part- 
Maltby,  38  Tex.  523.  ner,  ignorant  of  the  payment  of  the 

(fc)  Sykes  v.   Beadon,  11  Ch.  D.  usury,  executes  his  own  note  in 

170,  is  an  authority  for  this  propo-  lieu  of  the  other,  he  cannot,  when 

sition,  although  overruled  on  an-  sued  upon  it,  set  up  as  a  defense 

other  ground,  ante,  p.  101.  the  payment  of  usury  by  his  part- 

(l)  Stewart  v.  Gibson,  7  CI.  &  Fin.  ner.    Jones  v.  Jackson,  14  Ala.  186. 

228 


CH.  V,  SEC.  II.]  ILLEGAL    PARTNERSHIPS.  *107 

him  for  some  illegal  purpose,  it  is  incompetent  for  A.  to  re- 
quire B.  to  band  back  tbe  money  if  be,  B.,  has  not  already- 
parted  with  it,  (n)  and  the  illegal  purpose  has  not  been  car- 
ried out.  (o)  Although,  therefore,  the  subscribers  to  an 
illegal  company  have  not  a  right  to  an  account  of  the  deal- 
ings and  transactions  of  that  company  and  of  the  profits 
made  thereby,  they  have  a  right  to  have  their  subscriptions 
returned;  (p)  and  even  though  the  moneys  sub- 
scribed have  been  laid  out  in  the  purchase  of  *land  [*107] 
and  other  things  for  the  purpose  of  the  company, 
the  subscribers  are  entitled  to  have  that  land  and  those 
things  reconverted  into  money,  and  to  have  it  applied  as 
far  as  it  will  go  in  payment  of  the  debts  and  liabilities  of 
the  concern,  and  then  in  repayment  of  the  subscriptions. 
In  such  eases  no  illegal  contract  is  sought  to  be  enforced; 
on  the  contrary,  the  continuance  of  what  is  illegal  is  sought 
to  be  prevented.  (</) 

Again,  Tenant  v.  Elliott,  (r)  and  other  cases,  decided  that 
if  A.  and  B.  are  parties  to  an  illegal  contract,  and  B.  in 
pursuance  thereof  pays  money  to  C.  for  A.'s  use,  A.  can  re- 
cover  this  money  from  C.  It  follows  from  this  that  if  two 
partners,  A.  and  B.,  enter  into  an  illegal  agreement  with  C, 
and  in  pursuance  of  this  agreement  C.  pays  money  to  D.  for 
the  use  of  A.  and  B.,  not  only  can  A.  and  B.  recover  this 
money  from  D.,  but  if  he  pays  it  over  to  either  one  of  the 
two  partners,  that  one  must  account  to  the  other  for  his 
share  of  it.  This  must  also  be  the  case  if  C,  instead  of  pay- 
ing the  money  to  D.,  pays  it  over  at  once  to  A.  or  B.     In 

(n)  See  Taylor  v.  Lendy,  9  East,        (q)  Sheppard  v.   Oxenford,  1  K. 

49;  Varney  v.  Hickman,  5  C.   B.  &  J.  491 ;  Butt  v.  Monteaux,  id.  98. 

271;  Diggle  v.  Higgs,  L.  R.  2  Ex.  See,  also,  Symes  v.  Hughes,  9  Eq. 

D.  422 ;  Hampden  v.  Walsh,  1  Q.  B.  475 ;  Taylor  v.  Bowers,  1  Q.  B.  D. 

D.  189 ;  Taylor  v.  Bowers,  id.  291.  291. 

(o)  See  Herman  v.  Jeuchner,  15        (r)  Tenant  v.  Elliott,  1  Bos.  &  P. 

Q.  B.  D.  561.  3;  Farmer  v.  Russell,  id.  296;  Bous- 

(p)  See  Harvey  v.  Collett,  15  Sim.  field  v.  Wilson,  16  M.  &  W.  185; 

332.     Compare    the    cases    in  the  Nicholson    v.    Gooch,    5   E.   &  B. 

next  note.  999. 

2:9 


*108  CONTRACTS    OF   PARTNERSHIP.  [liOOIC    I. 

other  words,  it  follows  from  Tenant  v.  Elliott  and  that  class 
of  cases,  that  if  an  illegal  act  has  been  performed  in  carry- 
ing- on  the  business  of  a  legal  partnership,  and  gain  has 
accrued  to  the  partnership  from  such  act,  and  the  money 
representing  that  gain  has  been  actually  paid  to  one  of  the 
partners  for  the  use  of  himself  and  copartners,  he  cannot 
set  up  the  illegality  of  the  act  from  which  the  gain  accrued 
as  an  answer  to  a  demand  by  them  for  their  share  of  what 
he  has  received.  Upon  this  principle  it  was  held  in  Sharp 
v.  Taylor  (V)  that  a  partner  was  entitled  to  an  account 
against  his  copartner  of  moneys  actually  come  to  the  hands 
of  the  latter  from  the  employment  of  a  ship  in  a  manner 
not  permitted  by  the  navigation  laws;  and  in  Sheppard  v. 

Oxenford  (I)  that  the  directors  of  an  illegal  company 
[*108]  were  liable  to  account  *ix>r  the  *  money  received  by 

them  on  behalf  of  the  company  and  for  the  use  of 
its  members. 

Illegality  set  up  by  executors. —  An  executor  or  admin- 
istrator of  a  deceased  partner  cannot  protect  himself  from 
accounting  for  the  estate  of  the  deceased  by  setting  up 
against  his  creditors,  legatees,  or  next  of  kin,  the  illegality 
of  the  transactions  in  which  the  deceased  may  have  been 
concerned,  (it)  That  has  nothing  to  do  with  their  claims; 
and  the  reasons  upon  which  the  maxim  ex  turpi  causa  noti 
oritur  actio  is  founded  evidently  have  no  application  to 
such  a  case.  Even  if  the  executor  was  one  of  the  deceased's 
copartners,  and  was  thus  mixed  up  with  him  in  the  illegal 
transactions,  still  if  the  share  of  the  deceased  in  the  gains 
arising  from  them  has  actually  been  placed  to  his  credit  in 
the  partnership  books  and  has  come  or  might  have  come  to 
the  hands  of  the  executor  as  such,  he  must  account  for  that 
share,  (x)      But  if  there   has   been   no   account   settled  it 

(s)  2  Ph.  801,  recognized  in  Sbep-  (u)  See  Joy  v.  Campbell,  1  Sen. 

paid  v.   Oxenford.  1  K.  &  J.  491.  &  Lef.  339;  Hale  v.  Hale,  4  Beav. 

Compare  Sykes  v.  B?adon,  11  Ch.  369. 

I).  170.  (x)  See  Joy  v.  Campbell,  1  Sch.  & 

(0  1  K.  &  J.  491.     See,  too,  Butt  Lef.  328. 
v.  Monteaux,  id.  93. 

230 


CH.  V,  SEC.  II.]  ILLEGAL    PARTNERSHIPS.  *109 

would  seem  that  the  executor  may  in  his  character  of  part- 
ner rely  on  illegality  and  decline  to  come  to  any  account 
in  respect  of  the  gains  in  question,  (y) 

Illegal  trusts. —  But  notwithstanding  Tenant  v.  Elliot, 
Sharp  v.  Taylor,  and  other  cases  of  that  class,  illegal  trusts 
will  not  be  enforced.  Sykes  v.  Beadon,  (z)  already  referred 
to,  is  a  clear  authority  for  this  proposition.  Another  au- 
thority is  Ottley  v.  Browne,  (a)  There  A.,  who  was  a  share- 
holder with  B.  and  others  in  two  companies,  wished  to 
become  a  banker ;  and  in  order  to  evade  a  statute  which 
rendered  it  illegal  for  a  banker  to  be  a  partner  in  commer- 
cial undertakings,  (5)  A.  assigned  his  shares  to  B.  in  trust 
for  himself.  B.,  who  carried  on  a  separate  trade,  was  made 
bankrupt,  and  his  assignees  sold  all  his  shares  in  the  above 
companies,  and  also  the  shares  held  by  him  in  trust  for  A. 
A.  then  filed  a  bill  against  B.'s  assignees,  praying  that  they 
might  be  declared  trustees  of  these  last  shares  for  him,  A., 
and  that  they  might  be  ordered  to  pay  the  value 
-thereof  to  him,  or  that  he  might  be  at  liberty  to  [*109] 
prove  for  such  value  against  B.'s  estate;  but  the  bill 
was  dismissed  with  costs,  on  the  ground  that  it  sought  to 
enforce  a  secret  trust,  which  was  directly  against  a  positive 
law.  (c) 

Indictment. —  Before  quitting  the  subject  of  the  conse- 
quences of  the  illegality  of  a  partnership  the  risk  of  crim- 
inal prosecution  ought  to  be  mentioned.  Persons  engaged 
in  an  illegal  business,  whether  partners  or  not,  and  whether 
incorporated  or  not,  are  liable  to  be  punished  criminally;  (d) 
and  even  where  the  object  of  a  society  is  not  illegal,  its 


(y)  See  Ottley  v.  Browne,  1  Ball  (c)  The  same    principle    is  illus- 

&  Bea.  360;  and  compare  Sharp  v.  trated  by  Thomson  v.  Thomson,  7 

Tayloe,  2  Ph.  801.  Ves.  470,  which,  however,  was  not 

(z)  11  Ch.  D.  170,  ante,  p.  105.  a  partnership  case. 

(a)  1  Ball  &  Bea.  360.     And  see  (d)  See  the    title    Conspiracy  in 
Ex  parte  Mather,  3  Ves.  373.  Russell  on  Crimes,  and  Archbold's 

(b)  29  Geo.  2,  ch.  16  (Irish).  Criminal  Law. 

231 


*109  CONTRACTS  OF  PARTNERSHIP.         [BOOK  I. 

directors  and  managers  will  do  well  to  bear  in  mind  that, 
if  they  wilfully  violate  the  provisions  of  an  act  of  parlia- 
ment, they  are  guilty  of  a  misdemeanor,  and  are  liable  to  be 
indicted  accordingly,  (e) 

(e)  See  Lord  Campbell's  observations  in  Longwortb's  Ex.  Case,  1  DeG. 
F.  &  J.  81. 


^CHAPTER  VI.  [*U0] 

OF  THE  GENERAL  NATURE  OF  A  PARTNERSHIP. 
Section  I. —  Of  the  Mercantile  and   the   Legal   Notion 

OF   A   FlKM. 

Mercantile  view  of  a  firm. —  Partners  are  called  collect- 
ively a  firm.  Merchants  and  lawyers  have  different  no- 
tions respecting  the  nature  of  a  firm,  (a)  Commercial  men 
and  accountants  are  apt  to  look  upon  a  firm  in  the  light  in 
which  lawyers  look  upon  a  corporation,  i.  e.,  as  a  body  dis- 
tinct from  the  members  composing  it,  and  having  rights 
and  obligations  distinct  from  those  of  its  members.  Hence, 
in  keeping  partnership  accounts,  the  firm  is  made  debtor  to 
each  partner  for  what  he  brings  into  the  common  stock, 
and  each  partner  is  made  debtor  to  the  firm  for  all  that  he 
takes  out  of  that  stock.  In  the  mercantile  view,  partners 
are  never  indebted  to  each  other  in  respect  of  partnership 
transactions,  but  are  always  either  debtors  to  or  creditors  of 
the  firm. 

Owing  to  this  impersonification  of  the  firm  there  is  a 
tendency  to  regard  its  rights  and  obligations  as  unaffected 
by  the  introduction  of  a  new  partner,  or  by  the  death  or 
retirement  of  an  old  one.  Notwithstanding  such  changes 
among  its  members,  the  firm  is  considered  as  continuing 
the  same ;  and  the  rights  and  obligations  of  the  old  firm  are 

(a)  See    on    this    subject  Cory's  need  of  its  legal  recognition,"  in 

Treatise  on  Accounts  (2d  ed.  1839,  the  second  volume  of  the  Papers 

Pickering),  a  valuable  work,  but,  it  read  before  the  Juridical  Society, 

is  believed,  not  so  widely  known  as  page   40.     To  both    of    these   the 

it  should  be.     See,  too,  a  paper  by  writer  desires  to  acknowledge  his 

J.  M.  Ludlow,  Esq.,  "On  the  mer-  obligations, 
cantile  notion  of  the  firm,  and  the 

233 


Ill 


CONTRACTS    OF    PARTNERSHIP. 


[book 


regarded  as  continuing  in  favor  of  or  against  the  new 
[*111]  firm  as  if  no  changes  had  '-occurred.  The  partners 
are  the  agents  and  sureties  of  the  firm :  its  agents 
for  the  transaction  of  its  business;  its  sureties  for  the  liqui- 
dation of  its  liabilities  so  far  as  the  assets  of  the  firm  are 
insufficient  to  meet  them.  The  liabilities  of  the  firm  are 
regarded  as  the  liabilities  of  the  partners  only  in  case  they 
cannot  be  met  by  the  firm  and  discharged  out  of  its  assets. 
Legal  view  of  a  firm.—  But  this  is  not  the  legal  notion  of 
a  firm.  The  firm  is  not  recognized  by  lawyers  as  distinct 
from  the  members  composing  it.  (b) l     In  taking  partnership 

(b)  Ex  parte  Gliddon,  13  Q.  B.  D 


43;  Hoare  v.  Oriental  Bank  Cor- 
poration, 2  App.  Ca.  589,  illustrate 
this.  And  see  per  James,  L.  J.,  in 
Ex  parte  Corbett,  14  Ch.  D.  12G. 

1  Authority  to  tax  all  persons  ex- 
ercising any  profession  may  be 
executed  by  taxing  each  member 
of  a  law  firm  separately.  The 
member  cannot  require  that  the 
firm  shall  be  taxed  and  not  him- 
self, though  he  does  not  practice 
otherwise  than  as  a  partner.  Lanier 
v.  The  Mayor,  59  Ga.  187. 

Personal  property  belonging  to  a 
firm  is  assessable  in  the  locality 
where  it  is,  if  the  firm  has  its  place 
of  business  there.  Williams  V. 
Saginaw,  51  Mich.  120. 

Before  the  value  of  the  interest 
of  decedent  in  a  firm  has  been  as- 
certained, and  before  any  account- 
ing between  the  executors  and  the 
firm  of  which  decedent  was  a  mem- 
ber, the  executors  cannot  be  as- 
sessed for  taxes  for  the  interest  of 
decedent  in  said  firm,  within  the 
meaning  of  chapter  392,  Statutes 
of  1883,  or  section  3  of  Revised 
Statutes  (7th  edition),  982,  defining 
what  property  shall  be  subject  to 
taxation.  People  v.  Coleman,  44 
Hun  (N.  Y.\  20. 


Where  the  special  tax  for  one 
year  required  by  Revised  Statutes 
of  United  States,  section  3232,  has 
been  paid  by  a  firm  of  brewers, 
which,  before  the  expiration  of  the 
year,  was  dissolved  by  the  retire- 
ment of  one  partner,  the  other  may 
carry  on  the  same  business  in  the 
same  place  for  the  remainder  of  the 
year  without  again  paying  such 
tax  or  any  part  thereof.  United 
States  v.  Glab,  99  U.  S.  225. 

The  amount  of  a  tax  assessed 
upon  the  property  of  a  firm  after 
its  dissolution,  paid  under  protest 
by  one  partner,  cannot  be  recovered 
back  by  him  if  the  facts  do  not 
show  that,  at  the  time  the  tax  was 
assessed,  affairs  of  the  firm  had 
been  wound  up  or  that  there  was 
no  taxable  property  of  the  firm  un- 
disposed of.  Oliver  v.  Lynn,  130 
Mass.  143. 

As  to  the  place  of  business  for 
purposes  of  taxation  of  a  firm  hav- 
ing factories  in  several  places,  see 
Barker  v.  Watertown,  137  Mass.  227. 

Township  taxes  assessed  on  the 
personal  property  of  the  partnership 
can  only  be  assessed  in  the  town- 
ship where  the  firm  has  a  place  of 
business  (Comp.  L.,  sec.  978). 
McCoy  r.  Anderson,  47  Mich.  502. 


234 


CH.  VI,  SEC.  I.]   GENERAL  NATURE  OF  A  PARTNERSHIP.    "112 

accounts  and  in  administering  partnership  assets,  courts 
have  to  some  extent  adopted  the  mercantile  view,  and 
actions  may  now  be  brought  by  or  against  partners  in  the 
name  of  their  firms;  (c)  but  speaking  generally,  the  firm  as 
such  has  no  legal  recognition.  The  law,  ignoring  the  firm, 
looks  to  the  partners  composing  it;  any  change  amongst 
them  destroys  the  identity  of  the  firm;  what  is  called  the 
property  of  the  firm  is  their  property,  and  what  are  called 
the  debts  and  liabilities  of  the  firm  are  their  debts  and  their 
liabilities.  In  point  of  law  a  partner  may  be  the  debtor  or 
the  creditor  of  his  copartners,  but  he  cannot  be  either  debtor 
or  creditor  of  the  firm  of  which  he  is  himself  a  member,  (d) 
A  member  of  an  ordinary  partnership  fills  a- double  char- 
acter: he  is  both  a  principal  and  an  agent.  As  a  principal 
he  is  bound  by  what  he  does  himself  and  by  what  his  co- 
partners do  on  behalf  of  the  firm,  provided  they  keep  within 
the  limits  of  their  authority;  as  an  agent  he  binds  them  by 
what  he  does  for  the  firm,  provided  he  keeps  within  the 
limits  of  his  authority.  But  a  partner  is  not  the  surety  of 
the  firm.  Every  member  of  an  ordinary  partnership,  how- 
ever numerous  the  partners  may  be,  is  liable  as  a  principal 
to  have  his  private  property  seized  for  a  partnership  debt, 
whether  the  firm  has  assets  to  pay  it  or  not;  and  not  only 
so,  but  the  property  of  the  firm  is  liable  to  be  seized 
for  the  private  debts  of  any  of  *the  partners  com-  [*112] 
posing  it.  (e)  This  non-recognition  of  the  firm,  in 
the  mercantile  sense  of  the  word,  is  one  of  the  most  marked 
differences  between  partnerships  and  incorporated  com- 
panies. 

(c)  Rules  of  Sup.  Ct.,  Orel,  xvi,  England,  4  M.  &  Cr.  171,  172;  and 
rule  14;  Bank.  Act,  1883,  §  115,  and  De  Tastet  v.  Shaw,  1  B.  &  A.  664. 
Bank.  Rules,  18S6,  r.  259.  (e)  See    Execution,    in    book    ii, 

(d)  See  Lord  Cottenham's  judg-  ch.  3,  g  4. 
ment  in  Richardson  v.  The  Bank  of 

235 


112 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


Section    II. —  Consequences    of   the    Non-recognition    of 
the  Firm  in  the  Mercantile  Sense. 

1.   Generally  as  regards  its  name. 

Name  of  a  firm. —  It  follows  from  the  foregoing  remarks 
that  the  name  under  which  a  firm  carries  on  business  is  in 
point  of  law  a  conventional  name  applicable  only  to  the 
persons  who,  on  each  particular  occasion  when  the  name  is 
used,  are  members  of  the  firm.  (/)  When  a  firm  is  spoken 
of  by  its  name  or  style,  evidence  is  admissible  to  show  who 
in  fact  constituted  the  firm  at  the  time  in  question;  (g)  and 
if  persons  trade  or  carry  on  business  under  a  name,  style  or 
firm,  whatever  may  be  done  by  them  under  the  name  is  as 
valid  as  if  real  names  had  been  used.1     This  is  seen  every 


( f)  A  firm  is  usually  described  in 
legal  proceedings  as  certain  persons 
trading  or  carrying  on  business 
under,  and  using  tbe  name,  style, 
and  firm  of,  etc.  As  to  the  suffi- 
ciency of  this  description,  see  Smith 
v.  Ball,  9  Q.  B.  361. 

(g)  Carruthers  v.  Sheddon,  6 
Taunt.  15;  Bass  v.  Clive,  4  M.  &  S. 
13;  Stubbs  v.  Sargon,  2  Keen,  255, 
and  3  M.  &  Cr.  507;  Latouche  v. 
Waley,  Hayes  &  Jones  (Ir.  Ex.),  43. 

1  The  partnership  name  repre- 
sents the  constituents  of  the  firm, 
and  when  it  is  rightly  pledged  the 
respective  partners  are  jointly 
bound.    Gates  v.  Fisk,  45  Mich.  522. 

The  parties  to  a  copartnership 
may  give  it  just  such  a  name  as 
they  please,  and  all  contracts  or 
obligations  or  notes,  made  with  or 
given  to  such  firm,  may  be  prose- 
cuted in  the  individual  names  of  its 
members.  Crawford  v.  Collins,  45 
Barb.  2G9;  S.  C.  30  How.  Pr.  398. 
See  Fii-st  Nat.  Bank  v.  Freeman,  47 
Mich.  408. 

A  firm   may  do  business  under 


the  name  of  one  of  the  partners 
alone,  and  can  sue  in  all  their  names 
on  contract  made  in  the  name  cf 
such  one  alone.  Martin  v.  John- 
son, 8  Daly,  541;  Mohawk  Nat. 
Bank  v.  Van  Slyck,  29  Hun,  188. 

Where  a  partnership  business  is 
done  in  the  name  of  an  individual 
member  of  the  firm,  the  burden  is 
upon  one  seeking  to  charge  the  co- 
partnership upon  a  note  given  for 
money  loaned,  executed  in  the 
name  of  such  individual  member, 
to  show  that  the  money  was  bor- 
rowed for  or  appropriated  to  the 
use  of  the  firm,  or  at  least  that  the 
name  was  in  fact  used  for  the  firm. 
Gernon  v.  Hoyt,  90  N.  Y.  631. 

Where  there  is  no  statute  prohib- 
iting the  use  of  a  name  or  abbrevi- 
ation other  than  that  of  the  indi- 
vidual, there  is  no  presumption  of 
partnership  from  the  use  of  "  & 
Co."  after  dealer's  name.  Bren- 
nan  v.  Paid  ridge,  11  West.  Rep. 
(Mich.)  542;  S.  C.  35  N.  West.  Rep. 
85. 

One  who  contracts  debts  in   a 


236 


CH.  VI,  SEC.  II.]   GENERAL  NATURE  OF  A  PARTNERSHIP. 


'112 


day  in  the  case  of  bills  of  exchange  and  promissory  notes; 
and  even  in  the  case  of  more  formal  instruments,  there  is  no 


firm  name  and  receives  the  benefits 
to  be  derived  from  a  partnership 
name  cannot  divest  himself  of  the 
burdens  incident  thereto  as  respects 
the  right  to  bring  an  action  in  the 
county  in  which  the  alleged  firm 
was  doing  business,  although  the 
firm  consists  of  himself  alone. 
Roseubaum  v.  Hayden,  36  N.  West. 
R  p.    Neb.)  147. 

A  company  claiming  to  have  been 
incorporated  under  the  laws  of  an- 
other state  commenced  doing  busi- 
ness in  this  state  under  its  assumed 
corporate  name;  subsequently  an- 
other   company    became    incorpo- 
rated by  the  same  corporate  name 
as  the  former,  under  the  laws  of 
this  state,  and  commenced  business 
in  the  same  city  in  which  the  for- 
mer company  was  already  estab- 
lished.     The  company    organized 
under  the  laws  of  this  state  sought 
to  restrain  the  persons  composing 
the  other  company  from  continu- 
ing to  do  business  under  the  corpo- 
rate name,  alleging  that  the  de- 
fendant's pretended  corporation  no 
longer  existed ;  but  it  was  held  that 
was  not  sufficient  ground  for  the 
relief  sought.      If  the   defendants 
were  no  longer  incorporated,  or  if 
their  original  organization  as  a  cor- 
poration was  illegal,  they  still  had 
a  right  to  prosecute  their  business 
as  partners,  and  under  any  name 
they  might  adopt.     Ottoman  Cah- 
vey  Company  v.  Dane,  95  111.  203. 
Persons  doing  business  under  a 
corporate  name,  if  not  a  corpora- 
tion, are,  it  is  said,  a  partnership. 
Hoi  brook  v.  St.  Paul  F.  &  M.  Ins. 
Co.  25  Minn.  229. 
The  mere  assumption  by  a  firm 


of  a  name  appropriate  for  a  corpo- 
ration is  no  violation  of  section  220 
of  the  Criminal  Code;  nor  would 
the  putting  forth  of  a  sign  or  ad- 
vertisement in  which  a  corporate 
name  is  assumed  constitute  such  a 
violation  if  not  done  for  the  pur- 
pose of  soliciting  business.  Edger- 
ton  v.  Preston,  15  Bradw.  23. 

The  mere  fact  that  an  abbrevi- 
ated form,  as  "  Chas.  &  Wm. 
Feickert,"  instead  of  "Charles 
Feickert  and  William  Feickert,"  is 
used  in  describing  the  payees  of  a 
note,  does  not  as  a  matter  of  law 
authorize  the  public  to  assume  they 
were  partners.  Ryhiner  v.  Feick- 
ert, 92  111.  305. 

It  is  not  necessary  that  a  firm 
name  should  be  agreed  upon  in 
partnership  articles.  If  there  was 
evidence  of  an  agreement  to  buy 
and  sell  on  joint  account  for  mut- 
ual profit,  and  if  one,  with  the 
knowledge  and  assent,  express  or 
implied,  of  the  other,  was  in  the 
habit  of  using  a  certain  name,  it  is 
sufficient  to  fix  the  liability  of  the 
firm  upon  a  note  signed  with  that 
name.  Parsley  v.  Ramsey,  31  Ga. 
403. 

It  is  not  necessary  that  two  firms 
in  different  localities,  entering  into 
an  agreement  in  express  terms  cre- 
ating a  partnership  for  the  carrying 
on  of  a  special  business,  should 
adopt  any  partnership  or  firm 
name.  Wright  v.  Hooker,  10  N. 
Y.  51. 

There  is  no  presumption  of  law 
or  fact  that  a  firm  name  includes 
more  than  one  person ;  and  if  it  is 
desired  that  the  names  of  plaintiffs 
should  be  shown,  the  fact  of  part- 


237 


■112 


CONTRACTS  OF  PARTNERSHIP. 


[BOOK  I. 


doubt  of  their  validity,  although  some  of  the  executing  par- 
ties may  be  described  as  A.  &  Co.  (A)1    So  partners  may  be 


nership  must  be  put  in  issue  by 
verified  plea.  Robinson  v.  Magar- 
ity,  28  111.  423. 

The  use  of  "  and  company  "  after 
a  firm  name  creates  a  presumption 
that  there  is  a  partner  not  named, 
which,  however,  may  be  overcome 
by  positive  proof.  "Whitlock  v. 
McKechnie,  1  Bosw.  427. 

An  assignment  of  a  note  and 
mortgage  to  third  persons  named, 
constituting  the  firm  of  W.  &  P., 
stating  that  it  assigned  the  instru- 
ment to  the  "said  W.  &  P.,"  etc., 
the  indebtedness  intended  to  be 
secured  being  to  the  firm  of  W.  & 
P.,  is  an  assignment  to  the  firm 
and  not  to  its  individual  members. 
Potter  v.  Strausky,  48  Wis.  235. 

A  partnership  alleged  to  be  com- 
posed of  two  persons  under  the 
name  of  "  McCormick  &  Lewis," 
and  a  partnership  alleged  to  be 
composed  of  three,  "McCormick, 
Lewis  &  Co.,"  will  not  be  presumed 
to  be  the  same  firm  in  the  absence 
of  allegation  or  proof  of  their 
identity.  Harrison  v.  McCormick, 
69  Cal.  616. 

The  rights  and  liabilities  of  a 
partnership,  as  a  rule,  are  not 
affected  by  a  change  in  its  name 
unaccompanied  by  a  change  in  its 
members.  Gill  v.  Ferris,  82  Mo. 
156. 

In  New  York  the  use  of  a  firm 
name  not  representing  actual  ex- 
isting partners  is  by  statute  made 
illegal,  except  by  the  remaining 
members  of  a  former  firm,  who 
shall  file  a  certificate  with  the 
county  clerk  showing  who  the  re- 
maining partners  are,  etc.  A  firm 
cannot  enforce  a  contract  made  by 


them  while  using  such  illegal  firm 
name.  Lunt  v.  Lunt,  10  N.  Y. 
Weekly  Dig.  329.     See  ante. 

Where  a  husband  and  wife  had 
formed  a  partnership  and  done 
business  under  the  name  of  A.  & 
Co.,  held,  that  they  had  not  vio- 
lated the  statute  (L.  1883,  ch.  281) 
to  prevent  persons  from  transact- 
ing business  under  fictitious  names, 
and  that  they  could  recover  in  a 
suit  in  their  joint  names  for  goods 
sold  and  delivered  by  them  in  such 
partnership  name.  Zimmerman  v. 
Erhard,  8  Daly,  311. 

(h)  See  Maughan  v.  Sharpe,  17 
C.  B.  N.  S.  443,  a  mortgage ;  Brut- 
ton  v.  Burton,  9  Chitty,  707,  a  war- 
rant of  attorney ;  Evans  v.  Curtis, 
2  C.  &  P.  296,  an  agreement  for  a 
lease ;  Moller  v.  Lambert,  2  Camp. 
548,  a  bond ;  Gorrie  v.  Woodley,  17 
Ir.  Com.  L.  Rep.  221,  a  guaranty; 
Latouche  v.  Waley,  Hayes  &  Jones 
(Ir.  Ex.),  43.  How  far  the  firm  is 
bound  by  instruments  on  which  its 
true  name  does  not  appear  will 
be  seen  hereafter.  And  see  as  to 
the  parties  to  sue  on  a  covenant 
with  a  firm,  Metcalf  v.  Rycroft,  6 
M.  &  S.  75,  noticed  infra,  book  ii, 
ch.  3. 

iUpon  the  formation  of  a  part- 
nership, until  a  firm  name  is 
adopted,  the  presumption  must  be 
that  in  the  transaction  of  the  firm 
business  each  member  is  the  agent 
of  the  others  to  transact  the  busi- 
ness, even  to  the  signing  of  the 
names  of  the  several  members  of 
the  firm  to  writiugs  executed  in 
the  legitimate  business  of  the  firm. 
Kitner  v.  Whitlock,  88  111.  514. 
By  a  partnership  agreement  be- 


238 


CH.  VI,  SEC.  II.]   GENERAL  NATURE  OF  A  PARTNERSHIP.   *113 

registered  as  shareholders  in  the  name  of  their  firm;  (i)  and 
under  the  Copyright  Act,  5  and  6  Victoria,  chapter 
45,  *and  Engravings  Act,  8  George  II,  chapter  13,  [*113] 
section  1,  it  is  sufficient  to  register  a   book  in  the 
name  of  the  firm,  (j)  or  to  print  the  name  of  the  firm  of 
proprietors  under  the  engravings.  (Jc) 

Effect  of  change  amongst  the  partners  —  Legacy  to  a 
firm. —  But  as  the  name  of  the  firm  is  only  a  conventional 
mode  of  designating  the  persons  composing  it,  any  varia- 
tion amongst  these  persons  is  productive  of  a  new  significa- 
tion of  the  name.  If,  therefore,  a  legacy  is  left  to  the 
firm,  the  legacy  is  payable  to  those  who  compose  the  firm 
at  the  time  the  legacy  vests ;  (!)  and  if  a  legacy  is  left  to  the 
representatives  of  an  old  firm,  it  will  be  payable  to  the  exec- 
utors of  the  last  survivor  of  the  partners  constituting  the 
firm  alluded  to,  and  not  to  its  successors  in  business.  {?ri) 

Advances  to  a  firm. —  Again,  if  trustees  are  authorized 
to  lend  money  to  a  firm,  and,  after  the  death  or  retirement 
of  one  of  the  members,  the  trustees  lend  to  the  remaining 
members,  this,  it  seems,  would  be  a  breach  of  trust  on  the 
part  of  the  trustees.  (;i) 

tween  two,  no  firm  name  was  ex-  Ontario  Bank  v.  Hennessey,  48  N. 

pressly  adopted,    but  one  partner  Y.  545. 

was  to  give  his  personal  attention  (i)  Weikersheirn's  Case,  8Ch.  831. 

to  and  have    entire    control    and  (j)  Weldon  v.   Dicks,  10  Ch.  D. 

management  of  the  business,  with  247. 

authority  to  arrange  and  negotiate  (k)  Rock  v.  Lazarus,  15  Eq.  104. 
the  acceptance  of  drafts,  the  other  {I)  See  Stubbs  v.  Sargon,  2  Keen, 
to  incur  no  risks  and  to  assume  no  253,  and  3  M.  &  Cr.  507.  In  May- 
responsibility.  Held,  that  it  might  berry  v.  Brooking,  7  De  G.  M.  &  G. 
be  inferred  that  the  copartnership  673,  a  legacy  of  a  debt  due  to  A. 
business  was  to  be  done  in  the  was  held  to  pass  A.'s  interest  in  a 
name  of  the  first  partner,  and  the  debt  due  to  him  and  his  copartners, 
other  be  held  liable  upon  a  draft  See,  also,  Ex  parte  Kirk,  5  Ch.  D. 
drawn  by  him  in   his    individual  800. 

name,  procured  to  be  discounted  (m)  Leak  v.   MDjwall,  3  N.  R. 

by  him  for  the  benefit  of  the  firm,  185,  M.   R. ;  Kerrison  v.   Redding- 

and  avails  applied  to  its  use;  al-  ton,   11  Ir.  Eq.  451.     See  Greville 

though  at  the  time  the  draft  was  v.  Greville,  27  Beav.  594. 

discounted  the  second  partner  was  (n)  See  Fowler  v.  Raynal,  2  De 

not  known  to  the  payee  as  such.  G.  &  Sm.  749,  and  3  M.  &  G.  500. 

239 


*114 


CONTRACTS    OF   PARTNERSHIP. 


[book  I. 


Agency. —  An  authority  given  to  two  partners  to  insure 
in  their  names  does  not  authorize  an  insurance  in  the  names 
of  themselves  and  a  third  person  afterwards  taken  into 
partnership  with  them,  (o)  So,  if  there  be  a  firm,  A.,  B. 
and  C,  and  it  has  an  agent  D.,  and  C.  retires  from  the  firm, 
though  D.  may  continue  the  agent  of  the  firm,  he  is  no 
longer  the  agent  of  C,  but  only  of  A.  and  B.  (p) 1  In 
Tosher  v.  Shepherd,  two  partners  had  appointed  an  agent 
for  four  years  and  a  half.  One  of  the  partners  having  died 
before  the  expiration  of  that  time,  it  was  held  that  the  sur- 
viving partner  was  under  no  obligation  to  continue  the  agent 

in  his  employ.  The  court  held  that  the  appointment 
["114]  had  reference  to  the  existing  partnership  only,  *and 

that  the  contract  was  intended  to  be  for  four  years 
and  a  half,  provided  the  parties  so  long  lived,  {g) 


(o)  Barron  v.  Fitzgerald,  6  Bing. 
N.  C.  201.  But  of  course  a  con- 
tinuance of  the  authority  may  be 
inferred  from  the  dealings  of  the 
person  giving  it  with  the  changing 
firms.  See  Pariente  v.  Lubbock,  8 
De  G.  Mc.  &  G.  5. 

(p)  See  Jones  v.  Shears,  4  A.  & 
E.  832. 

lrThe  agent  of  a  partnership  is 
not  the  agent  of  the  partners  indi- 
vidually, but  of  the  firm  collect- 
ively. Johnston  v.  Brown,  18  La. 
Ann.  330. 

Dissolution  revokes  the  power  of 
any  agent  previously  acting  for  the 
firm.  Bank  of  Montreal  v.  Page, 
98  111.  109. 

A  revocation  of  the  agency  is 
effected  by  the  death  of  the  prin- 
cipal or  a  member  of  the  firm,  even 
though  the  agency  arises  from  the 
fact  of  tbe  existence  of  a  partner- 
ship between  the  principal  and 
agent.  Travers  v.  Crane,  15  Cal. 
12;  Marlett  v.  Jackman,  3  Allen, 
287;  Johnson  v.  Wilcox,  25  Ind.  182. 


See,  however,  Bank  of  N.  Y.  v. 
Vanderhorst,  32  N.  Y.  553,  where 
it  was  held  that  where  an  agent  of 
a  firm,  authorized  to  draw  its 
moneys  from  the  bank  and  apply 
the  same  to  the  uses  of  the  firm, 
continues  to  do  so  after  the  death 
of  one  of  the  members  thereof, 
without  knowledge  on  his  part,  or 
on  the  part  of  the  bank,  of  such 
death,  he  acts  within  the  scope  of 
his  authority,  and  his  acts  bind  the 
firm.  See,  also,  "Wilson  v.  Stew- 
art, 5  Pa.  L.  J.  Rep.  450. 

So  a  dissolution  of  a  partner- 
ship revokes  a  power  of  attorney 
given  by  the  firm.  Schlater  v. 
Winpenny,  75  Penn.  St.  321.  But 
a  mere  change  in  the  name  of  a 
firm,  when  the  firm  under  a  new 
name  is  composed  of  tbe  same 
members  as  that  under  the  old  one, 
does  not  revoke  an  agency  con- 
ferred upon  it.  Billingsley  v.  Daw- 
son, 27  Iowa,  210. 

(q)  Tasker  v.  Shepherd,  6  H.  & 
N.  575. 


240 


CH.  VI,  SEC.  II.]       GENERAL    NATURE    OF    A   PARTNERSHIP.        *114: 

Offices  held  by  a  firm. —  Upon  the  same  principle  — 
namely,  that  the  name  of  the  firm  is  only  a  conventional 
name  for  its  members  —  if  a  firm  is  appointed  by  its  mer- 
cantile name  to  any  office,  e.  c/.,  the  office  of  trustee,  guard- 
ian or  executor,  the  partners  in  the  house  at  the  time  of  its 
appointment  to  the  office  are  the  persons  who,  in  point  of 
law,  are  considered  as  filling  it.  (r)  The  firm,  as  such,  can- 
not hold  an  office;  nor  can  rights,  personal  to  the  members 
of  a  given  firm,  be  exercised  by  new  members  who  may  be 
introduced  into  it,  (s)  nor  by  its  successors  in  business;  (f) 
unless  they  are  clearly  intended  to  exercise  them. 

Protection  of  name. —  The  name  by  which  a  firm  is 
known  is  not  of  itself  the  property  of  the  firm,  and  there 
is  nothing  at  common  law  to  prevent  persons  from  carrying 
on  business  in  partnership  under  any  name  they  please  l 
(unless  perhaps  it  purports  to  be  the  name  of  a  corpora- 
tion), (u) 

But  one  firm  is  not  at  liberty  to  mislead  the  public  by  so 
using  the  name  of  another  firm  as  to  pass  off  themselves  or 
their  goods  for  that  other,  or  for  the  goods  of  that  other,  (x) 

(r)  De  Mazar  v.  Pybus,  and  Knud-  the  firm's  name,  is  no  defense  to 

son  v.  Pybus,  4  Ves.  649.  an  action  by  such  owner  against  a 

(s)  See  Barron  v.   Fitzgerald,  6  railroad  corporation  for  loss  of  or 

Bing.  N.  C.  201 :  Stevens  v.   Ben-  damage  to  the  property  while  in 

ning,  1  K.  &  J.  168.  transit.     The  said  act,  being  highly 

(t)  Hole  v.  Bradbury,  12  Ch.  D.  886.  penal,  will  not  be  extended  by  im- 

1  See  ante.  plication  or  construction  to  cases 

The  law  of  Louisiana,  prohibit-  not  within  the  terms  of  the  act 

ing  an  individual  from  doing  busi-  fairly  interpreted.     Wood  v.   Erie 

ness  under  a  firm  name,  does  not  Railway  Company,  72  N.  Y.  196. 

affect  a  person  residing  in  another  (u)  See  as  to  this,  mite,  p.  93. 

state.      Succession  of   Bofenchen,  (x)  See  Lee  v.  Haley,  5  Ch.  155 ; 

29  La.  Ann.  711.  Massam  v.   Thorley's  Cattle  Food 

The  fact  that  the  owner  and  ship-  Co.  12  Ch.  D.  748,  reversing  S.  C. 

per  of  property  is  doing  business  6  Ch.  D.  574 ;  Burgess  v  Burgess,  3 

in  the  name  of  a  firm  in  violation  D.    G.    M.    896.      See,  also,  Singer 

of  the  provisions  of  the  act  of  New  Machine  Manufactures  v.  Wilson, 

York  (ch.  281,  Laws  of  1833),  "to  3  App.    Ca.  376,  and  Singer  Man. 

prevent  persons  transacting  busi-  Co.  r.  Loog,  18  Ch.  D.  395,  and  8 

ness  under  fictitious  names,"  and  App.  Ca.  15 ;  Braham  v.  Beachim, 

that  the  property  is  marked  with  7  Ch.  D.  848. 

Vol.  I— 16  241 


*115  CONTRACTS    OF   PARTNERSHIP.  [BOOK   I. 

Moreover,  an  established  firm  can  prevent  a  company  from 
registering  itself  under  the  name  of  the  firm,  (y) 

Name  and  trade-mark. —  The  name  of  a  firm  may  more- 
over be  registered  as  a  trade-mark  for  particular  classes  of 
goods  (46  and  47  Yict.  ch.  57,  §§  64  and  65) ;  and  if  so  regis- 
tered it  is  capable  of  being  assigned  in  connection  with  the 
good-will  of  the  firm  (§  70).  Eegistration  is  equiva- 
[*115]  lent  to  antecedent  use  (§  75).  Provision  is  made  *to 
prevent  the  improper  registration  of  the  same  trade- 
mark by  several  persons  (§  72). 

Changes  and  mistakes  in  name  of  a  firm. —  Speaking 
generally,  the  rights  and  liabilities  of  a  firm  cannot  be  af- 
fected by  a  change  in  its  name  unaccompanied  by  a  change 
amongst  its  members.  Kegarded  as  a  trade-mark,  and  in 
connection  with  good-will,  a  change  in  name  may  be  at- 
tended by  important  consequences,  but  in  other  respects  it 
matters  little ;  for  so  long  as  there  is  no  change  amongst 
the  members,  the  different  names  they  assume  all  denote  the 
same  persons.  It  must  not,  however,  be  concluded  that 
one  partner  can  bind  his  copartners  by  using  a  name  under 
which  he  and  they  do  not  carry  on  business,  and  the  use 
of  which  they  have  not  sanctioned ;  and  as  will  be  seen 
hereafter,  he  has  no  power  so  to  bind  them.  0)  Moreover, 
a  mistake  in  the  name  of  a  firm  may  be  important;  e.  g., 
under  the  Copyright  Act,  if  the  owners  of  a  copyright  carry 
on  business  in  partnership  and  are  not  registered  properly, 
they  cannot  sue  for  an  infringement,  (a) 

2.  In  legal  proceedings. 

Actions  by  and  against  firms. —  The  non-recognition  of 
the  firm,  in  a  mercantile  sense,  was  very  apparent  when  it 
had  to  sue  or  be  sued  at  law,  for: 

(y)  Hendriks  v.  Montagu,  17  Ch.    ton,  9  M.  &  W.  284,  and  other  cases 
D.  638.     The  Copyright  Acts  have    of  that  class,  noticed  infra,  book  ii, 
no  application  to  mere  names.   See    ch.  1,  §  5. 
Maxwell  v.  Hogg,  2  Ch.  307.  (a)  Low  v.  Routledge,  1  Ch.  42. 

(z)  See  as  to  this,  Kirk  v.  Blur- 

242 


CH.  VI,  SEC.  II.]   GENERAL  NATURE  OF  A  PARTNERSHIP.    *116 

1.  A  firm  could  neither  sue  nor  be  sued  otherwise  than  in 
the  names  of  the  partners  composing  it.  (5) 

2.  Consequently,  no  action  could  be  brought  by  the  firm 
against  one  of  its  partners,  nor  by  one  of  its  partners  against 
it;  for  in  any  such  action  one  person,  at  least,  would  appear 
both  as  plaintiff  and  as  defendant,  and  it  was  considered 
absurd  for  any  person  to  sue  himself  even  in  form,  (c) 

3.  For  the  same  reason,  one  firm  could  not  bring 

an  action  ^against  another  if  there  were  one  or  more  [*116] 
partners  common  to  both  firms,  (d) 

So,  if  one  member  of  a  firm  drew  a  bill  on  the  firm,  and 
the  bill  was  accepted  in  the  name  of  the  firm,  the  drawer 
could  not  sue  the  firm  on  such  a  bill ;  for  he,  as  one  of  the 
firm,  was  liable  as  an  acceptor,  and  ought,  therefore,  to  be 
a  defendant  to  the  action  in  which  he  was  plaintiff,  (e) 

The  extent  to  which  these  rules  have  been  modified  by 
modern  legislation  will  be  examined  hereafter,  {f)  They 
are  alluded  to  here  in  order  to  show  the  logical  conse- 
quences which  flow  from  the  non-recognition  of  any  such 
entity  as  a  firm.  In  bankruptcy,  however,  the  firm  is  often 
recognized,  as  will  be  seen  hereafter. 

Effect  of  change  in  a  firm  on  its  rights  and  liabilities. — 
Another  most  important  consequence  of  the  principle  that 
on  any  change  amongst  the  persons  composing  a  partner- 
ship there  is  in  fact  a  new  partnership,  and  not  a  mere  con- 
tinuation of  the  old  one,  is  that  although,  upon  a  change  in 
a  firm,  it  may  be  agreed  between  the  members  of  the  old 
and  new  firms  that  the  rights  and  obligations  of  the  old 

(&)  See  infra,  book  ii,  ch.  3.     A  (d)  Bosanquet  v.  Wray,  6  Taunt, 

corporation  may  sue  in  a  name  it  597 ;    Mainwaring    v.   Newman,  2 

has  acquired  by  reputation.      The  Bos.  &  P.  120. 

Dutch  West  India  Co.  v.  Moses,  1  (e)  See  Neale  v.  Turton,  4  Bing. 

Str.  612.     As  to  actions  by  individ-  149.     Compare  Beecham  v.  Smith, 

uals  who  have  assumed  to  act  as  a  E.  B.  &  E.  442,  where  the  note  sued 

corporation,  see  Coochu.  Goodman,  upon  was  the  several  note  of  the 

2  Q.  B.  580.  defendants. 

(c)  De  Tastet  v.  Shaw,  1  B.  &  A.  (/)  See  infra,  book  ii,  ch.  3. 
664;  Richardson  v.  The  Bank  of 
England,  4  M.  &  Cr.  171,  172. 

243 


*117  CONTRACTS  OF  PARTNERSHIP  [BOOK  I. 

shall  devolve  upon  the  new  partners,  this  has  no  effect 
upon  third  parties  unless  they  accede  to  it.  As  to  them  it 
is  res  inter  alios  acta;  and  there  is  no  principle  by  virtue  of 
which  the  existing  rights  or  obligations  of  non-partners  can 
be  affected,  either  for  better  or  for  worse,  by  agreements 
to  which  they  are  strangers.  This  subject  will  be  alluded 
to  hereafter.  (g) 

3.  Partnership  disabilities. 

Disabilities  of  one  partner  affecting  the  firm. —  Speak- 
ing generally,  no  person  can  do  by  his  agent  what  he  can- 
not do  himself;  and  although  each  member  of  a,  firm  is  a 
principal  as  regards  his  own  conduct,  he  is  the  agent  of  his 
copartners;  and  he  cannot  therefore  do  for  the  firm  what 
they  cannot  do.  In  other  words,  the  disability  of  one  of 
the  partners  affects  the  whole  firm.  Illustrations  of 
[*117]  this  doctrine  will  *be  found  in  book  II,  chapter  III, 
section  1,  relating  to  defenses  to  actions  by  partners. 
Further  illustrations  are  afforded  by  those  cases  which  pre- 
clude a  firm  of  solicitors  or  any  of  its  members  from  doing 
work  which  one  of  the  members  cannot  do.  (h) 

Again,  there  are  rules  in  bankruptcy  which  prevent  the 
partners  of  the  trustee,  registrar  or  official  receiver  from 
doing  various  acts  which  they  might  do  if  they  were  not  in 
partnership  with  him.  (i) 

By  50  and  51  Yictoria,  chapter  58,  section  40,  no  inspector 
of  a  coal  mine  can  be  a  partner  in  it,  nor  can  a  partner  of 
any  land  agent,  mining  engineer,  etc.,  be  an  inspector. 

4.  As  regards  sureties  and  securities. 

Effect  of  change  in  a  firm  on  the  position  of  its  sure- 
ties.—  It  is  a  principle  of  the  law  of  suretyship  that  any 
act  on  the  part  of  the  principal  creditor  which  alters  the 

(g)  See  infra,  book  ii,  ch.  2,  §  3.        (i)  See  Bank.  Act,  1883,  §§  88,  116 
(h)  See  Duke  of  Northumberland    (2):  sched.  1,  r.  26;  Bank.  E.  1886, 

v.  Todd,  7  Ch.  D.  777,  as  to  swear-    r.  56  (2),  113,  114. 

ing  affidavits. 

244 


CH.  VI,  SEC.  II.]   GENERAL  NATURE  OF  A  PARTNERSHIP.    *118 


risk  of  the  surety  without  his  consent  discharges  him  from 
future  liability,  (k) 

Sureties  to  a  Arm. —  If,  therefore,  a  person  becomes 
surety  to  a  firm,  it  is  important  to  ascertain  whether  he 
clearly  contemplated  changes  in  the  firm  and  agreed  to  be- 
come surety  to  a  fluctuating  body  or  not.  If  he  did,  his 
liability  is  not  discharged  by  any  change  amongst  the  mem- 
bers constituting  the  partnership  at  the  time  he  became 
surety  ;(l)  but  if  no  such  intention  can  be  shown,  then  a 
contract  of  suretyship  entered  into  with  a  firm  will  be 
deemed  to  be  binding  so  long  only  as  the  firm  remains  un- 
changed (see  19  and  20  Vict.  ch.  97,  §  4,  on  the  next 
page);  "-and  consequently  any  change  in  it,  whether  [*118] 
by  the  death  (m)  or  the  retirement  (n)  of  a  partner, 
or  by  the  introduction  of  a  new  partner  (o),  immediately 
puts  an  end  to  the  surety's  liability  so  far  as  subsequent 
events  are  concerned.1     In  all  such  cases  the  surety's  posi- 


(7c)  See,  as  to  sureties,  the  note 
to  Arlington  v.  Merrick,  2  Wms. 
Sauna".  414.  As  to  the  discharge 
of  apprentices  and  their  sureties  by 
a  change  in  the  firm  to  which  they 
are  bound,  see  Lio\Td  v.  Blackburne, 
9  M.  &  W.  363 ;  R.  v.  St.  Martin's, 
2  A.  &  E.  655. 

(0  Pease  v.  Hirst,  10  B.  &  C.  122; 
Metcalf  v.  Bruin,  12  East,  400,  and 
2  Camp.  422.  And  see  Barclay  v. 
Lucas,  1  T.  R.  291,  note;  Kipling 
v.  Turner,  5  B.  &  A.  261.  In  Pari- 
ente  v.  Lubbuck,  8  Da  G.  Mc.  &  G. 
5,  an  authority  to  a  firm  of  con- 
signees, to  recognize  the  consign- 
or's son  as  his  agent,  was  held  to 
continue,  notwithstanding  changes 
in  the  firm,  as  long  as  the  consignor 
continued  his  business  connection 
with  the  firm. 

(m)  Holland  v.  Teed,  7  Ha.  50; 
Strange  v.  Lee,  3  East,  484 ;  Weston 
v.  Barton,  4  Taunt.  673;  Pemberton 
v.   Oakes,  4  Russ.   154;  Sinison  v. 


Cooke,  1  Bing.  452;  Chapman  v. 
Beckington,  3  Q.  B.  703;  Backhouse 
v.  Hall,  6  N.  R.  98,  Q.  B. 

(u)  Myers  v.  Edge,  7  T.  R.  254 ; 
Dry  v.  Davey,  10  A.  &  E.  30.  And 
see  Solvency  Mutual  Guarantee  Co. 
v.  Freeman,  7  H.  &  N.  17. 

(o)  Wright  v.  Russell,  2  Wm. 
Blacks.  934. 

1  Where  a  mortgage  is  given  to  a 
firm  to  secure  advances  and  the 
firm  was  subsequently  dissolved  by 
death  and  a  new  firm  formed  by 
the  surviving  partner  and  others, 
such  mortgage  will  not  inure  to 
the  benefit  of  the  successor  of  the 
old  firm,  notwithstanding  a  verbal 
agreement  to  extend  the  obligation 
of  mortgage  so  as  to  include  debts 
incurred  to  the  new  firm.  Taylor 
v.  Post,  30  Hun  (N.  Y.),  446. 

A  mortgage  given  to  partners  to 
secure  them  for  goods  sold  and  to 
be  sold  by  them  to  a  party,  which, 
after  dissolution,  was  assigned  to 


245 


*118  CONTRACTS  OF  PARTNERSHIP.  [BOOK  I. 

tion  and  risk  are  altered,  and  whether  he  has  in  fact  been 
damnified  by  the  change  or  not,  he  has  a  right  to  say  non 
in  hceo  feeder aveni. 

Sureties  for  a  firm. —  Similar  doctrines  apply  to  cases 
where  a  person  becomes  surety  for  the  conduct  of  a  firm,  (p)1 
Moreover,  a  person  who  becomes  surety  for  another  is  not 
necessarily  surety  for  his  conduct  as  a  partner,  and  obvi- 
ously not  for  the  conduct  of  himself  and  his  copartner,  (q) 

Effect  of  incorporation. —  Again,  if  a  person  becomes 
surety  to  several  people  for  the  conduct  of  a  servant  in 
their  employ,  and  those  people  are  afterwards  incorporated, 
the  surety  is  discharged ;  for  the  person  created  by  the  act 
of  incorporation  is  different  from  the  persons  in  whose  em- 
ploy the  servant  was,  and  with  whom  the  surety  con- 
tracted, (r)  On  precisely  similar  grounds  it  is  conceived 
that  a  person  who  becomes  surety  to  a  corporation  for  the 
conduct  of  one  of  its  servants  would  be  discharged  by  the 
amalgamation  of  that  corporation  with  another;  for  the  two 

one  of  the  partners  as  his  share  of  ing  the  time  of  payment  without 

the    assets,   under   an    agreement  the  assent  of  B.,  quaere,  whether 

that    it    should   also  secure   such  B.  is  not  to  be  regarded  as  having 

partner  for  goods  thereafter  sold  been  a  mere  surety  for  the  debt, 

by  him  to  the  mortgagor,  held,  to  and  as  released  by  the  taking  of  the 

be  a  valid  security  when  enforced  notes.     Gates  v.  Hughes,  44  Wis. 

by  foreclosure,  both  for  the  firm  333. 

debts  and  individual  debts  subse-  A  sui-ety  on  a  note  given  after 
quently  contracted  by  the  mort-  the  dissolution  of  a  firm,  by  one  of 
gagee  upon  the  security  of  the  the  members  of  the  firm,  in  re- 
mortgage.  Ferry  v.  Meckert,  32  newal  of  a  note  of  the  firm,  on 
N.  J.  Eq.  38.                            ■  which  also  he  was  surety,  may  re- 

(p)  Bellairs  v.  Ebsworth,  3  Camp,  cover  of  the  other  member  of  the 

53;    University   of  Cambridge    v.  firm  money  which  he  has  paid  in 

Baldwin,  5  M.  &  W.  580 ;  Simson  discharge    of    the    renewal    note. 

v.  Cook,  1  Bing.   452;   19  and  20  Leabo  v.  Goode,  67  Mo.  126. 

Vict.  ch.  97,  §  4.  (q)  The  London  Assurance  Co.  v. 

i  Where,  after  dissolution  of  the  Bold,  6  Q.  B.   514;    Montifiore  v. 

firm  of  A.  and  B.,  A.  assumes  as  Lloyd,   15  C.   B.  N.  S.  203,  where 

between  himself  and  B.  payment  the  partnership  was  known  to  the 

of  a  firm  debt,  and  the  creditor,  surety. 

with  knowledge  of   that  arrange-  (r)  Dance  v.    Girdler,    1   Bos.  & 

ment,  accepts  notes  of  A.  postpon-  Pull.  N.  R.  34. 

246 


CH.  VI,  SEC.  II.]   GENERAL  NATURE  OF  A  PARTNERSHIP.   *119 

together  would  be  a  different  body  from  either  of  its  amal- 
gamated members,  (s)  But  a  mere  change  of  name  conse- 
quent on  registration  with  limited  liability  has  not  this 
effect,  (t) 

*Mercantile  Law  Amendment  Act. — The  doctrines  [*119] 
established   in  the  foregoing   cases  have  been  ex- 
pressly sanctioned  by  the  legislature;  it  being  enacted  by 
the  Mercantile  Law  Amendment  Act  (u)  that : 

"  No  promise  to  answer  for  the  debt,  default  or  miscarriage  of  another, 
made  to  a  firm  consisting  of  two  or  more  persons,  or  to  a  single  person 
trading  under  the  name  of  a  firm,  and  no  promise  to  answer  for  the 
debt,  default  or  miscarriage  of  a  firm  consisting  of  two  or  more  persons, 
or  of  a  single  person  trading  under  the  name  of  a  firm,  shall  be  binding 
on  the  person  making  such  promise  in  respect  of  anything  done  or 
omitted  to  be  done  after  a  change  shall  have  taken  place  in  any  one  or 
more  of  the  persons  constituting  the  firm  or  in  the  person  trading  under 
the  name  of  a  firm,  unless  the  intention  of  the  parties  that  such  promise 
shall  continue  to  be  binding  notwithstanding  such  change  shall  appear 
either  by  express  stipulation  or  by  necessary  implication  from  the  nature 
of  the  firm  or  otherwise." 

Effect  of  a  change  in  firm  on  its  securities. —  Questions 
nearly  akin  to  those  just  alluded  to,  arise  where  securities 
have  been  deposited  with  bankers  to  secure  future  advances, 
and  a  change  has  occurred  in  the  banking  firm  before  the 
making  of  some  of  the  advances.  Prima  facie,  the  securi- 
ties extend  only  to  those  advances  which  are  made  by  the 
firm  whilst  its  members  continue  the  same  as  when  the 
securities  were  deposited,  (x)  And  similarly,  if  a  partner 
pledges  his  separate  property  for  future  advances  to  be  made 
to  his  firm,  and  he  afterwards  dies,  an  advance  made  after 
his  death  to  his  surviving  partners  will  not  be  chargeable 

(s)  In  The  Eastern  Union  Rail.  Co.  (t)  Groux's  Soap  Co.  v.  Cooper,  8 

v.  Cockrane,  9  Ex.   197,  and  The  C.  B.  N.  S.  800. 

London,  Brighton  &  South  Coast  (u)  19  and  20  Vict.  ch.  97,  §  4. 

Rail.    Co.   v.  Goodwin,  3  Ex.  320,  See,  on  this  section,  Backhouse  v. 

the  surety  was  not  discharged;  but  Hall,  6  B.  &  Sm.  507,  and  6  N.  R. 

the  statute  amalgamating  the  two  98,  Q.  B. 

companies  contained    an    express  (x)  See  per  Lord   Eldon   in   Ex 

provision  on  the  subject.  parte  Kensington,  2  V.  &  B.  83. 

247 


*120  CONTRACTS  OF  PARTNERSHIP.         [BOOK  L 

against  the  property  pledged,  {y)  It  has  even  been  held  that 
if  a  person  deposits  deeds  as  a  security  for  advances  to  be 
made  to  him,  the  security  does  not  cover  advances  made  to 
him  and  his  partners,  (z) 

Equitable  mortgagees.—  However,  it  is  established  that 
an  equitable  mortgage  by  deposit  of  title  deeds  may  be  ex- 
tended, even  by  parol,  to  cover  advances  made  after  a  change 
in  the  firm  with  which  the  deeds  are  lodged,  {a)  And 
[*120]  although  a  legal  mortgage  to  a  firm  ^cannot  be  con- 
verted into  an  equitable  mortgage  merely  by  parol,  (b) 
it  may  be  so  converted  by  a  written  agreement,  and  may 
as  an  equitable  mortgage  become  available  as  a  security 
for  advances  made  after  a  change  in  the  firm  to  which  the 
legal  mortgage  was  originally  given,  (c)  Owing  to  these 
doctrines  a  security  given  to  a  firm  for  advances  to  be 
made  by  it  is,  upon  a  change  in  the  firm,  readily  made  a 
continuing  security;  and  a  slight  manifestation  of  intention 
on  the  part  of  the  borrower  that  it  should  so  continue  will 
enable  the  new  firm  to  hold  the  securities  until  the  advances 
made  by  itself  as  well  as  those  made  by  the  old  firm  have 
been  repaid,  {d) 

Lien  of  solicitors.—  The  lien  which  a  firm  of  solicitors 
has  on  the  deeds,  etc.,  of  its  clients  is  not  lost  by  a  mere 
change  in  the  firm,  (e)  But  a  solicitor's  lien  only  attaches 
where  the  papers  on  which  the  lien  is  claimed  have  come 
to  the  possession  of  the  very  persons  to  whom  the  client  is 
legally  indebted ;  whence  it  follows  that  papers  which  come 

(y)  Bank  of  Scotland  v.  Christie,  And  see  Ex  parte  Nettleship,  2  M. 

8  CI.  &  Fin.  214.  D.  &  De  G.  124. 

(z)  Ex  parte  Mackenna,  3  De  G.  (6)  Ex  parte    Hooper,    2    Rose, 

F.  &  J.  629;  Ex  parte  Freen,  2  Gl.  328. 

<fc  J.  24S.     See,  too,  Chuck  v.  Freen,  (c)  Ex  parte  Parr,  4  D.  &  C.  436. 

1  Moo.  &  M.  259.     These  cases  turn  (d)  See   Ex  parte  Kensington,  2 

on  the  terms  of  the  memoranda  of  Ves.  &  B.  79 ;  Ex  parte  Marsh,  2 

deposit,  and  on  the  circumstances  Rose,  239 ;  Ex  parte  Loyd,  3  Deac. 

undei'    which    the    securities    are  305 ;  Ex  parte  Alexander,  1  Gl.  & 

given.  J.  409. 

(a)  Ex  parte  Lloyd,   1  Gl.  &  J.  (e)  Pelly  v.  Wathen,  7  Ha.  351, 

389;  Ex  parte  Lane,  De  Gex,  300.  affirmed  1  De  G.  Mc.  &  G.  16. 

248 


CH.  VI,  SEC.  II.]       GENERAL    NATURE    OF   A   PARTNERSHIP.        "*12Q 


into  the  possession  of  a  firm  after  the  introduction  of  a  new 
partner  (f)  or  the  retirement  of  an  old  one  {g)  cannot  be 
retained  for  a  debt  due  before  the  change  in  the  firm  took 
place.  The  death  of  a  partner  is  not,  however,  it  is  con- 
ceived, equivalent  to  retirement,  for  the  survivors  become 
the  legal  creditors;  and  there  is,  therefore,  no  reason  why 
they  should  not  have  a  lien  for  a  debt  due  to  them  and  their 
deceased  partner  on  papers  coming  into  their  possession 
after  his  death. 

A  dissolution  of  a  partnership  between  solicitors  operates 
as  a  discharge  by  them  of  their  client;  and  any  lien  they 
may  have  on  his  papers  is  subject  to  his  right  to  have  them 
handed  over  to  a  fresh  solicitor,  for  the  purpose  of  enabling 
him  to  finish  business  of  the  client  pending  at  the  time  of 
dissolution,  (h) l 


if)  Re  Forshaw,  16  Sim.  121; 
Pelly  v.  Wathen,  7  Ha.  351. 

(g)  Vaughan  v.  Vanderstegen,  2 
Drew.  409. 

(7i)  Griffiths  v.  Griffiths,  2  Ha.  587 ; 
Rawlinson  v.  Moss,  7  Jur.  N.  S. 
1053,  V.-C.  W. 

1  Partnerships  between  attorneys 
are  subject  to  the  incidents  of  mer- 
cantile partnerships ;  and  one  part- 
ner is  liable  upon  the  contracts 
made  by  the  other  within  the  scope 
of  the  partnership  business,  and  for 
his  negligence  in  respect  to  a  part- 
nership contract,  and  a  right  of 
action  against  the  firm  survives 
against  the  survivor  alone.  Liv- 
ingston v.  Cox,  6  Pa.  St.  360. 

Where  a  partnership  exists  be- 
tween two  attorneys,  and  one  of 
them  receives  a  retaining  fee,  con- 
ducts the  trial  of  the  cause  and 
charges  the  fee  therefor  on  the 
books  of  the  firm,  the  presumption 
will  be  of  a  retainer  of  the  firm, 
and  that  the  fee  accrued  to  the 


firm.  Harris  v.  Pearce,  5  Brad. 
(111.)  622. 

If  attorneys  who  are  copartners 
accept  a  retainer  the  contract  is 
joint,  and  continues  to  the  termina- 
tion of  the  suit,  and  neither  can  be 
released  from  the  obligation  or  re- 
sponsibilities assumed,  either  by  a 
dissolution  of  their  firm,  or  by  any 
other  act  or  agreement  between 
themselves.  Walker  v.  Goodrich, 
16  111.  341.  See,  also,  Smyth  v. 
Harvie,  31  111.  62. 

A  dissolution  of  a  partnership  be- 
tween attorneys  does  not  affect  en- 
gagements made  during  partner- 
ship, so  far  as  their  clients  are 
concerned.  Walker  v.  Goodrich, 
supra. 

Where  a  claim  was  placed  in  the 
hands  of  two  attorneys,  who  were 
partners,  for  collection,  a  judgment 
obtained,  land  of  the  debtor  sold 
under  execution,  and  redemption 
made  from  the  sale  by  paying  the 
money  to  the  sheriff,  who  paid  it 


249 


*120 


CONTRACTS   OF   PARTNEESHIP. 


[BOOK   I. 


over  to  one  of  the  attorneys,  and     in  the  collection,  although  he  gives 


prior  to  the  redemption  the  copart- 
nership between  the  attorneys  was 
dissolved,  held,  that  both  of  the 
partners  were  liable  to  the  client 
for  the  money  thus  received  by  one 
of  them  after  dissolution.  Smyth 
v.  Harvie,  supra. 

So  attorneys  practicing  in  part- 
nership are  equally  responsible  for 
money  collected  and  not  paid  over, 
though  one  of  them  had  no  partici- 
pation in  that  particular  transac- 
tion. Dwight  v.  Simon,  4  La.  Ann. 
490. 

An  attorney  who  has  received 
notes  for  collection  is  individually 
responsible  for  care  and  diligence 


his  client  notice  that  he  has  associ- 
ated with  him  a  partner  who  at- 
tends to  the  collecting,  unless  the 
client  has  recognized  the  partner- 
ship in  the  transaction  of  his  busi- 
ness. Mardis  v.  Shackleford,  4 
Ala.  493. 

"When  two  attorneys  are  in  part- 
nership, and  one  receives  money, 
demand  on  him  is  a  demand  on 
both,  and  renders  both  liable. 
McFarland  v.  Crary,  8  Cow.  253. 

When  two  attorneys  are  in  part- 
nership, and  one  does  the  business 
of  a  client  unskilfully,  both  are 
liable  to  him  in  damages.  "Warner 
v.  Griswold,  8  Wend.  665. 


250 


"CHAPTER  ¥11.  [*iai] 

OF  THE  DURATION    OF  CONTRACTS  OF  PARTNERSHIP  —  OF 
PARTNERSHIPS  AT  WILL  AND  FOR  A  TERM. 

Partnerships  at  will  and  for  a  term  —  Prima  facie 
partnerships  are  at  will. —  A  contract  of  partnership  is 
determinable  at  the  will  of  any  one  of  the  persons  who 
have  entered  into  it,  provided  it  has  not  been  agreed  that 
the  contract  shall  endure  for  a  specified  time.  In  other 
words,  the  result  of  a  contract  of  partnership  is  a  partner- 
ship at  will,  unless  some  agreement  to  the  contrary  can 
be  proved,  (a) l  Such  an  agreement  may  be  established  as 
well  by  direct  evidence  as  by  implication  from  the  acts  of 
the  partners;  and  it  is  not  possible  to  lay  down  any  rule  by 
means  of  which  the  intention  of  the  partners  on  this  head 
can  be  certainly  ascertained  where  no  express  agreement 
has  been  come  to.  One  or  two  points,  however,  on  the  sub- 
ject have  been  decided  and  demand  notice. 

Effect  of  existence  of  debts. —  The  mere  fact  that  a  firm 
has  incurred  debts  and  charged  its  assets  for  their  payment 
is  no  proof  of  an  agreement  that  the  firm  shall  continue 
until  its  debts  are  paid,  for  those  debts  may  be  paid  as  well 
after  as  before  a  dissolution,  {b) 

Effect  of  taking  a  lease. —  Again,  the  fact  that  the  part- 
ners have,  for  partnership  purposes,  taken  land  on  lease  for 
a  term  of  years,  is  not  proof  of  an  agreement  that  the  part- 
nership between  them  shall  subsist  for  the  same  period. 
This   has  been  decided  on   several   occasions,  (c)  and  the 

(a)  See  per  Parke,  J. ,  in  Heath  v.        (b)  See  King  v.  The  Accumulative 
Sanson,   4  B.  &  Ad.  175;  Frost  v.     Assurance  Co.  3  C.  B.  N.  S.  151. 
Moulton,   21    Beav.    596,   and  the        (c)  Featherstonhaugh  v.  Fen  wick, 
cases  cited  in  the  following  notes.     17  Ves.  307 ;  Jefferys  v.  Smith,  1 

1  See  post.  Jac.  &  W.  301 ;  Alcock  v.  Taylor, 

251 


*122 


CONTRACTS    OF   PARTNERSHIP. 


[book  I. 


reasons  are  thus  given  by  Lord  Eldon  in  Crawshay  v.  Maule, 
a  leading  case  upon  the  subject: 

"  Without  doubt,  in  the  absence  of  express  there  may  be  an  implied 
contract  as  to  the  duration  of  a  partnership;  but  I  must  contra- 
[*122]  diet  all  authority  *if  I  say  that,  whenever  there  is  a  partnership, 
the  purchase  of  a  leasehold  interest  of  longer  or  shorter  duration 
is  a  circumstance  from  which  it  is  to  be  inferred  that  the  partnership 
shall  continue  as  long  as  the  lease.  On  that  argument  the  court,  hold- 
ing that  a  lease  for  seven  years  is  proof  of  partnership  for  seven  years, 
and  a  lease  of  fourteen  of  a  partnership  for  fourteen  years,  must  hold 
that  if  the  partners  purchase  a  fee-simple  there  shall  be  a  partnership 
forever.  It  has  been  repeatedly  decided  that  interests  in  land  purchased 
for  the  purpose  of  carrying  on  trade  are  no  more  than  stock  in  trade."  (d) 

Partnerships  continued  after  their  terms  are  expired. — 

Further,  where  a  partnership  originally  entered  into  for  a 
certain  number  of  years  is  continued  after  their  expiration, 
and  there  is  no  evidence  as  to  the  additional  time  for  which 
the  partnership  was  to  last,  it  is  treated  as  having  become  a 
partnership  at  will,  and  not  as  having  been  renewed  for 
another  definite  period,  (e) 1 


Taml.  506;  Burdon  v.  Barkus,  3 
Giff.  412,  and  on  appeal,  4  DeG.  F. 
&  J.  42. 

(d)  Crawshay  v.  Maule,  1  Swanst. 
509. 

(e)  Neilson  v.  Mossend  Iron  Co. 
11  App.  Ca.  208;  Featherstonhaugh 
v.  Fen  wick,  17  Ves.  ,307;  Booth  v. 
Parkes,  1  Moll.  465.  See,  also, 
Cuffe  v.  Murtagh,  7  Ir.  L.  R.  411. 

1  A  partnership  is  none  the  less 
ended  because  the  party  who,  upon 
final  settlement,  turned  over  to  the 
other  as  cash  certain  drafts  and 
notes,  is  to  be  responsible  for  his 
proportion  of  the  debts  uncollected 
thereon,  or  is  afterwards  employed 
by  the  other  in  making  collections ; 
nor  because  any  specific  property 
of  the  firm  remains  unsold,  wherein 
each  under  the  settlement  retains 
his  proportionate  share.  Sharpe  v. 
Johnston,  59  Mo.  557. 


In  such  case  the  one  employed 
as  collector  may  be  held  criminally 
for  embezzlement  of  proceeds  of 
such  drafts  or  notes  converted  to 
his  own  use.  Sharpe  v.  Johnston, 
supra. 

By  a  contract  of  dissolution  it 
was  provided  that  one  partner  was 
to  withdraw  and  be  paid  a  propor- 
tion  of  the  profits  when  the  esti- 
mates were  made.  Held,  that  such 
a  one  was  a  partner  until  the  esti- 
mates were  made.  Magill  v.  Merrie, 
5  B.  Mon.  168. 

Although  a  partnership  is  entered 
into  for  any  certain  time  it  may  be 
terminated  by  mutual  consent  any 
time  the  partners  may  choose. 
Bank  of  Montreal  v.  Page,  98  111. 
109. 

Partners  may  dissolve  inter  se  by 
consent;  but  in  order  to  relieve  a 
retiring  partner  from  liability  to 


252 


CH.  VII.]       DURATION    OF    CONTRACTS    OF   PARTNERSHIP. 


"123 


Duration    of  subpartnerships. —  So,  if   one   of  several 
partners  forms  a  subpartnersbip  with  a  stranger,  the  fact 


one  who  has  dealt  and  continues  to 
deal  with  the  firm  on  the  faith  of 
his  being  a  member,  notice  of  the 
dissolution  is  necessary.  Richards 
v.  Butler,  65  Ga.  593,  and  Richards 
v.  Hunt,  65  Ga.  842.     See  ante. 

A  written  agreement  for  the  dis- 
solution of  a  partnership  and  dispo- 
sition of  its  assets  merges  and 
supersedes  all  prior  and  contempo- 
raneous agreements  respecting  the 
same  matters.  Bragg  i\  Geddes,  93 
111.  39. 

A  resolution  by  the  partners  to 
wind  up  the  business  and  appoint 
one  of  their  number  or  a  third 
party  for  that  purpose  amounts  to 
a  dissolution.  Bank  of  Montreal  v. 
Page,  98  111.  109. 

A  partner  may  compel  compli- 
ance with  a  contract  of  dissolution 
and  recover  a  sum  due  him  under 
its  provisions.  Meredith  v.  Ewing, 
85  Ind.  410. 

Articles  of  dissolution  construed 
not  to  amount  to  a  sale  of  the  in- 
terest of  the  retiring  partner  to  the 
partner  continuing  the  business. 
Parker  v.  Merritt,  84  Ind.  154. 

Contract  for  dissolution  of  co- 
partnership construed.  Corning  v. 
Grohe,  65  la.  328. 

If  all  the  partners  agree  to  receive 
a  stranger  as  a  partner,  and  subse- 
quently one  partner  contracts  with 
him  to  share  with  him  his  profits 
in  the  firm,  and  the  other  partners 
are  fully  advised  thereof  and  make 
no  objection  thereto,  such  stranger 
will,  nevertheless,  continue  a  mem- 
ber of  the  partnership,  and  will  not 
cease  to  be  such  unless  it  appears 
expressly,  or  by  fair  implication 
from  the  conduct  of  such  partners, 


that,  after  such  contract,  there  was 
a  mutual  understanding  that  the 
stranger  was  to  be  no  longer  a 
member  of  the  firm.  Setzer  v. 
Beale,  19  W.  Va.  274. 

Where  articles  of  copartnership 
provided  for  an  annual  account  to 
be  taken,  and  the  payment  to  each 
partner  of  his  share  of  the  net  prof- 
its, and  just  before  the  expiration 
of  the  year  a  dissolution  was  agreed 
upon,  in  which  it  was  stipulated  in 
writing  that  an  account  should  be 
taken  between  the  parties,  to  in- 
clude only  moneys  drawn  by  the 
parties  since  "the  last  preceding 
settlement,"  as  provided  in  the  ar- 
ticles of  copartnership,  held,  that 
the  subsequent  agreement  must  be 
construed  with  the  original  articles, 
and  when  considered  with  them  re- 
quired the  account  to  include  all  of 
the  individual  accounts  of  each 
partner,  whether  for  moneys  re- 
ceived or  drawn  out,  or  for  any 
other  indebtedness  to  the  firm. 
Scroggs  v.  Cunningham,  81  111. 
110. 

A  provision  in  an  agreement  for 
the  dissolution  of  a  partnership, 
authorizing  one  of  the  partners 
alone  "to  sell  and  dispose  of  the 
property  and  assets  of  the  copart- 
nership, and  to  settle  all  its  con- 
cerns, collect  all  bills,  notes  or  book 
debts  due  the  concern,  and  for  that 
purpose,  or  for  any  other  purpose 
legally  connected  therewith,  to  use 
the  copartnership  name,"  confers 
upon  such  partner  authority  to  as- 
sign to  a  third  party  a  book  account 
due  to  the  concern.  Stanton  v. 
Lewis,  26  Conn.  444. 

A  contract  of   dissolution   pro- 


253 


*123  CONTRACTS   OF   PARTNERSHIP.  [BOOK   I. 

that  the  principal  partnership  has  been  entered  into  for  a 
certain  number  of  years  is  no  proof  that  the  subpartner- 
sbip  was  intended  to  last  for  the  same  number  of  years,  or 
for  as  many  of  them  as  were  unexpired  when  the  subpart- 
nership  was  formed.  (/) 

Implied  terms  of  duration.—  On  the  other  hand,  in 
Wheeler  v.  Van  Wart,  (g)  a  company,  the  duration  of  which 
was  not  expressly  fixed,  was  held  to  be  intended  to  last  at 
least  until  after  a  day  appointed  in  its  deed  of  settlement 
for  the  holding  of  a  general  meeting.  And  in  Reade  v.  Bent- 
ley,  (h)  it  was  considered  that  an  agreement  to  the  effect 
that  a  publisher  should  defray  the  expenses  of  a  work  writ- 
ten by  an  author,  and  should  receive  a  percentage  on  the 
gross  amount  of  sale,  and  that  the  net  profits  of  each 
edition  should  be  divided  equally  between  both  parties, 
amounted  to  an  agreement  for  a  joint  adventure  between 
the  author  and  the  publisher  for  so  long  as  might  be  neces- 
sary to  dispose  of  a  complete  edition ;  and  that  the  publi- 
cation of  every  new  edition  prolonged  the  partner- 
[*123]  ship  until  that  edition  should  *be  disposed  of;  but 
that  when  any  edition  was  exhausted  either  party 
was  free  to  discontinue  the  joint  adventure.1 

vided  that  the  liquidating  partner  accounts  and  pay  certain  debts  of 

"  should  from  time  to  time,  as  assets  the  firm.     One  of  them,  on  being 

may  be  received,"  pay  to  the  other  compelled  to  pay  a  debt  which  the 

a  fixed  sum,  "  to  place  him  on  equal  other  had  so  agreed  to  pay,  brought 

footing  with  "  the  former,  who  had  suit  on  this  agreement.     Held,  that 

received  a  certain  sum  before  dis-  it  was  not  a  condition  precedent  to 

solution,  and  divide  the  surplus  in  the  plaintiff's  right  to  recover  that 

the  proportion  of  one-third  to  the  he  should  prove  he  had  paid  all  the 

former  and  two-thirds  to  the  latter,  debts  which  he  had  assumed  by  the 

but  the  assets  proved  insufficient  to  agreement.      Martin   v.   Good,   14 

make  up  the  equality.     Held,  that  Md.  398. 

the  liquidating  partner  was  bound  ( /)  Frost  v.  Moulton,  21  Beav.  596. 

to  pay  the  other  one-third  of  the  (g)  9  Sim.  193 ;  and  better  in  2 

deficiency.  Lilly  v.  Kroesen,  3  Md.  Jur.  252. 

Ch.  83.  (h)  4  K.  &  J.  656 ;  and  3  id.  281. 

Two  partners  settled  their  busi-  l  If  a  partership  is  formed  for  a 

ness,  each  agreeing  to  take  certain  single   purpose   or   transaction  it 

254 


CH.  VII.]       DURATION    OF    CONTEACTS    OF    PARTNERSHIP.  *123 

Causes  of  dissolution. —  The  right  to  rescind  a  partner- 
ship contract  for  fraud  or  misrepresentation  will  be  dis- 
cussed hereafter  in  book  III;  and  the  right  to  dissolve  a 
partnership  or  to  have  it  dissolved,  and  the  consequences 
of  its  dissolution,  will  be  examined  in  book  TV. 

ceases  as  the  business  is  completed,    ness.     Bank  of  Montreal  v.  Page, 
or  when  an  end  is  put  to  the  busi-    98  111.  109. 

255 


[*124] 


•book  ii. 


OF  THE  EIGHTS  AND   OBLIGATIONS   OF  PART- 
NERS AS  REGARDS  NON-PARTNERS. 


CHAPTER  I. 

OF  THE  LIABILITIES  OF  PARTNERS  FOR  THE  ACTS  OF  EACH 

OTHER. 


Section  I. —  General   Principles   of  Agency  as  Applied 
to  Ordinary  Partnerships. 

Eacli  partner  the  agent  of  the  firm.— Every  member  of 
an  ordinary  partnership  is  its  general  agent  for  the  trans- 
action of  its  business  in  the  ordinary  way ; L  and  the  firm  is 


1  A  firm  may  appoint  one  mem- 
ber managing  partner.  Where  the 
managing  partner  of  a  mercantile 
firm  borrows  money  on  firm  note 
and  lender  believes  at  the  time  the 
money  loaned  is  to  be  used  in  part- 
nership business,  it  is  immaterial 
to  the  lender  whether  the  money  is 
actually  so  used  or  not,  or  whether 
the  other  members  of  the  firm  re- 
ceive any  benefit  therefrom  or  not ; 
and  he  may  recover  against  the 
other  members  of  the  firm  as  well 
as  against  the  managing  partner. 
Lindth  v.  Crowley,  29  Kan.  756 ;  S. 
C.  26  Kan.  47. 

Where  the  managing  partner  of 


a  firm  buys  goods  on  time  when  he 
ought  to  have  bought  for  cash  ac- 
cording to  the  terms  of  their  agree- 
ment, the  firm  and  each  member 
thereof  (out  of  his  individual  estate) 
is  liable  for  the.  debt,  even  though 
the  sellers  had  knowledge  of  the 
stipulation  against  the  credit ;  and 
this  whether  the  partner  sought  to 
be  charged  derived  any  individual 
advantage  from  the  enterprise  or 
not.  Johnston  v.  Bernheim,  86  N. 
C.  339. 

The  managing  partner  intrusted 
with  the  winding  up  of  the  busi- 
ness, and  authorized  by  agreement 
to  trade  any  part  of  the  assets  and 


256 


CH.  I,  SEC.  I.]  LIABILITIES    OF   PARTNERS. 


*12± 


responsible  for  whatever  is  done  by  any  of  the  partners 
when  acting  for  the  firm  within  the  limits  of  the  authority 
conferred  by  the  nature  of  the  business  it  carries  on.  (a) l 


do  all  and  anything  for  settling  its 
affairs  that  may  be  deemed  expedi- 
ent, is  authorized,  on  borrowing 
money  to  pay  a  firm  debt,  to  pledge 
the  notes  of  the  firm  as  collaterals 
to  secure  not  only  the  new  indebt- 
edness so  created,  but  also  a  prior 
firm  indebtedness  to  the  same  cred- 
itor. Smith  v.  Dennison,  101  111. 
531. 

The  authority  of  managing  part- 
ner to  make  loans,  execute  mort- 
gages, and  to  secure  the  same  "  on 
such  part  of  the  premises  as  he 
may  deem  most  advisable,"  consid- 
ered in  Morse  v.  Eichmond,  97  111. 
303;  S.  C.  6  Brad  w.  166. 

The  managing  partner  of  a  dis- 
solved partnership  has  authority  in 
good  faith  to  insure  the  firm  prop- 
erty, and  may  charge  the  firm  as- 
sets to  refund  the  premiums  paid 
for  such  insurance  by  a  third  party 
at  his  request ;  such  premiums  are 
a  part  of  the  expense  of  managing 
the  property,  and  are  preferred 
claims  against  the  firm  assets,  and 
are  not  affected  by  the  statute  of 
limitations  until  a  settlement  of  the 
partnership  accounts  has  been 
made.  Conrad  v.  Buck,  21  W.  Va. 
396. 

The  managing  partner  of  a  firm 
is  competent  to  put  an  end  to  terms 
of  credit  of  a  sale  and  agree  to  a 
cash  payment.  Eeid  v.  Smith,  2 
Ont.  69 ;  S.  C.  2  Can.  L.  T.  305 ;  18 
Can.  L.  J.  (N.  S.)  205. 

AVhere  a  partnership  was  formed 
between  A.  &  B.  as  one  member, 
C.  &  D.  another,  and  E.,  F.  &  G. 
a  third,  each  member  putting  in 
one-third  of  the  capital,  and  to 
Vol.  I— 17  257 


share  alike  in  profits  and  losses, 
and  E.  was  made  general  manager 
of  the  business,  and  heavy  losses 
were  sustained  by  his  mismanage- 
ment, it  was  held,  on  bill  to  wind 
up  the  partnership,  that  E.  alone 
was  liable  to  the  other  members  of 
the  firm  for  his  negligence  and 
mismanagement,  and  that  E.,  F.  & 
G.  were  not  jointly  liable  therefor. 
Fordyce  v.  Shriver,  115  111.  530. 

The  superintendent  of  a  firm  will 
not  be  required  to  account  for  a 
loss  in  the  purchase  of  an  old  stock 
of  goods  on  overvaluation  where 
he  was  not  responsible  for  such 
purchase.  Fordyce  v.  Shriver,  115 
111.  530. 

As  to  the  extent  of  the  power  of 
a  firm  manager  in  a  planting  part- 
nership to  apply  the  crop  to  an  ad- 
ditional supply  bill,  see  Morgan  v. 
Pierce,  59  Miss.  210. 

Where  one  partner  was,  by  the 
articles,  the  general  manager,  and 
upon  the  death  of  another  partner 
his  executor  consented  to  the  con- 
tinuance of  the  business,  it  was  held 
that  the  manager  became  the  agent 
of  the  executor  as  well  as  of  the 
other  surviving  member.  Patter- 
son v.  Lilly,  90  N.  C.  82. 

(a)  The  case  is  different  with 
mere  part-ownerships.  Barton  v. 
Williams,  5  B.  &  A.  395;  Helme  v. 
Smith,  7  Bing.  709. 

1  See  London,  etc.  Society  v. 
Hagerstown,  etc.  Bank,  36  Penn. 
St.  498;  Norton  v.  Thacher,  8  Neb. 
186 ;  Davis  v.  Richardson,  45  Miss. 
489;  Capelle  v.  Hall,  12  N.  B.  R.  1; 
Boardman  v.  Adams,  5  Iowa,  224 ; 
Abraham    v.    Hall,    59    Ala.    386; 


*124 


EIGHTS   AND    OBLIGATIONS. 


[BOOK   II. 


Whatever,  as  between  the  partners  themselves,  may  be  the 
limits  set  to  each  other's  authority,  every  person  not  ac- 


Morse  v.  Richmond,  97  111.  303; 
S.  C.  6  Bradw.  166 ;  Richardson  v. 
Thacker,  1  Tex.  App.  (Civ.)  55; 
Rhodius  v.  Storey,  1  id.  143;  Han- 
son v.  Dodge,  134  Mass.  273 ;  Wills 
v.  Cutler,  61  N.  H.  405 ;  Higgins  v. 
Armstrong,  10  Pac.  Rep.  232  (a 
mining  partnership);  McClure  v. 
Hill,  36  Ark.  268;  Davis  v.  Black- 
well,  5  Brad  w.  32 ;  Gavin  v.  Walker, 
14  Lea,  643 ;  Seaman  v.  Ascherman, 
57  Wis.  547 ;  Todd  v.  Jackson,  75 
Ind.  272 ;  Alabama  Fertilizer  Co.  v. 
Reynolds,  79  Ala.  497;  Deitz  v. 
Regner,  27  Kan.  94;  Beecher  v. 
Bush,  45  Mich.  188;  S.  C.  40  Am. 
Rep.  465 ;  Clark  v.  Taylor,  68  Ala. 
453;  Chittenden  v.  Witbeck,  50 
Mich.  401 ;  Pearson  v.  Post,  2  Dak. 
220. 

Conversely  the  act  of  the  firm  is 
the  act  of  the  individual  partner. 
Hubbard  v.  Pace,  34  Ark.  80. 

The  acts  of  each  and  all  persons 
in  copartnership,  and  the  copart- 
nership itself,  in  dealing  with  the 
firm  property,  are  subject  to  the 
same  legal  rules  as  individuals. 
Second  National  Bank  v.  Farr,  9 
East.  Rep.  821;  S.  C.  6  Cent.  R. 
321;  7  Atl.  R.  892;  11  East.  Rep.  1. 

Whether  a  particular  act  is  or  is 
not  within  the  scope  of  the  part- 
nership is  a  question  for  the  jury. 
Hodges  v.  Ninth  National  Bank,  54 
Md.  406;  Briggs  v.  Hubert,  14  S.  C. 
620.  See,  however,  Banner  To- 
jbacco  Co.  v.  Jennison,  48  Mich. 
459. 

When  acting  within  the  scope  of 
the  firm  business,  one  partner  is 
presumed  to  act  as  the  agent  of  his 
copartner  with  respect  to  the  lat- 
ter's  interest.    Holt  v.   Simmons, 


16  Mo.  App.  97 ;  Porter  v.  Wilson. 
12  West.  Rep.  (Ind.)  926. 

The  rule  that,  when  an  authority 
to  do  an  act  is  conferred  upon  sev- 
eral agents,  all  must  join  in  its  ex- 
ecution, does  not  apply  to  a  part- 
nership ;  in  such  case  each  partner 
may  do  the  act,  and  the  act  of  one 
is  the  act  of  the  firm.  Deakin  v. 
Underwood,  33  N.  West.  Rep. 
(Minn.)  318.  See,  also,  Purington  v. 
Ins.  Co.  72  Me.  22;  Gordon  v. 
Buchanan,  5  Yerg.  71;  Ewell's 
Evans  on  Agency,  *32  and  note. 

Where  one  member  of  a  law 
partnership  obtained  possession  of 
a  letter  containing  an  authority  to 
take  care  of  the  writer's  interests, 
directed  to  the  other  partner,  and 
acted  under  the  instructions  con- 
tained in  the  letter,  held,  that  the 
writer  was  bound  by  the  act  of  the 
partner,  as  much  so  as  if  the  other 
partner  had  received  the  letter  and 
acted  upon  it.  Beck  v.  Martin,  2 
McMull.  260. 

One  member  of  a  partnership, 
who  are  the  agents  of  an  insurance 
company,  has  all  the  powers  of  the 
firm  in  making  a  parol  contract  of 
insurance.  Kennebeck  Co.  v.  Au- 
gusta Ins.  etc.  Co.  6  Gray,  204. 

As  to  partnerships  between  at- 
torneys, see  ante. 

Although  every  member  of  a  firm 
is  in  a  sense  a  general  agent  of  the 
firm,  a  firm  is  not  necessarily  the 
agent,  general  or  special,  of  any 
other  firm  in  which  either  of  its 
members  is  a  partner.  Wright  v. 
Ames,  4  Abb.  App.  Dec.  644. 

Where  a  person  engaged  as  an 
agent  in  the  sale  of  manufactured 
articles  on  a  commission  forms  a 


238 


CH.  I,  SEC.  I.]  LIABILITIES    OF    PARTNERS. 


•124 


quainted  with  those  limits  is  entitled  to  assume  that  each 
partner  is  empowered  to  do  for  the  firm  whatever  is  neces- 


copartnership  with  another,  and 
the  firm  continues  the  business,  it 
will  be  a  continuance  of  the 
agency,  not  only  to  sell,  but  also 
to  collect  for  articles  previously 
sold  for  the  principal ;  such  money 
when  collected,  over  and  above  the 
commission,  belongs  to  the  princi- 
pal and  not  to  the  agent.  Com- 
mercial National  Bank  v.  Proctor, 
98  111.  558. 

Where  an  agent  gave  a  bond 
conditioned  to  account  for  all  prop- 
erty intrusted  to  his  care,  and  after 
acting  for  a  time  alone  took  a 
partner  in  the  business  of  the 
agency  and  afterwards  surrendered 
the  agency,  but  neglected  to  ac- 
count for  all  the  property  that 
came  into  his  hands,  and  the  plaint- 
iff never  recognized  the  partner, 
but  dealt  solely  with  the  agent, 
held,  that  the  agent  was  at  liberty 
to  employ  such  agency  to  assist 
him  as  he  might  choose ;  that  the 
money  which  came  into  the  hands 
of  his  partner  in  legal  effect  came 
into  his  hands,  and  that  the  sureties 
must  respond  for  his  default  as 
though  no  partnership  had  been 
formed.  Hayden  v.  Hill,  52  Vt. 
259.  See,  also,  White  Sewing  Ma- 
chine Co.  v.  Hines,  28  N.  W.  Rep. 
157. 

One  partner  of  a  firm  which 
owns  corporate  stock  as  a  part  of 
its  assets,  acquired  in  its  legal  busi- 
ness, has  the  power  to  represent 
that  stock  in  all  matters  which  re- 
late to  it  in  the  usual  management 
of  the  firm's  business,  and  his  ac- 
tion binds  the  firm ;  thus  he  may 
receive  and  waive  notice  of  stock- 
holders'   meeting,    vote    at    such 


meetings,  etc.  Kenton  Furnace, 
etc.  Co.  v.  McAlpin,  5  Fed.  Rep. 
737. 

Where  the  same  person  is  a  mem- 
ber of  two  firms,  his  acts,  done  in 
the  name  of  one  of  the  firms,  can- 
not be  proved  in  an  action  against 
the  other  firm,  the  same  persons 
not  comprising  both  firms.  Krat- 
zer  v.  Lyon,  5  Pa.  St.  274. 

It  is  proper  to  show  the  general 
business  of  a  firm  as  bearing  upon 
the  question  whether  certain  acts 
of  one  partner  bind  them.  Salt- 
marsh  v.  Bower,  34  Ala.  613. 

The  authority  of  partners  to  bind 
each  other  is  not  fixed  by  the 
articles  of  copartnership,  but  by 
the  character  of  their  dealings,  and 
the  manner  in  which  they  hold 
themselves  out  to  the  world.  Cat- 
lin  v.  Gilders,  3  Ala.  536. 

Where  one  allowed  his  partner 
to  bring  an  action  in  his  own  name 
on  a  demand  due  the  partnership, 
held,'that  he  could  not  impeach  the 
title  of  another,  who  had,  in  good 
faith  and  without  notice,  pur- 
chased the  judgment  recovered 
from  the  former,  who  was  plaintiff 
on  the  record.  McCotter  v.  McCot- 
ter,  16  Abb.  Pr.  265 ;  S.  C.  25  How. 
Pr.  478. 

It  is  the  duty  of  every  one  deal- 
ing with  a  member  of  a  com- 
mercial partnership  out  of  the  line 
of  business  of  such  partnership  to 
require  evidence  of  the  partner's 
special  authority  to  bind  his  copart- 
ners. Allen  v.  Cary,  33  La.  Ann. 
1455. 

Where  a  party  dealing  with  a 
firm,  the  affairs  of  which  are  kept 
secret,  has  no  means  of  judging  of 


259 


*12± 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


sary  for  the  transaction  of  its  business,  in  the  way  in  which 
that  business  is  ordinarily  carried  on  by  other  people,  (b)3 


•f 


the  scope  of  the  business  other  than 
what  the  partnership  allows  its 
general  agent  to  do  in  its  name, 
the  onus  of  proving  what  were  the 
articles  of  partnership  a  party  deal- 
ing with  the  firm  was  precluded 
from  knowing  cannot  be  cast  upon 
him.  In  such  case  it  is  the  duty 
of  the  firm  to  see  that  its  agent 
transacted  no  business  outside  the 
scope  of  the  partnership.  What 
the  agent  said  to  the  vendor  at  the 
time  of  the  sale,  just  who  the  part- 
ners were,  and  what  were  their  re- 
sponsibility, is  admissible  evidence 
against  the  firm.  McNeish  v.  Hul- 
less  Oat  Co.  57  Vt.  316. 

Where  one  deals  with  a  partner 
in  a  matter  not  within  the  scope  of 
the  firm  business,  the  law  presumes 
that  he  deals  with  him  in  his  indi- 
vidual capacity.  Davis  v.  Black- 
well,  5Bradw.(Ill.)32. 

One  member  of  a  copartnership 
cannot  be  made  liable  for  the  act 
or  undertaking  of  another,  in  a 
transaction  not  embraced  in  their 
original  partnership  business,  un- 
less proof  is  adduced  that  he  knew 


of  the  transaction  and  assented  to 
it,  or  subsequently  ratified  it. 
Goodman  v.  White,  25  Miss.  163; 
Hotchin  y.  Kent,  8  Mich.  526;  Cay- 
ton  v.  Hardy,  27  Mo.  536 ;  Welles 
v.  March,  30  N.  Y.  344;  Bell  v. 
Faber,  1  Grant's  Cas.  31;  Nichols 
v.  Hughes,  2  Bailey,  109;  Scott  v. 
Bandy,  2  Head  (Term.),  197;  Ven- 
able  v.  Levick,  id.  351 ;  Long  v. 
Carter,  3  lied.  L.  238;  Butler  v. 
Finck,  10  N.  Y.  Weekly  Dig.  163; 
Davis  v.  Blackwell,  5  Bradw.  (111.) 
32;  Rimel  V.  Hayes,  83  Mo.  200. 

Although  the  engagement  of  an 
individual  member  of  a  firm  may 
not  be  within  the  scope  of  the  part- 
nership dealings,  yet  if  the  trans- 
action comes  within  the  knowledge 
of  his  copartners,  and  is  assented 
to  by  them,  then  it  will  be  obliga- 
tory upon  the  concern.  McNeil  v. 
Reynolds,  9  Ala.  313. 

Where  a  partner,  acting  appar- 
ently beyond  the  limits  of  his 
authority,  untruly  states  his  co- 
partners' consent,  his  representa- 
tions will  not  bind  them,  even  in 
favor  of  parties  dealing  with  him 


(6)  See  per  James,  L.  J.,  in 
Baird's  Case,  5  Ch.  733,  and  per 
Parke,  B.,  in  Hawken  v.  Bourne,  8 
M.  &  W.  710.  The  fact  that  one 
partner  ordinarily  attends  to  one 
branch  of  the  business  does  not 
prevent  his  binding  the  firm  when 
acting  out  of  his  own  department. 
Morans  v.  Armstrong,  Arm. 
M'Artn.  &  Ogle,  Ir.  N.  P.  Rep.  25. 

3  Where,  by  agreement,  the  man- 
agement and  control  of  a  business 
association  are  given  to  one  of  its 


members,  and  the  nature  and  char- 
acter of  the  business  necessarily 
involved  varied  duties  and  respon- 
sibilities, the  parties  to  such  agree- 
ment will  be  held  to  have  impliedly 
given  to  the  managing  member, 
where  nothing  appears  to  the  con- 
trary, the  requisite  power  and  au- 
thority to  discharge  such  duties 
and  obligations  in  the  ordinary 
and  usual  course  of  the  business. 
Morse  v.  Richmond,  97  111.  303; 
S.  C.  6  Brad.  166. 


260 


CH.  I,  SEC.  I.]  LIABILITIES    OF    PARTNERS. 


*124 


But  no  person  is  entitled  to  assume  that  any  partner  has  a 
more  extensive  authority  than  that  above  described. 


in  good  faith.  Allen  v.  Cary,  33 
La.  Ann.  1455. 

Although  it  may  be  agreed  be- 
tween partners  in  cropping  that  ac- 
counts against  the  firm  for  the 
crops  shall  be  made  only  by  a  par- 
ticular partner,  yet  if  he  assent  to 
the  other  partner's  furnishing  sup- 
plies or  tools,  expressly  or  impli- 
edly, by  refusing  to  furnish  them 
himself  when  necessary,  the  other 
partner  may  furnish  them,  and  will 
be  reimbursed  out  of  the  crops  to 
the  value  of  the  supplies  and  a 
reasonable  compensation  for  the 
use  of  the  tools,  but  he  cannot  de- 
mand payment  for  the  tools  them- 
selves, nor  throw  them  upon  the 
other's  hands  after  the  crop  is 
made.  Nichol  v.  Stewart,  36  Ark. 
612. 

In  a  suit  against  partners  by  the 
payee  of  a  promissory  note,  an  an- 
swer by  one  defendant  that  his 
copartner  without  his  consent  exe- 
cuted the  note  in  the  firm  name,  of 
which  the  plaintiff  at  the  time  had 
notice,  is  bad  on  demurrer.  Aliter, 
if  it  be  averred  that  the  defendant 
at  the  time  of  the  execution  of  the 
note  did  not  consent  and  objected 
thereto,  of  which  the  plaintiff  then 
had  notice.  Moffitt  v.  Roche,  92 
Ind.  96. 

To  remain  silent  after  discover- 
ing that  one  partner  has  used  the 
firm  name  for  purposes  outside  the 
firm  business  is  evidence  of  assent, 
prior  or  subsequent,  but  not  con- 
clusive as  matter  of  law.  Fergu- 
son v.  Gordon,  1  Sneed,  254. 

Where  the  acquiescence  of  one 
of  two  partners  in  the  articles  of  an 
association  is  but  an  inference  from 


his  attendance  at  meetings,  and 
otherwise  participating  in  promot- 
ing its  objects,  the  consent  of  the 
.other  partner  cannot  be  inferred 
therefrom.  Wells  v.  Turner,  16 
Md.  133. 

Plaintiffs  were  dealing  in  cattle 
as  commission  merchants.  One 
member  of  the  firm,  without  the 
knowledge  of  his  partners,  made  a 
contract  with  the  defendant  in  the 
name  of  the  firm,  by  which  the 
firm  was  to  advance  money,  the 
defendant  purchase  and  ship  cattle 
to  plaintiffs,  to  be  sold  by  them 
without  commission,  and  the  prof- 
its divided.  Under  that  contract 
defendant  bought  and  shipped  cat- 
tle. The  transactions  resulted  in 
loss.  No  settlement  was  had  be- 
tween the  defendant  and  the  firm, 
or  the  contracting  member  thereof, 
upon  the  basis  of  the  contract  or 
otherwise.  Held,  that  the  firm 
could  not,  ignoring  the  express 
contract,  maintain  an  action 
against  the  defendant  as  an  ordi- 
nary shipper  upon  an  implied  con- 
tract to  pay  commissions.  Frye  v. 
Sanders,  21  Kan.  26. 

In  the  absence  of  any  special 
agreement  therefor,  neither  part- 
ner can  make  a  contract  beyond 
the  commercial  custom  of  the  busi- 
ness of  the  firra,  without  the  con- 
sent of  the  other.  Chandler  v. 
Sherman,  16  Fla.  99. 

A  written  contract  of  partner- 
ship, in  an  adventure  limited  to 
certain  specified  transactions  and 
to  some  definite  duration,  does  not 
give  to  the  partners  such  power  to 
bind  the  firm  as  is  possessed  in 
cases    of  permanent  and    general 


261 


■125 


EIGHTS    AND    OBLIGATIONS. 


[liOOK    II. 


The  consequences  of  this  principle  are  : 

General  rules. —  1.  That  if  an  act  is  done  by  one 
[*125]  partner  on  behalf  of  the  *firra,1  and  it  was  neces- 


mercantile    transactions.     Toof  v. 
Duncan,  45  Miss.  48. 

In  order  to  establish  that  a  com- 
mercial partnership  is  not  bound 
by  the  act  of  one  of  the  partners  in 
any  particular  matter,  it  is  neces- , 
sary  expressly  to  deny  his  author- 
ity and  to  disclose  by  evidence  the 
nature  of  their  commercial  busi- 
ness. Vienne  v.  Harris,  14  La.  Ann. 
382. 

One  who  seeks  to  hold  a  non- 
commercial partnership,  such  as  a 
mining  firm,  liable  upon  a  contract 
made  by  one  member  only  in  be- 
half of  the  firm,  must  show  af- 
firmatively that  such  partner  had 
power  to  contract  for  his  associates. 
Such  power  is  implied  by  law  in 
the  case  of  commercial  partnerships 
only ;  with  respect  to  non-commer- 
cial firms,  it  is  a  question  of  fact 
depending  on  the  articles,  course 
of  business,  and  other  circum- 
stances shown  in  each  case.  Judge 
v.  Braswell,  13  Bush,  67. 

To  prove  the  sale  of  real  estate  to 
a  firm  not  engaged  in  dealing  in 
that  kind  of  property  it  must  be 
shown  that  the  transaction  was 
approved  and  ratified  by  each 
partner.  Although  it  be  estab- 
lished that  one  of  the  partners 
assented  to  the  purchase,  this  does 
not  render  him  individually  liable 
unless  there  is  evidence  that  he  in- 
tended to  become  so ;  without  more, 


his  assent  under  those  circum- 
stances must  be  taken  upon  condi- 
tion that  the  others  join.  Live- 
right  v.  Martin,  42  Leg.  Intel.  435. 

Every  partner  possesses  fully  an 
absolute  authority  to  bind  all  the 
partners  by  his  acts  or  contracts  in 
relation  to  the  business  of  the  firm, 
in  the  same  manner  and  to  the 
same  extent  as  if  he  held  full  pow- 
ers of  attorney  from  them;  and,  as 
between  the  firm  and  third  parties 
who  deal  with  it  in  good  faith  and 
without  notice,  it  is  a  matter  of  no 
consequence  whether  the  partner 
is  acting  fairly  with  his  copartners 
in  the  transaction  or  not,  if  he  is 
acting  within  the  apparent  scope 
of  his  authority  and  professedly  for 
the  firm.  Pahlman  v.  Taylor,  75 
111.  62&- • 

Any  restrictions  imposed  by  the 
partnership  articles  operate  only 
inter  se,  and  not  in  transactions 
with  third  persons,  unless  they 
have  knowledge  of  such  restric- 
tions. Davis  v.  Richardson,  45 
Miss.  499.     See  post. 

One  partner  cannot  bind  his  co- 
partner by  any  contract  not  con- 
nected with  the  trade  or  business ; 
and  a  knowledge  of  third  persons 
of  the  limited  nature  of  the  part- 
nership will  be  inferred  from  cir- 
cumstances. Livingston  v.  Roose- 
velt, 4  Johns.  251. 

Where  the  credit  of  the  firm  is 


1  The  presumption  is  that  con- 
tracts made  by  a  partner  are  made 
on  account  of  the  partnership,  and 
the  firm  will  be  bound  thereby  un- 
less the  parties  with  whom  he  con- 


tracts know  the  contrary.  Le  Roy, 
Bayard  &  Co.  v.  Johnson,  2  Pet. 
198;  Rochester  v.  Trotter,  1  A.  K. 
Marsh.  54. 


262 


CH.  I,  SEC.  I.] 


LIABILITIES    OF    PARTNERS. 


*125 


sary  for  carrying  on.  the  partnership  business  in  the  ordi- 
nary way,  the  firm  will  prima  facie  be  liable,  although  in 
point  of  fact  the  act  was  not  authorized  by  the  other 
partners. 

2.  That  if  an  act  is  done  by  one  partner  on  behalf  of  the 
firm,  and  it  was  not  necessary  for  carrying  on  the  partner- 


used  by  a  partner's  authority  and 
relied  on  by  the  creditor  in  a  trans- 
action in  the  ordinary  course  of 
trade,  all  the  partners,  are  bound, 
whatever  their  liability  inter  se. 
White  v.  Kearney,  2  La.  Ann.  639. 

Partners  are  liable  for  all  debts 
contracted  by  either  of  the  part- 
ners in  respect  to  their  business, 
notwithstanding  an  agreement  be- 
tween them  that  they  should  not 
be  so  bound.  Sauffey  v.  Howard, 
7  Dana,  667.  See,  also,  Coons  v. 
Renick,  11  Tex.  134. 

Either  partner  in  a  firm  can  bind 
himself  by  using  the  firm  name  in 
an  affair  having  no  connection 
with  its  business ;  but  the  liability 
would  extend  no  further  as  long  as 
the  party  dealing  with  him  under- 
stood him  to  be  using  the  firm 
name  for  the  convenience  of  an- 
other person  and  outside  of  the 
scope  of  its  business.  Merchant  v. 
Belding,  49  How.  Pr.  344. 

A  partner  is  bound  by  the  act  of 
his  copartner  within  the  scope  of 
the  business  of  the  firm,  even  if 
that  act  be  fraudulent  as  between 
the  partners.  Capelle  v.  Hall,  12 
Bankr.  Reg.  1. 

Where  one,  without  the  knowl- 
edge or  consent  of  his  copartners, 
made  to  an  agreement,  executed 
between  the  firm  and  third  persons, 
an  addition,  signing  the  firm  name 
thereto,  giving  such  third  person 
the  privilege,  at  any  time  within 
three  months  after  a  change  in  the 


firm  in  any  way  affecting  their  in- 
terests, to  purchase  the  property 
on  hand,  owned  by  the  firm  and 
resulting  from  the  fulfillment  of 
the  original  contract  upon  specified 
terms,  held,  that  the  proposed 
contract  was  valid,  the  third  per- 
sons not  knowing  the  fraud.  Dra- 
per v.  Moore,  2  Cin.  167. 

The  purchase  of  real  estate  may 
or  may  not  be  within  the  scope  of 
the  partnership  business.  Lewis, 
John  A.,  and  Isaac  Cook,  were  co- 
partners engaged  in  the  business 
of  general  merchandising,  under 
the  firm  name  of  "  Cook  Bros." 
Lewis  was  the  resident  partner; 
John  A.  and  Isaac  were  non-resi- 
dents. Lewis  Cook  purchased  a 
stone  storehouse  and  a  lot  of  sta- 
tionery in  his  individual  name,  and 
in  paying  therefor  gave  the  notes 
sued  upon  in  this  action  in  the  firm 
name.  Held,  in  reviewing  all  the 
testimony,  that  Lewis  Cook,  in 
making  this  purchase,  acted  within 
the  scope  of  the  partnership  busi- 
ness, and  that  the  knowledge  of 
such  purchase  was  not  sufficient  to 
put  the  plaintiff  upon  inquiry  as  to 
the  consent  of  the  other  partners. 
Davis  v.  Cook,  14  Nev.  265. 

Where  services  are  rendered  by 
a  firm  for  another  on  his  request, 
outside  of  their  regular  business, 
the  amount  can  be  recovered  by 
the  firm  in  an  action  in  their  part- 
nership name.  Tiernan  v.  Doran, 
19  Neb.  492. 


263 


•::12G  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

ship  business  in  the  ordinary  way,  the  firm  w\\l  prima  facie 
be  not  liable. 

In  the  first  case  the  firm  will  be  liable  unless  the  one 
partner  had  in  fact  no  authority  to  bind  the  firm,  and  the 
person  dealing  with  him  was  aware  of  that  want  of  author- 
ity ;  whilst  in  the  second  case  the  firm  will  not  be  liable 
unless  an  authority  to  do  the  act  in  question,  or  some  ratifi- 
cation of  it,  can  be  shown  to  have  been  conferred  or  made 
by  the  other  partners,  (o) 

Secret  partnerships  — Authority  of  dormant  partner. 
The  doctrine  that  each  member  of  any  ordinary  firm  is  its 
implied  agent  for  the  transaction  of  its  business  in  the 
ordinary  way  is  generally  laid  down  without  qualification. 
But  it  is  questionable  whether  this  rule  applies  to  a  case  in 
which  a  person  who  happens  to  be  a  member  of  a  firm,  but 
who  is  not  known  to  be  such,  and  who  has  in  fact  no  au- 
thority to  act  for  it,  takes  upon  himself  so  to  do.  Eeat 
authority  is  excluded  by  hypothesis;  and  it  is  difficult  to 
see  from  what,  in  such  a  case,  any  authority  can  be  implied. 
If,  indeed,  he  was  known  to  be  a  partner,  whether  by  his 
own  representations  or  otherwise,  his  authority  to  act  for 
the  firm  would  be  properly  inferred.  But  the  case  supposed 
excludes  all  knowledge  of  his  position,  and  under  such  cir- 
cumstances it  is  conceived  there  can  be  no  apparent,  as  dis- 
tinguished from  real,  authority,  (d) 

Liability  of  dormant  partners.—  Again,  with  respect  to 
the  liability  of  dormant  partners:  a  distinction  must  be 
drawn  between  —  first,  undisclosed  principals  who  carry  on 
a  business  by  partners  or  agents;  and  secondly,  persons 
who  simply  share  the  profits  of  a  business  carried  on  by 
others  on  their  own  account,  i.  e.,  as  principals  only 
[*126]  and  *not  as  agents  for  those  who  share  their  profits. 

(c)  See  Dickinson  v.  Valpy,  10  B.  (d)  See  the  judgment  of  Cock- 
&  C.  128,  and  Crellin  v.  Brook,  14  burn,  C.  J.,  in  Nicholson  v.  Rick- 
M.  &  W.  11,  where  there  was  suffi-  etts,  2  E.  &  E.  524,  and  of  Cleasby, 
cient  ratification.  B.,  in  Holme  v.  Hammond,  L.  R. 

7  Ex.  233. 
264 


CH.  I,  SEC.  I.]  LIABILITIES    OF    PARTNERS.  *126 

In  the  first  case  the  dormant  partners  are  liable  for  what- 
ever may  be  done  by  their  partners  and  agents  in  the 
course  of  transacting  the  business  in  the  ordinary  way ; l 
but  in  the  second  case  the  so-called  dormant  partners  are 
not  principals  at  all;  the  persons  who  carry  on  their  busi- 
ness do  not  carry  it  on  as  their  agents  either  really  or 
apparently,  and  the  doctrines  applicable  to  undisclosed 
principals  are  altogether  excluded,  (e) 

Necessity  the  limit  of  authority  —  Extraordinary  ne- 
cessity—Discretion in  urgent  cases. —  It  will  be  observed 
that  what  is  necessary  to  carry  on  the  partnership  business 
in  the  ordinary  way  is  made  the  test  of  authority  where 
no  actual  authority  or  ratification  can  be  proved.  This  is 
conformable  to  the  most  recent  and  carefully  considered 
decisions;  but  by  adopting  it  the  liability  of  a  firm  for  the 
acts  of  its  copartners  is  not  so  extensive  as  non-lawyers 
sometimes  imagine.  The  act  of  one  partner,  to  bind  the 
firm,  must  be  necessary  for  the  carrying  on  of  its  business; 
if  all  that  can  be  said  of  it  was  that  it  was  convenient,  or 
that  it  facilitated  the  transaction  of  the  business  of  the  firm, 
that  is  not  sufficient  in  the  absence  of  evidence  of  sanction 
by  the  other  partners.  (/)     Nor,  it  seems,  will  necessity 

iThe  credit  given  in  case  of  a  maybe  answerable  as  a  dormant 

dormant  partnership,  though  man-  partner  on  a  contract  made  by  the 

ifestly  given  to  the  ostensible  part-  partnership  of  which  he  is  in  fact 

ner,  is  not  to  be  presumed  to  be  a  member ;  but  this  law  is  confined 

exclusive,  but  all  for  whom  such  to  trade  and  commerce,  and  does 

partner  acts,  if  in  their  business  not  extend  to  speculations  in  the 

and  for  their  benefit,  will  be  liable,  purchase   and  sale  of  lands ;    for 

Richardson  v.  Farmer,  36  Mo.  35.  where  lands  are  sold,  no  man,  as  a 

Where  promissory  notes,  offered  dormant    partner,  can  claim  any 

by  the  acting  partner  at  a  bank,  in  part  of  the  lands  by  virtue  of  any 

the  usual    course    of   partnership  conveyance  to  which  he  is  not,  on 

business,  are  discounted,  and  the  the  face  of    it,  a  party.     Pitts  v. 

money  is  subsequently  misapplied,  Waugh,  4  Mass.  424. 

the     holders,     not     being     privy  (e)  This  distinction    is   rendered 

thereto,    have    a    right  of    action  necessary  by  the  decision  of  the 

against     the     dormant    partners,  house  of  lords  in  Cox  v.  Hickman. 

Winship  v.  Bank  of  United  States,  See  ante,  pp.  30  et  seq. 

5  Pet.  529.  (/)  See   Brettel  v.   Williams,  4 

By  the    law  merchant    a    man  Ex.  630. 

265 


*127  EIGHTS    AND    OBLIGATIONS.  [BOOK   II. 

itself  be  sufficient  if  it  be  an  extraordinary  necessity.1 
What  is  necessary  for  carrying  on  the  business  of  the  firm 
under  ordinary  circumstances  and  in  the  usual  way  is  the 
test;  and  therefore,  in  a  case  where  the  nature  of  the  busi- 
ness was  one  in  which  there  was  no  necessity  to  borrow 
money  to  carry  it  on  under  ordinary  circumstances  and  in 
the  ordinary  manner,  the  court  held  the  firm  not  liable  for 
money  borrowed  by  its  agent  under  extraordinary  circum- 
stances, although  money  was  absolutely  requisite  to  save 
the  property  of  the  firm  from  ruin.  (//)  This  case  is  an 
authority  for  saying  that  a  power  to  do  what  is  usual  does 
not  include  a  power  to  do  what  is  unusual,  however  urgent; 
and  although,  in  the  case  referred  to,  the  money  was  not 
borrowed  by  a  partner,  but  by  a  person  who  was  only  an 
agent  of  the  firm,  the  decision  would,  it  is  appre- 
[*127]  hended,  have  *been  the  same  if  he  had  been  a  part- 
ner. For  notwithstanding  the  fact  that  every  part- 
ner is  to  a  certain  extent  a  principal  as  well  as  an  agent, 
the  liability  of  his  copartners  for  his  acts  can  only  be  estab- 
lished on  the  ground  of  agency.  As  their  agent  he  has 
no  discretion  except  within  the  limits  set  by  them  to  his 
authority,  and  the  fact  that  he  is  himself,  as  one  of  the 
firm,  a  principal,  does  not  warrant  him  in  extending  those 
limits,  save  on  his  own  responsibility.  (A) 

Nature  of  the  business  the  test  of  necessity.—  The  ques- 
tion whether  a  given  act  can  or  cannot  be  said  to  be  neces- 

1  As  to  the  enlargement  of  the  M.  &  W.   595.     And  see  Ex  parte 

authority  of  an  agent  in  emergen-  Chippendale,  4  De  G.  M.  &  G.  19. 

cies  requiring  it,  see  Ewell's  Evans  See,  also,  Simpson's  Claim,  3G  Ch.  D. 

on  Agency,  *123,  note.  532,  where  a  company  was  held 

The  implied  power  of  a  partner  not  liable    on  a  promissory   note 

to  do  any  act  binding  on  the  part-  given  by  its  general  agent  as  secu- 

nership,  arises  not  from  necessity  rity  on  a  guaranty  given  by  the 

of  a  particular  occasion  but  must  promisee  in  payment  of  goods  or- 

arise  out  of  and  be  within  the  con-  dered  by  the  agent  for  the  com- 

templation  of  the  contract  of  part-  pany. 

nership.     Berry  v.  Folkes,  60  Miss.        (h)  See    Ricketts   v.   Bennett,    4 

576.  C.  B.  686,  and  Dickinson  v.  Valpy, 

(p)  See  Hawtayne  t\  Bourne,  7  10  B.  &  C.  128. 

266 


CH.  I.  SEC.  I  ]  LIABILITIES    OF    PARTNERS. 


*127 


sary  to  a  transaction  of  a  business  in  the  way  in  which  it  is 
usually  carried  on  must  evidently  be  determined  by  the 
business,  and  by  the   practice  of  persons   engaged  in  it.1 


1The  authority  of  a  partner  is 
limited  to  things  done  in  the  regu- 
lar course  of  the  business  of  the 
firm;  outside  of  this  he  has  no  au- 
thority. If  he  attempts  to  mort- 
gage or  assign  under  suspicious 
circumstances,  such  act  would  be 
of  no  effect  as  against  the  parties 
injured  thereby.  A  transfer  by  a 
partner  of  the  joint  effects  in  fraud 
of  a  copartner  will  constitute  the 
transferee  who  received  them  with 
notice,  as  without  consideration,  a 
trustee  for  the  benefit  of  the  firm 
or  its  creditors.  If  the  joint  funds 
were  employed  by  one  partner  to 
purchase  property,  either  in  his 
own  name  or  that  of  another,  with 
the  intent  to  defraud  his  copart- 
ner or  the  creditors  of  the  firm, 
the  property  so  purchased  will  be 
treated  as  trust  funds  for  the  firm 
and  its  creditors.  Stegall  v.  Coney, 
49  Miss.  761. 

A  partnership  to  effect  a  special 
end  binds  the  members  for  each 
other's  acts  only  in  the  prosecution 
of  that  end,  unless  an  authority 
may  be  implied  from  the  method 
of  transacting  business.  Town  v. 
Hendee,  27  Vt.  258. 

One  partner  has  no  right,  without 
the  assent  of  the  others,  to  bind  the 
firm  for  his  individual  account. 
Atkin  v.  Berry,  1  Lea  (Tenn.),  91. 

Partnership  in  a  patent-right,  as 
for  the  navigation  of  steam-vessels, 
does  not  authorize  one  partner  to 
bind  the  partnership  in  a  matter, 
as    for    building    steamboats,   not 


A  partner  who  conducts  the  busi- 
ness of  a  partnership  in  farming 
has  no  implied  authority  to  carry 
on  also  a  mercantile  business  in 
connection  with  it.  Humes  v. 
O'Bryan,  74  Ala.  64. 

The  estate  of  a  deceased  partner 
is  not  liable  for  the  amount  of 
bonds  left  without  his  knowledge 
in  the  hands  of  the  other  partners 
as  a  special  deposit,  when  it  was  no 
part  of  the  firm's  business  to  re- 
ceive such  deposit.  Hatheway's 
Appeal,  52  Mich.  112. 

A  contract  of  partnership  for 
buying  of  grain  and  its  manufact- 
ure into  flour  and  meal,  and  the 
sale  of  such  grain  as  accumulates 
in  excess  of  that  required  for  manu- 
facture, and  the  use,  with  the 
knowledge  of  all  the  partners,  of 
cards  and  letter-heads  describing 
the  firm  as  millers  and  dealers  in 
grain,  do  not  necessarily  imply  au- 
thority to  deal  in  the  firm  name 
in  futures  for  the  purpose  of  specu- 
lation. Irwin  v.  Williar,  110  U.  S. 
499. 

A  copartnership  formed  to  trans- 
port passengers  and  their  baggage 
by  a  line  of  stages  does  not,  from 
the  mere  nature  of  the  business, 
authorize  one  of  the  partners  to 
bind  the  firm  by  an  agreement  that 
he  will  convey  a  person  a  certain 
distance  in  a  specified  time.  Wal- 
cott  v.  Carfield,  3  Conn.  194. 

The  mere  fact  that  the  defend- 
ants are  partners  in  the  practice  of 
medicine    does  not  render    them 


strictly  connected  with  the  enjoy-  jointly  liable  for  the  expenditures 
ment  of  their  joint  privileges,  of  each  other,  having  no  connection 
Lawrence  v.  Dale,  3  Johns.  Ch.  23.     with  their  partnership  business  as 

267 


*127 


RIGHTS   AND    OBLIGATIONS. 


[book  II. 


Evidence  on  both  of  these  points  is  therefore  necessarily 
admissible,  and,  as  may  readily  be  conceived,  an  act  which 


physicians.    Thompson  v.  Howard, 
2  Ind.  245. 

One  partner  cannot  make  him- 
self the  agent  of  his  firm  to  sub- 
scribe stock  to  a  railroad  company, 
the  building  of  railroads  not  being 
within  the  scope  of  the  partnership. 
Livingston  v.  Pittsburg,  etc.  R.  R. 
Co.  2  Grant,  Cas.  219. 

But  where  partners  who  were 
mainly  engaged  in  the  oyster  busi- 
ness had  at  different  times  engaged 
together  in  various  transactions, 
and  among  other  things  had  once 
or  twice  dealt  in  railroad  stocks, 
held,  upon  this  evidence,  that  a 
jury  were  justified  in  finding  a  sub- 
scription for  railroad  stock,  made 
by  one  partner  in  the  firm  name,  to 
be  within  the  scope  of  the  partner- 
ship business.  Maltby  v.  North- 
western, etc.  R.  R.  Co.  16  Md.  422. 

A  contract,  creating  in  fact  a 
new  partnership  between  two  dif- 
ferent firms,  though  both  engaged 
in  the  same  business,  cannot  be 
made  on  behalf  of  either  firm  by  a 
single  member  thereof,  but  re- 
quires the  consent  of  all  the  mem- 
bers. Buckingham  v.  Hanna,  20 
Ind.  110. 

So  the  assent  of  a  member  of  a 
particular  firm  is  necessary  to  en- 
gage him  as  a  member  of  a  new 
firm;  and  the  general  authority 
given  by  all  to  each,  or  even  to  the 
acting  or  managing  partner,  to 
bind  the  whole  company,  does  not 
extend  to  the  erection  of  new  com- 
panies, composed  of  new  members. 
Tabb  v.  Gist,  6  Call,  279. 

McC,  a  member  of  a  firm,  en- 
tered into  the  following  contract ; 
"Rec'd    of  W.    F.    McC.  $20,  for 


which  sum  I,  N.  L.  T.,  agree  to 
give  the  said  W.  F.  McC.  any 
profits  that  I  may  have  on  a  lot  of 
five  thousand  three  hundred  and 
fifty  pounds  of  wool,  over  and 
above  costs  and  freight.  And  I, 
W.  F.  McC,  agree  to  pay  any  loss 
that  may  be  made  in  sale  of  wool 
under  $1,328.75,  and  freight. 
(Signed)  N.  L.  T.,  W.  F.  McC." 
There  was  a  loss  of  $298.02  on  the 
sale  of  the  wool.  McC.  was  in 
partnership  with  N.  in  the  grain 
business,  but  concealed  the  written 
contract,  as  also  did  T.  N.  was  in- 
formed that  the  only  risk  was  the 
$20,  and  was  not  aware  of  the 
character  of  the  contract  until  after 
the  sale  of  the  wool.  Held,  with- 
out proof  of  prior  authority  to  pur- 
chase the  wool,  or  knowledge  of 
the  contract  and  its  terms,  N.  could 
not  be  held  liable,  the  contract  not 
having  been  made  for  the  firm. 
Norton  v.  Thatcher,  8  Neb.  186. 

Surrendering  notes  to  a  firm  of 
wdiich  the  maker  is  a  member  is 
not  necessarily  equivalent  to  a  sur- 
render of  them  to  him,  whereby 
they  become  extinguished.  Suc- 
cession of  Dolhonde,  21  La.  Ann.  3. 

Ordinary  partners  are  not  bound 
in  solido  for  attorney's  fees  for 
services  rendered  the  firm  under 
the  employment  by  one  of  its  mem- 
bers. In  such  a  case  each  one  of 
the  partners  is  bound  for  his  share, 
if  no  agreement  had  been  made 
between  the  attorney  and  the  part- 
ner who  employed  him.  Hyams 
v.  Rogers,  24  La.  Ann.  230. 

See  the  general  subject  of  the 
implied  authority  of  partners  con- 
sidered, post. 


268 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


'128 


is  necessary  for  the  prosecution  of  one  kind  of  business  in 
the  ordinary  way  may  be  wholly  unnecessary  for  carrying 
on  another.  Consequently  no  answer  of  any  value  can  be 
given  to  the  abstract  question,  Can  one  partner  bind  his 
firm  by  such  and  such  an  act?  unless,  having  regard  to 
what  is  usual  in  business,  it  can  be  predicated  of  the  act  in 
question  either  that  it  is  one  without  which  no  business  can 
be  carried  on,  or  that  it  is  one  which  is  not  necessary  for 
carrying  on  any  business  whatever.  There  are  obviously 
very  few  acts  of  which  any  such  assertions  can  be  truly 
made.  The  great  majority  of  acts,  and  practically  all  which 
ffive  rise  to  doubt,  are  those  which  are  necessarv  in  one  busi- 
ness  and  not  in  another.  Take,  for  example,  negotiable 
instruments;  it  may  be  necessary  for  one  member  of  a  firm 
of  bankers  to  draw,  accept  or  indorse  a  bill  of  exchange 
on  behalf  of  the  firm,  and  to  require  that  each  member 
should  put  his  name  to  it  would  be  ridiculous;  but  it  by  no 
means  follows,  nor  is  it  in  fact  true,  that  there  is  any  neces- 
sity for  one  of  several  solicitors  to  possess  a  similar  power, 
for  it  is  no  part  of  the  ordinary  business  of  a  solicitor  to 
draw,  accept  or  indorse  bills  of  exchange.  The  question, 
therefore,  Can  one  partner  bind  the  firm  by  accepting  bills 
in  its  name?  admits  of  no  general  answer;  the  nat- 
ure of  the  business  and  *the  practice  of  those  who  [*128] 
carry  it  on  (usage  or  custom  of  the  trade)  must  be 
known  before  any  answer  can  be  given,  (i) 

The  question  when  the  agency  of  a  partner  begins  and 
ends  will  be  examined  hereafter.    See  bk.  ii,  ch.  2,  §  3. 

Section  II. —  Liabilities  of  Partners  in  Eespect  of  Acts 
which  are  Neither  Torts  nor  Frauds. 

Having  noticed  the  general  principles  determining  the 
extent  to  which  one  partner  is  the  agent  of  the  firm,  it  is 
proposed  to  examine  the  power  of  one  partner  to  bind  his 

(i)  See  Hogarth  v.  Latham,  3  Q.  B.  D.  643 ;  Taunton  v.  Royal  Ins.  Co. 
2  Hem.  &  M.  135. 

269 


128 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


firm  in  particular  cases  where  there  is  no  question  of  tort 
or  fraud.  For  the  sake  of  convenience,  subjects  noticed 
will  be  arranged  in  alphabetical  order. 

1.  Accounts. —  An  account  rendered  by  one  partner  rela- 
tive to  a  partnership  transaction  is  equivalent  to  an  account 
rendered  by  the  firm.  (k) l 

The  power  of  one  partner  to  settle  accounts,  and  to 
assent  to  a  transfer  of  them,  will  be  found  noticed  infra 
under  the  head  Debts. 

2.  Admissions. —  The  admissions  of  one  partner  with  ref- 
erence to  a  partnership  transaction  are  evidence  against  the 
firm;(/)2  but  are  not  necessarily  conclusive,  (m)    An  admis- 


(k)  Fergusson  v.  Fyffe,  8  CI.  & 
Fin.  121,  where  an  account  sent  by 
one  partner  showing  a  balance  due 
from  the  firm,  and  bearing  interest 
at  nine  per  cent.,  was  held  to  be 
binding  on  the  firm.  See  as  to  false 
accounts,  infra,  §  3. 

1  An  account  in  the  handwriting 
of  the  ostensible  partner,  but  not 
shown  to  have  existed  while  the 
partnership  was  in  being,  is  not 
competent  evidence  in  a  suit 
against  an  alleged  secret  partner 
to  show  to  what  the  business  ex- 
tended. Oakley  v.  Aspinwall,  2 
Sandf.  7. 

An  account  stated,  made  by  one 
partner  after  the  dissolution,  is 
binding  only  upon  the  partner 
making  it.  Hart  v.  Woodruff,  24 
Hun  (N.  Y.),  510. 

(7)  Wood  v.  Braddick,  1  Taunt. 
104;  Pritchard  v.  Draper,  1  R.  & 
M.  191,  affirmed  2  CI.  &  Fin.  379; 
Nicholls  v.  Dowding,  1  Stark.  81; 
Sangster  v.  Mazarredo,  id.  162; 
Thwaites  v.  Richardson,  1  Peake, 
23;  Grant  v.  Jackson,  id.  268; 
Wright  v.  Court,  2  Car.  &  P.  232. 


And  see  the  last  preceding  note, 
andante,  p.  87.  As  to  part-owners, 
see  Jaggers  v.  Binnings,  1  Stark.  64. 
2  After  the  fact  of  a  partnership 
is  proved  by  other  evidence,  the 
admissions  of  one  partner  within 
the  real  or  apparent  scope  of  the 
firm  business  may  be  received  to 
charge  the  partnership  in  relation 
to  transactions  during  its  exist- 
ence. If  not  within  the  real  or  ap- 
parent scope  of  the  firm  business 
such  admissions  or  declarations  are 
not  admissible  in  evidence.  Phil- 
lips v.  Purington,  15  Me.  425; 
Gulick  v.  Gulick,  14  N.  J.  L.  578; 
Goodenough  v.  Duffield,  Wrigbt, 
455;  Wolle  v.  Brown,  1  Whart. 
365;  Boyce  v.  Watson,  3  J.  J. 
Marsh.  498;  Odiome  v.  Maxcy,  15 
Mass.  39;  Hoboken  Bank  v.  Beck- 
man,  36  N.  J.  Eq.  83 ;  Benninger  v. 
Hess.  41  Ohio  St.  64;  Boor  v. 
Lowrey,  103  Ind.  468 ;  Clark  v.  Tay- 
lor, 68  Ala.  453;  Deitz  v.  Regner, 
27  Kan.  94 ;  McLeod  v.  Lee,  17  Nev. 
104;  Union  Nat.  Bank  v.  Under- 
bill, 102  N.  Y.  336;  S.  C.  21  Hun, 
178;    Hawkins  v.  Lee,    8  Lea,  42; 


(to)  Wickham  v.  Wickham,  2  K.  &  J.  491,  where  the  point  in  question 
was  the  amount  of  a  debt. 

270 


CH.  I,  SEC.  II. J  LIABILITIES    OF    PARTNERS. 


:128 


sion  by  one  person  who  afterwards  enters  into  partnership 
with  others  is  no  evidence  against  them  merely  because 
they  and  he  are  partners  when  the  evidence  is  sought  to  be 


Ansyln  v.  Franke,  11  Mo.  App. 
598;  Harryman  v.  Rogers,  52  Md. 
64;  Hall  v.  Yountz,  87  N.  C.  285; 
Collett  v.  Smith,  10  New  Eng.  Rep. 
173;  S.  C.  3  New  Eng.  Rep.  715; 
Hammersmith  v.  Hilton,  8  Mo. 
App.  564;  Taylor  v.  Cook,  11  Ont. 
Pr.  60;  Western  Assurance  Co.  v. 
Towle,  65  Wis.  247.  See  Scully's 
Appeal,  11  East.  Rep.  (Pa.)  713. 

To  render  competent  the  declara- 
tions of  one  partner  against  an- 
other it  is  incumbent  on  the  judge 
to  determine  the  question  whether 
there  is  prima  facie  evidence  of  a 
copartnership ;  and  from  his  decis- 
ion as  to  this  preliminary  matter 
there  is  no  appeal.  Hilton  v. 
McDowell,  87  N.  C.  364. 

The  admissions  and  declarations 
of  one  partner,  made  after  the 
event  to  which  they  relate,  are  not 
admissible  against  the  other  unless 
part  of  the  res  gestce.  Boor  v. 
Lowrey,  103  Ind.  468. 

The  opinions  expressed  by  one 
physician  in  the  absence  of  his 
partner,  after  the  employment  is  at 
an  end,  as  to  the  propriety  of  a 
treatment  or  the  results  attained, 
are  not  binding  on  the  latter.  Boor 
v.  Lowrey,  103  Ind.  468. 

Members  of  a  firm  are  presumed 
to  know  best  who  are  creditors  of 
the  firm,  and  their  admission  will 
be  conclusive  upon  the  other  cred- 
itors unless  it  was  made  falsely 
for  the  purpose  of  defrauding  such 
creditors  or  reducing  their  pro 
rata  share.  McCracken  v.  Milhous, 
7  Bradw.  169. 

The  statements  of  one  partner, 
made  before  dissolution,  that  the 


other  partner  had  consented  to  the 
rescission  of  a  certain  contract  on 
which  the  other  partner,  as  the  suc- 
cessor to  the  firm,  was  seeking  to 
recover,  are  mere  hearsay  and  in- 
admissible as  evidence.  Shellitou. 
Sampson,  61  la.  40. 

Letters  of  a  partner  submitting 
propositions  with  reference  to  sale 
of  goods,  in  respect  to  inquiries 
from  defendant,  are  admissible  in 
trial  of  action  to  recover  the  price 
of  goods  as  bearing  on  contract  of 
sale.  Brown  v.  Atkinson,  91  N.  C. 
389. 

The  declarations  of  a  supposed 
partner,  in  the  absence  of  the 
other,  are  not  admissible  against 
the  latter  until  the  partnership  has 
been  proved  aliunde.  McFadgen 
v.  Harrington,  67  N.  C.  29 ;  Nixon 
v.  Downey,  42  Iowa,  78;  Alcott  v. 
Strong,  9  Cush.  323.  See,  also, 
Edgellu.  Macqueen,  8  Mo.  App.  71. 

But  where  a  partnership  is  al- 
leged to  exist  between  two  persons, 
the  acts  and  declarations  of  either 
bind  him,  but  do  not  affect  the 
other,  and  it  often  becomes  nec- 
essary to  prove  the  acts  and  decla- 
rations of  one  at  a  time ;  and  there- 
fore such  testimony  may  properly 
be  admitted,  and  the  legal  effect  of 
it  be  postponed  until  the  judge  in- 
structs the  jury  upon  the  law  of  the 
whole  case,  whose  duty  it  would 
be  to  inform  them  that  the  acts 
and  declarations  of  a  party,  before 
the  partnership  is  proved,  bind  him- 
self only.  Jennings  v.  Estes,  16 
Me.  323. 

Where  the  authority  of  a  part- 
ner to  speak  for  his  associates  ia 


271 


*129 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


used,  (n)    Moreover,  in  an  action  against  partners, 
[*129]  the  answer  of  one  of  -them  to  interrogatories  can- 
not be  read  against  the  others,  (o)  unless  they  have 
an  opportunity  of  contradicting  it. 

See  further,  infra,  under  the  heads  Debts  and  Represen- 
tations. 


not  shown,  his  statements,  so  far 
as  concerns  them,  are  mere  hear- 
say. Heffron  v.  Hanaford,  40 
Mich.  305. 

After  prima  facie  evidence  of 
partnership,  the  declarations  of 
one  of  the  partners  is  evidence  to 
bind  the  firm,  although  made  on 
oath  voluntarily  by  him,  under  the 
South  Carolina  summary  process. 
Allen  v.  Owens,  2  Spears,  170. 

Statements  of  one  partner  on  his 
examination  in  a  suit  against  a 
firm,  as  to  transactions  which  oc- 
curred during  the  partnership, 
binds  all  the  partners  unless  they 
seek  by  an  examination  of  some 
of  themselves  to  contradict  and 
qualify  the  statements  of  a  part- 
ner whose  evidence  they  object  to. 
Taylor  v.  Cook,  5  Can.  L.  T.  383; 
S.  C.  21  Can.  L.  J.  (N.  S.j  282. 

In  an  action  against  partners  to 
recover  money  alleged  to  have 
been  obtained  by  false  representa- 
tions, statements  made  by  either 
partner  during  the  existence  of  the 
partnership,  tending  to  show  that 
they  ought  not  to  have  received 
the  money,  are  admissible  against 
both  partners;  and  the  fact  that 
the  partner  making  such  statement 
has  been  defaulted  in  the  action 
and  is  hostile  to  his  co-defendant 
does  not  affect  the  credibility  of 
such    evidence.     Western    Assur- 


ance Co.  v.  Towle,  65  Wis.  247. 
See,  also,  Hall  v.  Yountz,  87  N.  C. 
285. 

In  an  action  against  partners 
jointly,  an  answer  in  chancery  of 
one  of  them  may  be  given  in  evi- 
dence by  the  plaintiff,  after  the 
partnership  has  been  proved,  to 
show  admission  of  the  plaintiff's 
demand;  and,  in  such  case,  evi- 
dence to  discredit  the  answer  can- 
not be  offered  by  the  other  mem- 
bers of  the  copartnership.  Hutch- 
ins  v.  Childress, -4  Stew.  &  Port.  34. 

Where  two  mercantile  houses  do 
business  under  their  respective 
names,  but  the  same  partners  com- 
pose both  firms,  the  acknowledg- 
ment of  one  is  prima  facie  evi- 
dence against  the  other.  Sneed 
v.  Kelly,  3  Dana,  538. 

Where  a  chose  in  action  -against 
a  partnership  was  assigned,  and 
one  of  the  partners,  being  called 
upon  for  payment  by  the  assignee, 
said  he  would  pay  to  him  if  he 
was  legally  entitled  to  receive  it, 
held,  that  it  was  sufficient  to  en- 
able the  assignee  to  maintain  an 
action  in  his  own  name  against  all 
the  partners,  on  showing  a  legal 
assignment.  Lang  v.  Fiske,  11  Me. 
385. 

The  "  admission "  of  one  part- 
ner that  his  copartner  is  indebted 
to  him  cannot  bind  such  copart- 


(n)  Tunley  v.  Evans,  2  Dowl.  &        (o)  Parker  v.  Morrell,  2  Ph.  453 ; 
L.  747 ;  Catt  v.  Howard,  3  Stark.  3.     Dale  v.  Hamilton,  5  Ha.  393. 

272 


CH.  I,  SEC.   II. J 


LIABILITIES    OF    PARTNERS. 


*120 


ner  in  a  suit  by  a  person  claiming 
through  the  former.  A  slairn  can- 
not be  allowed  so  to  prove  itself 
under  the  name  of  an  admission. 
Lewis  v.  Allen,  1?  Ga.  300. 

Where  the  vendor  of  goods,  at 
the  time  of  the  sale,  professes  to 
rell  them  to  the  vendee  in  his  in- 
dividual capacity,  he  cannot,  in  an 
action  against  a  firm  of  which  the 
v  endee  was  a  member,  give  in  evi- 
dence the  declarations  or  admis- 
sions of  such  vendee,  that  the  goods 
were  purchased  for  the  benefit  of 
the  firm.  Lazarus  v.  Long,  3  Ired. 
L.  39. 

The  admission  of  one  partner 
is  not  sufficient  to  prove  the  exist- 
ence of  the  copartnership  as  against 
the  other  partner.  Evans  v.  Cor- 
nell, 1  G.  Greene,  25;  Lea  v.  Guice, 
21  Miss.  656;  Hahn  v.  St.  Clair 
Savings,  etc.  Co.  50  111.  456;  Degan 
v.  Singer,  41  111.  28;  Gardner  v. 
N.  W.  Mfg.  Co.  52  111.  368.  See, 
also,  Cowan  v.  Kinney,  33  Ohio  St. 
422;  Edgell  v.  Macqueen,  8  Mo. 
App.  71. 

In  assumpsit  against  the  sur- 
viving partners  of  a  firm  alleged 
to  have  consisted  of  themselves 
ami  a  person  deceased,  where  the 
■  existence  of  a  partnership  was  in 
issue,  held,  to  be  error  to  admit  the 
declarations  of  such  deceased  per- 
sons, made  in  the  absence  of  the 
defendants,  and  not  communicated 
to  either  of  them,  the  defendants 
seasonably  objecting  to  such  ad- 
mission, although  the  jury  were  in- 
structed that  the  evidence  was  not 
admissible  against  the  defendants, 
but  only  to  prove  that  the  deceased 
was  a  partner,  and  that  such  proof 
was  necessary.  McLellan  v.  Pen- 
nell,  52  Me.  402. 

The  declarations  of    a    partner 


not  a  party  to  the  suit  are  not 
competent  evidence  of  a  partner- 
ship. Martin  v.  Kaffroth,  16  Serg. 
&  R.  120. 

In  a  suit  against  A.  and  B.  as 
partners,  declarations  Of  A.  that 
B.  was  not  his  partner  cannot  be 
introduced  as  evidence  to  exonerate 
B.     Young  v.  Smith,  25  Mo.  341. 

The  admissions  of  a  partner, 
made  during  the  partnership,  may 
be  introduced  as  evidence  against 
him  in  favor  of  creditors  of  the 
partnership,  but  such  admissions 
are  not  competent  evidence  against 
the  creditors  of  the  partnership, 
for  the  purpose  of  diverting  the 
assets  of  the  partnership  to  the 
payment,  of  his  individual  debts. 
Bond  v.  Nave,  62  Ind.  506. 

A  partner  can  only  bind  a  co- 
partner by  his  admissions  within 
the  scope  of  the  business  of  the  firm. 
Hahn  r.  St.  Clair  Savings,  etc.  Co. 
supra;  Heffron  v.  Hanaford,  40 
Mich.  305.     See  ante. 

Nor  can  his  admissions  bring 
matters  foreign  to  the  partnership 
within  the  scope  of  the  business. 
Heffron  v.  Hanaford,  supra. 

In  a  suit  against  surviving  part- 
ners to  recover  the  amount  of  a 
note  given  by  the  deceased  partner 
in  his  single  name,  his  declarations 
that  the  transactions  for  which  the 
note  was  given  were  for  the  part- 
nership business,  and  that  it  was  a 
company  note,  are  not  admissible 
in  evidence  if  there  be  no  evidence 
aliunde  that  those  transactions 
were  for  the  partnership.  Ostrom 
v.  Jacobs,  9  Mete.  454. 

Such  declarations  are  admissible 
against  the  survivor,  the  partner- 
ship being  admitted.  Doremus  v. 
McCormick,  7  Gill,  49. 

In  partnership  transactions  the 


Vol.  1—18 


273 


*129 


RIGHTS    AND    OBLIGATIONS. 


[book   II. 


acknowledgment  of  any  one  con- 
cerned in  interest  may  be  received 
in  evidence,  although  the  suit  may 
not  be  in  the  name  of  the  firm. 
Fisk  v.  Copeland,  1  Overt.  383. 

Declarations  of  a  dormant  part- 
ner are  admissible  in  evidence 
against  his  copartners  if  they  re- 
late to  the  partnership  business. 
Kaskaskia  Bridge  Go.  v.  Shannon, 
1  (iilm.  15. 

Entries  made  by  one  partner  dur- 
ing the  continuance  of  the  part- 
nership, in  a  book  of  accounts,  are 
admissible  evidence  against  both. 
Walden  v.  Sherburne,  15  Johns. 
409. 

In  a  suit  against  a  partnership, 
if  a  partner  voluntarily  submits  to 
be  examined  on  the  part  of  the 
plaintiff,  against  himself  and  his 
copartners  jointly,  his  evidence  is 
admissible  for  that  purpose:  the 
rule  is  the  same  in  contract  and  in 
tort.  O'Brien  v.  Vantine,  1  Pa. 
Law  Jour.  Rep.  79. 

The  answer  of  one  partner,  ad- 
mitting the  indebtedness  of  the 
partnership,  is  sufficient  to  charge 
the  partnership  as  garnishees. 
Anderson  v.   Wanzer,  6   Miss.  587. 

Where  one  of  two  partners  had 
assigned  his  interest  in  the  partner- 
ship property  to  his  copartner  as 
collateral  security  for  a  debt  which 
he  owed  him,  but  was  still  liable 
for  the  debts  of  the  firm,  and  en- 
titled to  his  proportion  of  the  sur- 
plus property  after  the  debts  of 
the  firm  and  his  debt  to  his  part- 
ner were  paid,  held,  that  a  paper 
signed  by  the  partner  who  had  as- 
signed his  interest,  and  made  after 
the  commencement  of  the  suit, 
stating  that,  after  the  assignment, 
he  had  taken  the  money  of  the 
firm,  to  recover  which  the  action 


was  brought,  and  had  appropt  tated 
it  to  the  payment  of  the  note  of 
another  firm  of  which  he  was  a 
member,  in  the  hands  of  the  de- 
fendant, was  admissible  in  evi- 
dence against  the  firm,  in  an  action 
of  assumpsit  for  money  had  and 
received,  brought  for  the  benefit  of 
the  assignee  alone.  Foster  v.  Fi- 
field,  29  Me.  136. 

A.,  being  in  partnership  with  B., 
collected  a  sum  of  money  in  his  in- 
dividual capacity  for  O,  and  after- 
wards executed  to  the  latter  a  note 
in  the  name  of  the  firm  for  the 
amount.  In  a  suit  against  the  firm 
on  the  note  the  plaintiff  offered  to 
prove  that  A.,  during  the  exist- 
ence of  the  firm,  had  declared  that 
said  money  had  been  used  by  him- 
self and  partner  in  the  business  of 
the  partnership.  Held,  that  the 
evidence  was  inadmissible.  Hick- 
man i\  Reineking,  6  Blackf.  387. 

In  an  action  against  the  surviv- 
ing member  of  a  firm  to  recover 
money  lent  to  the  deceased  part- 
ner, where  the  defense  is  that  the 
money  was  not  borrowed  or  used 
for  firm  purposes,  declarations  of 
the  deceased  partner  to  third  per- 
sons, made  after  the  money  was 
borrowed,  to  the  effect  that  it  was 
borrowed  and  used  for  firm  pur- 
poses, are  admissible  as  against  the 
surviving  partner.  Klock  v.  Beck- 
man,  18  Hun,  502. 

If  the  admissions  of  a  surviving 
partner  with  respect  to  a  transac- 
tion within  the  scope  of  the  copart- 
nership, made  after  the  death  of 
his  copartner,  be  competent  evi- 
dence against  the  personal  repre- 
sentatives of  the  deceased  partner, 
they  are  not  conclusive.  McElroy 
v.  Ludlam,  32  N.  J.  Eq.  828. 

The  declarations  of  the  alleged 


274 


OH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


'129 


partners),  unaccompanied  by  acts, 
and  unconnected  with  any  of  their 
declarations  proved  by  the  other 
party,  are  inadmissible  in  their  own 
favor.  Phillips  v.  Purington,  15 
Me.  425. 

The  acts,  declarations  or  admis- 
sions of  one  of  two  partners  are 
not  admissible  as  evidence  for 
them  in  an  action  against  them  as 
a  firm,  and  where  they  have 
jointly  pleaded  the  general  issue. 
Hutchins  v.  Childress,  4  Stew. 
&  P.  34. 

A.  entered  into  partnership  with 

B.  in  the  business  of  tanning,  and 

C.  bound  himself,  in  a  covenant  to 
B.,  for  A.'s  conduct  as  a  partner 
for  a  certain  time.  Held,  that  in 
an  action  by  B.  against  C.  on  the 
covenant,  the  admissions  of  A., 
made  after  the  expiration  of  the 
stipulated  time,  were  not  admissi- 
ble as  evidence  against  C.  Hotch- 
kiss  r.  Lyon,  2  Blackf.  223. 

When  defendant  is  sued  as  sur- 
viving partner  of  a  firm,  in  an  ac- 
tion on  the  case  for  fraud  and  deceit 
in  the  purchase  of  a  slave,  the  dec- 
larations of  his  deceased  copartner, 
by  whom  the  contract  was  made, 
before  and  after  the  purchase,  as 
to  his  object  in  purchasing,  are  not 
admissible  evidence  for  the  defend- 
ants show  that  his  copartner  made 
the  purchase  on  his  own  individual 
account,  and  not  on  account  of  the 
firm.  Dixon  v.  Barclay,  22  Ala.  370. 

A  declaration  of  a  partner  that 
a  liability  incurred  by  a  third  per- 
son, at  his  request,  in  borrowing  a 
sum  of  money,  was  for  the  benefit 
of  the  firm,  does  not  bind  his  co- 
partner. Thorn  v.  Smith,  21  Wend. 
365. 

The  acts  and  declarations  of  a 
partner  may  be  given  in  evidence 


to  prove  his  assent  to  the  junction 
of  his  firm  with  the  firm  of  a  third 
person ;  also  the  conduct  of  the 
tl  'id  person's  firm.  Wood  v.  Con- 
nell,  2  Whart.  513. 

A  declaration  by  a  surviving 
partner  that  the  partnership  owed 
the  deceased  a  certain  sum  may 
be  proved  to  show  that  there  was 
an  account  stated  with  the  deceased 
in  his  life-time.  Cunningham  v. 
Sublette,  4  Mo.  224. 

The  admissions  or  declarations  of 
one  partner  after  dissolution,  and 
not  under  a  new  authority,  are  not 
evidence  against  a  former  partner. 
Craig  v.  Alverson,  6  J.  J.  Marsh. 
509 ;  Crumless  v.  Sturgess,  6  Heisk. 
190 ;  Dougelot  v.  Rawlings,  58  Mo. 
75;  Fick  v.  Mulholland,  48  Wis. 
413;  Hawkins  v.  Lee,  8  Lea,  42; 
Jeffries  v.  Castleman,  75  Ala.  202; 
Nichols  v.  White,  85  N.  Y.  531 ; 
Hatheway's  Appeal,  52  Mich.  112. 
See,  however,  Tripp  v.  Williams, 
14  S.  C.  502. 

And,  on  the  other  hand,  partner- 
ship transactions  with  third  per- 
sons, which  took  place  after  the 
sale  of  his  present  interest  by  one 
partner  to  another,  and  after  the 
retiring  partner  had  ceased  to  be  a 
member  of  the  firm,  are  not  ad- 
missible in  evidence  against  him 
upon  the  question  of  the  value  of 
his  interest  when  sold,  nor  upon 
the  question  of  fraud  or  mistake  in 
the  contract  of  sale ;  and  equally 
inadmissible  are  judgments  ren- 
dered against  the  new  firm,  to 
which  the  retired  member  was  no 
party.    Dortie  v.  Dugas,  55  Ga.  484. 

Where  A.  and  B.  were  partners 
in  trade,  and  upon  their  dissolution 
B.  assigned,  for  value,  all  his  in- 
terest in  the  partnership  effects  to 
A.,    held,   that   B.    would    not    be 


275 


*129 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


3.  Agents.—  As  to  the  appointment  of  agents,  see  infra 
under  the  head  Servants} 


permitted  by  his  mere  declaration, 
made  after  such  assignment,  to  de- 
feat an  action  brought  in  their  joint 
names.  Owings  v.  Low,  5  Gill  & 
J.  .134. 

In  an  action  of  assumpsit  by- 
partners  for  work  and  labor,  Jield, 
that  evidence  of  the  statements  of 
one  of  the  partners,  made  after  the 
dissolution  of  the  partnership,  so 
far  as  they  tended  to  show  a  new 
contract  destroying  the  partnership 
claim,  and  giving  to  each  partner 
a  separate  demand  for  his  part  of 
the  debt,  was  not  admissible;  but 
that  the  statements  of  such  part- 
ner, so  far  as  they  showed  a  pay- 
ment made  to  himself,  might  be 
proved.  Lefavour  v.  Yandes,  2 
Blackf.  240. 

The  admissions  of  one  partner, 
made  at  the  time  of  the  payment 
to  him  of  a  debt  due  to  the  part- 
ners, and  at  a  time  subsequent  to  a 
dissolution,  are  admissible  against 
the  other  partners,  as  the  admis- 
sions of  an  agent  relative  to  an  act 
within  the  scope  of  his  authority, 
made  at  the  time  when  such  act 
was  done,  are  admissible  in  evi- 
dence to  bind  his  principal.  Kirk 
v.  Hiatt,  2  Ind.  322. 

In  Pennsylvania,  under  the  stat- 
ute of  183S,  authorizing  one  firm 
to  maintain  an  action  against  an- 
other, although  a  partner  in  one  is 
also  a  partner  in  the  other,  the  acts 
and  declarations  of  such  common 
partner,  done  and  made  after  the 
dissolution  of  the  partnership,  are 
admissible  in  evidence  in  such  ac- 
tion. Tassey  v.  Church,  4  Watts  & 
S.  141. 

A.  was  indebted  to  a  partnership 


on  a  note.  He  paid  a  portion  of  it 
to  B. ,  one  of  the  members  of  the 
firm,  which  B.  promised  to  indorse 
on  the  note,  but  neglected  to  do  so. 
After  the  dissolution  of  the  part- 
nership, C,  the  other  partner,  gave 
a  writing,  signed  by  his  individual 
name,  acknowledging  that  lie  had 
i-etained  in  his  hands  the  money  of 
A.  to  the  amount  due  on  the  note, 
and  promising  to  refund  to  A.  such 
sum  as,  in  a  suit  then  pending  on 
the  note,  the  court  should  find  had 
been  paid  thereon.  The  money  so 
retained  had  been  received  by  C. 
as  a  member  of  the  partnership, 
and  for  their  use  and  benefit.  The 
suit  was  then  withdrawn,  and  A. 
brought  his  action  against  B.  and 
C.  jointly  to  recover  back  the 
amount  first  paid  to  B.  Held,  that 
the  writing  given  by  G  to  A.  was 
admissible  in  evidence.  Story  v. 
Barred,  2  Conn.  665. 

After  the  dissolution  of  a  part- 
nership between  an  active  and  a 
dormant  partner,  an  action  for  the 
balance  of  an  account  was  brought 
against  both,  in  which  the  dormant 
partner  pleaded  payment,  and  the 
active  partner  was  defaulted. 
Held,  that  an  admission  made  after 
the  dissolution  of  the  partnership 
by  the  active  partner,  that  such 
balance,  in  consequence  of  a  mis- 
take, had  not  been  paid,  was  com- 
petent evidence.  Bridge  v.  Gray, 
14  Pick.  55. 

1  One  partner  may  appoint  an 
agent  by  parol  to  make  and  indorse 
bills,  etc. ;  and  such  power  is  not 
void,  though  given  by  one  partner 
by  writing  under. seal.  Lucas  v. 
Bank  of  Darien,  2  Stew.  280. 
76 


Cn.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


■129 


4.  Arbitration. —  One  partner  cannot,  without  special  au- 
thority, bind  the   firm  by  a  submission  to  arbitration,  (p)  l 


(p)  See  Stead  v.  Salt,  3  Bing. 
101;  Adams  v.  Bankhart,  1  Cr.  I£ 
&  R  081;  Antrarn  r.  Chace,  15 
East,  209. 

1  Carthaus  v.  Ferrers,  1  Pet.  222 ; 
Walker  v.  Bean,  34  Minn.  437; 
Faucher  v.  Bibb  Furnace  Co.  80 
Ala.  481  (overruling  Cochran  v. 
Cunningham,  16  Ala.  448  :  Jones 
v.  Bailey,  5  Cal.  345;  Wood  t». 
Shepherd,  2  Patt.  &  H.  442;  Buchoz 
v.  Grandjean,  1  Mich.  367;  Martin 
V.  Thrasher.  40  Vt.  46 ). 

In  Pennsylvania,  Kentucky  and 
Illinois,  however,  one  partner  ruay 
bind  his  copartner  by  submission 
to  arbitration  by  any  agreement 
not  under  seed.  Taylor  v.  Coryell, 
12  Serg.  &  R.  243 ;  Gay  o.  Waltman, 
89  Pa.  St.  453;  S.  C.  7  Weekly 
Notes  of  Cases,  1879,  p.  175:  Hal- 
lack  v.  Marsh,  25  III.  48;  Souther- 
land  v.  Steel,  3  Mon.  435. 

A  reference  to  third  parties  of 
the  extent  of  damage  caused  by 
fire,  made  by  one  partner  without 
the  assent  of  his  copartners,  is 
binding  on  him  as  to  his  share  of 
the  damage.  Brink  v.  New  Am- 
sterdam, etc.  Ins.  Co.  5  Robt.  104. 

One  partner  cannot  bind  another 
by  a  sealed  bond  to  perform  an 
award  in  the  name  of  the  firm ; 
the  bond  is,  however,  binding  upon 
the  party  who  seals  it,  and  may  be 
declared  upon  accordingly.  Arm- 
strong v.  Robinson.  5  Gill  &  J.  412. 

Where  one  partner  signed  a 
sealed  submission  to  an  award, 
and  accepted  the  amount  awarded 
in  favor  of  the  partnership,  pur- 
suant to  such  submission,  and  in- 
dorsed a  .receipt  in  full  on  the 
award,     held,     that     it    operated 

2 


either  as  a  release  by  one  partner, 
or  as  an  award  and  satisfaction, 
and  was  sufficient  to  bar  the  part- 
nership claim,  though  the  submis- 
sion might  not  have  been  binding 
upon  his  copartner.  Buchanan  v. 
Curry,  19  Johns.  137. 

Notice  to  one  of  the  copartners, 
who  have  separately  signed  articles 
of  submission  to  arbitration,  is  no- 
tice to  the  firm.  Haywood  v.  Har- 
mon, 17  111.  477. 

A  partner  can  bind  his  firm  by 
submission  to  arbitration  if  ex- 
pressly authorized  so  to  do;  and  an 
award  based  on  such  submission 
may  be  good  at  common  law. 
Davis  v.  Berger.  54  Mich.  652. 

As  to  when  one  partner  may  not 
revoke  a  submission  to  arbitration 
of  the  differences  between  himself 
and  his  copartner,  see  Haley  v. 
Bellamy,  137  Mass.  357. 

As  to  arbitration  and  award  be- 
tween administrator  of  a  deceased 
partner  and  a  surviving  partner, 
and  what  amounts  to  a  perform- 
ance of  the  award,  see  Clantoa 
v.  Price,  90  N.  C.  96. 

Joinder  of  partners  in  suing  out 
a  writ  of  error  to  release  the  judg- 
ment on  an  award  against  the  firm 
ratifies  the  authority  of  one  part- 
ner to  submit  to  arbitration.  Dav.'s 
v.  Berger,  54  Mich.  652. 

Where  a  replevin  suit  was  begun 
by  partners  after  a  dissolution,  but 
before  settlement  of  the  partners!]  ip 
affairs,  and  the  matter  in  dispute 
was  submitted  to  arbitration  by- 
one  partner  in  the  firm  name,  and 
the  other  did  not  repudiate  this 
action,  but  merely  said  that  he  was 
not  to  be  held  liable  under  it, 
7 


-129 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    If. 


The  power  to  refer  disputes,  even  although  they  relate  to 
dealings  with  the  firm,  cannot  be  said  to  be  necessary  for 
carrying  on  its  business  in  the  ordinary  way.  (q)  Where  a 
partnership  has  been  dissolved,  and  it  has  been  agreed  that 
one  of  the  partners  shall  get  in  the  debts  due  to  the  firm, 
he  has  no  power,  after  bringing  an  action  in  the  name  of 
the  firm  for  a  debt  due  to  it,  to  bind  his  copartner  by  a  ref- 
erence of  all  matters  in  difference  between  the  plaintiffs 
and  the  defendant,  (r)  The  partner  actually  referring  the 
dispute  is,  however,  himself  bound  by  the  award;  (s)  and 
the  other  partners  may  become  bound  by  ratification,  (i) 
[4a.  As*Lgnments}~\ 


held,  that  this  was  not  sufficient 
to  release  him  in  an  action  of  trover 
based  on  the  award.  McArthur  v. 
Oliver,  53  Mich.  299. 

An  award  on  a  submission  of 
matters  involved  in  a  suit  in  chan- 
cery for  dissolution  of  a  partner- 
ship, accounting,  etc.,  construed. 
McMillan  v.  James,  105  111.  194. 

(q)  Stead  v.  Salt,  3  Bing.  101; 
Adams  v.  Bankhart,  1  Cr.  M.  &  R. 
081.  And  see  Boyd  v.  Emerson,  2 
A.  &  E.  184. 

(r)  Hatton  v.  Royle,  3  H.  &  N. 
500. 

(s)  Strangford  v.  Green,  2  Mod. 
228. 

(t)  As  in  Thomas  v.  Atherton,  10 
Ch.  D.  185. 

1  See  Bills  and  Notes,  post. 

One  partner  may  transfer  or  as- 
sign a  chose  in  action,  or  a  debt 
due  to  the  partnership,  or  any 
other  partnership  effects,  so  far  as 
the  same  can  be  transferred  or  as- 
signed in  law.  Clarke  v.  Hoge- 
man,  13  W.  Va.  718;  Event  v. 
Strong,  5  Hill,  103;  Cullom  v. 
Bloodgood,  15  Ala.  34;  Harrison  v. 
Sterry,  5  Cianch,  289;  Anderson 
V.  Tompkins,    1    Brock.  450;  Mills 


v.  Barber,  4  Day,  428;  Randolph 
Bank  v.  Armstrong,  11  Iowa,  515; 
Fromme  v.  Jones,  13  Iowa,  471 ; 
Quiner  V.  Marblehead  Ins.  Co.  10 
Mass.  476;  Lamb  v.  Durant,  12  id. 
54 ;  United  States  Bank  v.  Binney, 
5  Mason,  176;  Hodges  v.  Harris,  G 
Pick.  360;  Halsey  V.  Whitney,  4 
Mason,  206 ;  Clark  v.  Rives,  33  Mo. 
579 ;  Boswell  v.  Green,  25  N.  J.  L. 
390;  McClelland  v.  Remsen,  36 
Barb.  623;  14  Abb.  Pr.  331;  S.  C. 
23  How.  Pr.  175. 

An  assignment  by  one  partner 
of  a  debt  due  to  the  partnership 
to  another  partner  for  his  benefit 
individually  is  not  binding  on  the 
other  partners.  Wood  v.  Shepherd, 
2  Patt.  &  H.  442. 

A  partner  cannot,  however,  sue 
in  his  own  name  to  recover  prop- 
erty of  the  firm  fraudulently  as- 
signed by  a  copartner  to  his  indi- 
vidual creditor.  Miller  v.  Price,  20 
Wis.  117. 

When  a  note  payable  to  a  part- 
nership is  transferred  by  one  of 
the  partners  in  payment  of  his  in- 
dividual debts,  the  purchaser  ac- 
quires only  the  assignor's  interest, 
and  holds  the  note  subject  in  equity 
78 


CII.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*129 


5.  Banking  account. —  One  partner  has  no  implied  au- 
thority to  bind  the  firm  by  opening  a  banking  account  on 
its  behalf  in  his  own  name,  (u)     See  infra,  Cheques. 


to  the  claim  of  the  other  partners. 
An  assignee  who  purchased  the 
note  for  cash,  after  maturity, 
while  it  was  in  the  hands  of  an  at- 
torney for  collection,  and  who  re- 
lied upon  the  representations  of 
the  partner  assigning  it  as  to  the 
state  of  accounts  between  his  co- 
partner and  himself,  and  as  to  his 
right  to  dispose  of  the  note,  is 
affected  with  notice  of  the  copart- 
ner's interest  therein.  Halstead  v. 
Shepard,  23  Ala.  558. 

The  assignment  of  a  bond  by  one 
of  two  joint  obligees,  made  in  the 
joint  name,  conveys  no  title  unless 
it  appear  (the  obligees  being  part- 
ners) that  the  assignment  relates 
to  a  matter  within  the  scope  of  the 
partnership  business.  Hudson  v. 
McKenzie,  1  E.  D.  Smith,  058. 

Where  an  assignment  of  a  part- 
nership claim  was  made  by  an 
agent  of  the  firm  with  the  consent 
of  one  of  the  partners,  to  apply  on 
a  demand  against  the  agent  and 
the  consenting  partner,  it  was  held 
that  the  objection  that  the  assign- 
ment was  invalid  for  want  of  the 
assent  of  all  the  partners  only 
went  to  the  sufficiency  of  the  con- 
sideration as  between  the  partner- 
ship and  the  assignees,  and  could 
only  be  raised  by  the  partners 
themselves.  An  assignment  in  the 
name  of  a  firm  cannot  be  contested 
by  a  thud  person  without  showing 
that  the  partners  did  not  acquiesce 
in  it.  Kull  v.  Thompson,  38  Mich. 
685. 

One   partner  may,  without   the 


knowledge  or  assent  of  his  copart- 
ner, assign  directly  to  a  creditor  a 
part  or  the  whole  of  the  partnership 
property  to  pay  or  secure  a  firm 
debt  existing  or  about  to  be  con- 
tracted. Mabbett  v.  White,  12 
N.  Y.  442;  McClelland  v.  Remsen, 
14  Abb.  Pr.  335;  S.  C.  36  Barb.  622; 
Mills  v.  Barber,  4  Day,  428 ;  Harri- 
son v.  Sterry,  5  Cranch,  289 ;  Dana 
v.  Lull,  17  Vt.  390;  Deming  v. 
Colt,  3  Sandf.  290;  Anderson  v. 
Tompkins,  1  Brock.  461 ;  Hodges 
v.  Harris,  6  Pick.  360;  Tapley  v. 
Butterfield,  1  Mete.  515;  Egberts 
v.  Woods,  3  Paige,  517;  Boswell  v. 
Green,  25  N.  J.  L.  390;  Cullurn  v. 
Bloodgood,  15  Ala.  34;  Everet 
v.  Strong,  5  Hill,  163;  S.  C.  7  Hill, 
585 ;  McCollough  v.  Sommerville, 
8  Leigh,  415;  Ormsbee  v.  Davis,  5 
R.  I.  443;  Russel  v.  Leland,  12 
Allen,  349;  Johnson  v.  Robinson, 
4  So.  W.  Rep.  625. 

Where,  however,  the  business  of 
the  firm  is  not  trade,  buying  and 
selling,  but  a  business  to  which 
the  continued  ownership  of  the 
property  sold  is  indispensable,  one 
partner  has  not  authority  even  to 
sell  the  firm  property  without  the 
knowledge  or  assent  of  his  copart- 
ner. So  held  in  Sloan  v.  Moore, 
37  Pa.  St.  217,  where  authority  was 
denied  one  partner  so  to  sell  a 
newspaper  which  he  and  his  co- 
partner were  publishing. 

But  one  partner  cannot,  without 
the  knowledge  or  assent  of  his  co- 
partner, assign  the  partnership 
property  to  a  trustee  for  the  bene- 


fit) The  Alliance  Bank  Limited  v.  Kearsley,  L.  R.  6  C.  P.  433. 

279 


*129 


EIGHTS    AND    OBLIGATIONS. 


[EOOK    II. 


fit  of  creditors.  Deming  v.  Colt,  3 
Sandf.  284;  Hayes  v.  Heyer,  3 
Sandf.  293;  Havens  v.  Hussey,  5 
Paige,  30;  Kirby  v.  Ingersoll,  1 
Doug.  477:  Dana  v.  Lull,  17  Vt. 
390;  Fisher  V.  Murray,  1  E.  D. 
Smith,  341 ;  Wetler  v.  Schlieper,  4 
E.  D.  Smith,  707;  Stein  v.  Ladow, 
13   Minn.  413;  Holland   v.  Drake, 

29  Ohio  St.  441 ;  Hook  v.  Stone,  34 
Mo.  329;  Pearpont-  v.  Graham,  4 
Wash.  C.  C.  234:  Hughes  v.  Elli- 
son. 5  Mo.  463;  Dickinson  v.  Le- 
gare,  1  Dessaus.  537;  Kimball  v. 
Hamilton,  8  Bosw.  495;  Ormsbee 
v.  Davis,  5  R.  I.  442;  Dunklin  v. 
Kimball,  50  Ala.  251;  Brooks  v. 
Sullivan,  32  Wis.  444;  Hudson 
v.  McKenzie,  1  E.  D.  Smith,  358; 
Kelly  v.  Baker,  2  Hilt.  531;  Hag- 
garty  v.  Granger,  15  How.  Pr.  243; 
Paton  v.  Wright,  15  How.  Pr.  481 ; 
Pettee  v.  Orser,  18  How.  Pr.  442 ; 
S.  C.  6  Bosw.  123 ;  Welles  v.  March, 

30  N.  Y.  344;  Coope  v.  Bowles,  42 
Barb.  88;  Adee  v.  Cornell,  25  Hun, 
78;  S.  C.  93  N.  Y.  572;  Hutchinson 
v.  Smith,  7  Paige,  96  (assignment 
by  survivor  in  payment  of  sepa- 
rate debt  of  deceased  partner) ; 
Nelson  v.  Tenney,  36  Hun,  327 
(general  assignment  by  survivor); 
Steinhart  v.  Fyhrie,  5  Mont.  463; 
Wilcox  v.  Jackson,  7  Colo.  521 ; 
Atchison  Sav.  Bk.  v.  Templar,  26 
Fed.  Rep.  580  (assignment  by  sur- 
vivor); Adams  v.  Thornton,  82 
Ala.  260.  See,  also,  cases  cited 
infra.  See,  however,  more  or  less 
contra,  Graves  v.  Hall,  32  Tex. 
665;  McGregor  v.  Ellis,  2  Disney, 
286 ;  Russell  v.  Stroud,  12  Weekly 
Not.  Cas.  419. 

But  while  the  law  implies  from 
the  mere  partnership  relation  no 
power  in  one  partner  to  make  a 
general  assignment  for  the  benefit 


of  creditors,  yet  a  power  to  make 
such  an  assignment  may  be  ex- 
pressly conferred  by  one  partner 
upon  another,  or  may,  like  any 
other  power,  be  inferred  from  the 
previous  or  subsequent  conduct  of 
the  partners,  their  manner  of  do- 
ing business,  and  the  circumstances 
in  which  they  place  themselves  in 
reference  to  the  business  of  the 
firm.  Kirby  v.  Ingersoll,  1  Doug. 
490,  491 ;  Adee  v.  Cornell,  93  N.  Y. 
572:  Sullivan  v.  Smith,  15  Neb. 
47G:  S.  C.  48  Am.  Rep.  354;  Nolan 
v.  Donnell,  4  Ont.  440. 

Its  exercise  has  been  upheld  by 
the  courts  in  cases  where  the  non- 
assenting  partners  were  absent 
and  could  not  be  consulted,  have 
absconded  leaving  the  firm  insolv- 
ent, or  have  made  the  assignor  sole 
managing  partner  or  subsequently 
ratified  the  assignment.  See  An- 
derson v.  Tompkins,  1  Brock.  456; 
Stein  v.  Ladow,  13  Minn.  412;  Rob- 
inson v.  Crowder,  4  McCord,  519; 
Deckard  v.  Case,  5  Watts,  22 ;  Har- 
rison v.  Sterry,  5  Cranch,  300;  Mc- 
Collough  v.  Sommerville,  8  Leigh, 
433,  436 ;  Robinson  v.  Mcintosh,  3 
E.  D.  Smith,  221 ;  Fisher  v.  Mur- 
ray, 1  E.  D.  Smith,  341 ;  Kemp  v. 
Camley,  3  Duer,  1 ;  McNutt  v.  Stray- 
horn,  39  Pa.  St.  269 ;  Clark  v.  Wil- 
son, 19  Pa.  St.  414 :  Bank  v.  Sackett, 
2  Daly,  395 ;  Roberts  v.  Shepard,  2 
Daly,  110 ;  Brooks  v.  Sullivan,  32 
Wis.  444;  Corwin  v.  Suydam,  24 
Ohio  St.  209;  Hewes  v.  Bayley,  20 
Pick.  96;  Clark  v.  McClelland,  2 
Grant's  Cases,  31 ;  Baldwin  v. 
Tynes,  19  Abb.  Pr.  32;  Kelly  v. 
Baker,  2  Hilt.  531 ;  Forbes  v.  Scan- 
nel,  13  Cal.  243;  Robinson  v.  Greg- 
ory, 29  Barb.  560 ;  Palmer  v.  Myers, 
43  Barb.  509;  Bank  v.  Sackett,  2 
Abb.  Pr.  N.  S.  286;  Hitchcock  v. 


280 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


•129 


St.  John,  1  Hoffm.  511 ;  Hennessey 
v.  Bank,  6  Watts  &  S.  300;  Sheldon 
v.  Smith,  28  Barb.  593;  Welles  v. 
March,  30  N.  Y.  344;  Palmer  v. 
Myers,  29  How.  Pr.  8 ;  Coleman  v. 
Darling,  66  Wis.  155 ;  Re  Daniels, 
14  R.  I.  500 ;  Loeb  v.  Pierpont,  58 
la.  469;  S.  C.  43  Am.  Rep.  122; 
Coleman  v.  RosenfelcT,  28  N.  W. 
Rep.  367;  Rumery  v.  McCulloch,  54 
Wis.  565 ;  Sullivan  v.  Smith,  15  Neb. 
476;  S.  C.  4S  Am.  Rep.  354;  Will- 
iams v.  Gillespie,  Ct.  App.  W.  Va., 
Jan.  28,  1888.  But  see  Pettee  v. 
Orser,  6  Bosw.  123,  in  which  ab- 
sence of  the  partners  not  assenting 
was  held  to  create  no  emergency 
which  justified  the  assignment  in 
that  case.  And  see  Coope  v. 
Bowles,  42  Barb.  88. 

Where  one  partner  has  absconded 
from  the  state  the  remaining  part- 
ner cannot  in  the  name  of  the  firm 
apply  for  the  benefit  of  the  state 
insolvent  law.  Second  National 
Bank  v.  Willing,  66  Md.  314. 

A  general  assignment  having 
been  agreed  to  by  the  firm,  each 
partner  is  authorized  to  execute 
the  deed  thereof.  Osborne  v.  Barge, 
29  Fed.  Rep.  725. 

One  partner  may,  in  the  absence 
of  his  copartner,  but  with  his  au- 
thority and  assent,  execute  an  as- 
signment of  the  firm  property  for 
the  benefit  of  creditors.  Williams 
v.  Frost,  27  Minn.  255.  See,  also, 
Nolan  v.  Donnelly,  4  Ont.  440. 
See,  however,  In  re  Lawrence,  5 
Fed.  Rep.  349,  where  it  was  held 
that  a  general  assignment  by  a 
firm  should  be  executed  and  ac- 
knowledged by  all  the  members  of 
the  firm  the  same  as  a  deed  of  real 
estate.  See,  further,  as  to  the 
form,  manner  of  execution,  etc.. 
of  assignments,  Still  v.   Focke,  66 


Tex.  715;  Farmers'  Bk.  v.  Ritter, 
12  Atl.  Rep.  (Pa.)  659;  Orr  v.  Fer- 
rell,  5  So.  West.  Rep.  (Tex.)  490; 
Hine  v.  Bowe,  46  Hun,  196. 

The  surviving  members  of  a  firm 
are  the  proper  persons  to  execute 
an  assignment  for  the  benefit  of 
creditors,  and  the  administrators 
of  a  special  partner  have  nothing 
to  do  with  it.  Farmers'  Bank  v. 
Ritter,  12  Atl.  Rep.  (Pa.  St.)  659. 

In  case  of  a  dormant  partner, 
and  a  fortiori  where  there  is  no 
partnership,  but  only  the  holding 
out  of  one  as  a  partner  to  a  firm 
individually,  the  active  partner  or 
real  proprietor  may  make  an  as- 
signment of  the  effects  for  the  se- 
curity, in  the  first  instance,  of  his 
individual  debts,  and  then  pro  rata 
for  all  creditors.  Whit  worth  v. 
Patterson,  6  Lea  (Tenn.),  119. 

Where  a  defective  assignment 
has  been  executed  by  both  partners, 
and  one  partner  has  left  the  state 
and  gone  to  Canada  to  reside,  the 
other  partner  may,  without  the 
knowledge  of  such  non-resident, 
execute  in  the  firm  name  a  second 
assignment  of  the  firm  property  to 
the  same  assignee,  to  correct  the 
defect  in  the  first.  Rumery  v. 
McCulloch,  54  Wis.  565.  . 

Where  an  assignment  for  the 
benefit  of  creditors  was  executed 
by  one  partner  for  a  copartner 
under  verbal  instruction  from  the 
copartner  before  leaving  for  Eng- 
land to  sign  for  Rim  if  assignment 
became  necessary,  and  also  under 
a  cablegram  received  from  him 
while  in  England  to  the  same  in- 
tent, held,  that  though  authority 
to  execute  a  deed  must  be  by  deed, 
this  would  not  affect  goods  of 
which  the  assignee  took  actual  pos- 
session, namely,  stock  in  trade  in 


281 


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EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


the  assignee's  store,  nor  goods 
warehoused  for  and  held  by  a  bank, 
where  the  bank  was  notified  and 
agreed  to  hold  the  surplus  after 
paying  its  claim  for  the  assignee. 
Nelles  v.  Maltby,  5  Ont.  263. 

A  partner  who  has  in  fact  with- 
drawn from  the  firm,  so  that  as  be- 
tween himself  and  the  other  part- 
ners he  has  no  authority  over  the 
property  or  business  of  the  firm, 
although  as  between  himself  and 
creditors  he  rnay  still  be  liable  for 
its  debts,  need  not  join  in  an  assign- 
ment by  such  firm  for  the  benefit 
of  its  creditors.  First  National 
Bank  v.  Hackett,  61  Wis.  335. 

An  assignment  by  "J.  T.  H.  & 
R.  H.,  copartners  under  the  firm 
name  and  style  of  J.  T.  H.  &  Co., 
parties  of  the  first  part,"  of  all  the 
property  "  belonging  to  the  said 
parties  of  the  first  part  or  in  which 
they  have  any  right  or  interest," 
etc.,  in  which  the  assignee  is  di- 
rected to  make  payments  "  to  the 
creditors  of  the  said  parties  of  the 
first  part,"  etc.,  is  an  assignment 
by  the  firm  for  the  benefit  of  firm 
creditors.  McNair  v.  Rewey,  62 
Wis.  167 ;  First  Nat.  Bank  v.  Hack- 
ett, 61  id.  333. 

A  transfer  by  one  partner  to  an- 
other of  all  the  assets  of  the  firm, 
to  collect  the  debts  and  pay  and 
discharge  its  liabilities,  giving  such 
managing  partner  all  the  powers 
of  both  for  the  purpose  of  settling 
the  partnership  affairs,  is  not  an 
assignment  for  the  benefit  of  cred- 
itors of  the  firm,  but  one  for  the 
benefit  of  the  parties,  and  will  not 
prevent  the  partner  taking  the  as- 
signment from  securing  one  cred- 
itor to  the  prejudice  of  others. 
Smith  v.  Dennison,  101  111.  531. 

It  has  been  held  by  the  supreme 


court  of  the  United  States  that  a 
sole  surviving  partner  of  an  insolv- 
ent firm,  who  was  himself  insolv- 
ent, may  make  a  general  assign- 
ment of  all  the  firm  assets  for  the 
benefit  of  all  the  firm  creditors, 
with  preference  for  some  of  them. 
Emerson  v.  Senter,  118  U.  S.  3. 
See,  also,  Espy  v.  Comer.  80  Ala. 
333;  Atchison  v.  Jones,  1  So.  West. 
Rep.  (Ky.)  406. 

And  such  assignment  is  not  in- 
validated by  the  fact  that  the  as- 
signor fraudulently  withheld  from 
the  schedules  certain  partnership 
property  for  his  own  benefit,  with- 
out the  knowledge  of  the  assignee 
or  the  beneficiaries  in  trust.  Emer- 
son v.  Senter,  118  U.  S.  3. 

In  Colorado  the  surviving  part- 
ner of  an  insolvent  firm  may  make 
an  equitable  and  just  assignment 
for  the  equal  benefit  of  all  the 
firm  creditors,  but  cannot  give 
preference  therein  to  certain  cred- 
itors. Salisbury  v.  Ellison,  7  Col. 
167;  S.  C.  id.  303;  49  Am.  Rep. 
347. 

In  New  York,  before  the  adoption 
of  the  Revised  Statutes,  an  assign- 
ment, by  the  surviving  partner,  of 
all  the  partnership  funds  for  the 
benefit  of  the  assignees,  who  were 
creditors,  and  one  of  whom  was 
administrator  of  the  deceased  part- 
ner, was  held  valid.  Hutchinson 
v.  Smith,  7  Paige,  26. 

A  sole  surviving  partner  may,  in 
that  state,  make  a  general  assign- 
ment, containing  preferences,  of  all 
the  firm  property  for  the  benefit  of 
the  firm  creditors,  which  shall  be 
valid  as  against  the  latter,  although 
liable  to  be  set  aside  on  the  appli- 
cation of  the  representatives  of  the 
deceased  partner.  Williams  v. 
Whedon,  39  Hun  (N.  Y.),  98.     See, 


282 


CH.   I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


•129 


also,  Haynes  v.   Brooks,    42  Hun,     property  of  the  firm,  for  the  bene- 


528;    S.   C.   17  Abb.   N.   C.   152;   8 
N.  Y.  Civ.  Proc.  106. 

If  such  assignment,  with  prefer- 
ences, is  made  by  the  surviving 
partners,  with  the  assent  of  the 
personal  representatives  of  the  de- 
ceased partner,  it  will  be  valid  both 
as  between  the  survivors  and  the 
firm  creditors,  and  the  survivors 
and  such  personal  representatives. 
Beste  v.  Burger,  13  Daly,  317 ;  S.  C. 
17  Abb.  N.  C.  102. 

When,  however,  the  surviving 
partner,  without  the  consent  of  the 
representatives  of  the  deceased 
partner,  makes  an  assignment  for 
the  benefit  of  the  firm  creditors, 
with  preferences,  the  executor  of 
the  deceased  partner  may  maintain 
a  bill  to  set  aside  the  assignment 
and  for  a  receiver  to  settle  up  the 
business,  and  so  discharge  the  firm 
obligations  as  to  protect  the  rights 
of  the  legal  representatives  of  the 
deceased.  Nelson  v.  Tenney,  36 
Hun  (N.  Y.),  337. 

A  cession  made  by  the  surviving 
members  of  the  firm,  who  are  iD 
possession  of  the  partnership  prop- 
erty, carries  that  property  into  in- 
solvency and  defeats  all  claims  of 
attaching  creditors  upon  it.  La- 
follye  v.  Carriere,  24  Fed.  Rep.  340. 

A  surviving  partner's  assignment 
of  all  real  and  personal  estate  "  be- 
longing to  me  personally,  or  as 
surviving  partner,  ...  to  di- 
vide and  pay  all  the  balance  of 
said  proceeds  among  all  my  cred- 
itors according  to  law,"  conveys 
his  separate  property  for  the  bene- 
fit of  his  separate  creditors,  and  the 
partnership  property  for  the  bene- 
fit of  his  partnership  creditors. 
Moody  v.  Downs,  03  N.  H.  50. 
A    general    assignment    of    the 


fit  of  a  portion  of  the  firm  cred- 
itors, made  by  one  partner  against 
the  opposition  of  the  other  partner, 
of  which  the  beneficiaries  under 
such  assignment,  or  their  agent 
procuring  it,  have  notice  prior  to 
its  execution,  is  invalid.  Bull  v. 
Han-is,  18  B.  Mon.  195. 

The  law  will  not  favor  an  attempt 
by  one  partner  to  give  a  preference 
to  particular  creditors  against  the 
wish  of  his  copartners.  Matter  of 
Lowenstein,  7  How.  Pr.  100. 

An  assignment  by  a  partner  of 
his  separate  property,  in  trust  for 
the  payment  of  the  partnership 
debts,  is  valid  as  against  a  separate 
creditor  of  such  partner.  Newman 
v .  Bagley,  16  Pick.  570. 

An  assignment  by  a  firm  for  the 
benefit  of  its  creditors,  preferring 
debts  of  individual  partners,  or  re- 
serving moneys  for  the  support  of 
their  families,  is  void  as  against 
those  creditors  of  the  firm  who 
elect  to  repudiate  it.  Willis  v. 
Bremner,  60  Wis.  622;  Schiele  v. 
Healy,  10  Daly,  92;  Vietor  v. 
Henlein,  34  Hun,  532;  Whitney 
v.  Hirsch,  9  N.  Y.  Civ.  Proc.  219. 

A  surviving  partner  borrowed 
money  to  pay  a  debt  of  the  late 
firm,  and,  on  making  an  assign- 
ment of  the  firm  assets  and  of  his 
own,  preferred  the  lender  as  a  part- 
nership creditor.  Held,  that  this 
did  not  avoid  the  assignment,  for 
the  lender  might  be  treated  as  a 
partnership  creditor  by  subroga- 
tion. Haynes  v.  Brooks,  17  Abb. 
N.  C.  152;  S.  C.  8  N.  Y.  Civ.  Proc. 
106 ;  42  Hun,  528. 

A  chattel  mortgage  by  partners, 
not  including  all  the  firm  property, 
and  not  intended  to  operate  as  an 
assignment  for  the  benefit  of  cred- 


283 


:129 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


itors,  cannot  be  construed  as  an 
assignment.  Carson  v.  Byers,  67 
la.  606. 

As  to  when  the  transfer  of  all 
the  assets  of  an  insolvent  firm  will 
be  treated  as  an  absolute  sale  and 
not  as  an  assignment,  see  Hine  v. 
Bowe,  4G  Hun  (N.  Y.),  196. 

A  firm  cannot,  in  an  assignment 
for  the  benefit  of  its  creditors,  give 
preference  to  notes  given  by  the 
firm  for  debts  due  to  the  members 
thereof.  First  National  Bank  v. 
Wood,  45  Hun  (N.  Y.),  411. 

Where  an  insolvent  partnership 
made  a  deed  of  assignment  of  spe- 
cific property  to  a  trustee,  provided 
for  a  payment,  equally  and  with- 
out preference,  of  certain  alleged 
creditors  named  in  Schedule  A, 
with  the  amounts  purported  to  be 
due  them,  and  provided  that,  after 
the  payment  in  full  of  such  cred- 
itors, certain  creditors  in  Schedule 
B.  should  be  paid  the  amounts 
therein  stated  to  be  due  them, 
held:  (1)  That  the  deed  conveyed 
integral  amounts  to  a  series  of  in- 
teger creditors,  and  its  provisions 
were  several  by  the  terms  of  the 
grant;  (2)  that  as  it  did  not  pro- 
vide for  the  contingency  of  some 
of  the  debts  in  Schedule  A  being 
fictitious,  which  they  in  fact 
proved  to  be,  and  the  amounts 
which  were  intended  for  them 
were  not  disposed  of  by  the  deed, 
they  remained  in  the  grantor,  as  to 
the  attacking  creditors,  and  were 
subject  to  their  claims.  Market 
Nat.  Bk.  v.  Hofheimer,  23  Fed. 
Rep.  13. 

The  members  of  a  firm  executed 
an  assignment  for  the  benefit  of 
creditors  of  all  their  firm  property, 
which  provided  that,  after  the  pay- 
ment of  the  firm  debts  in  the  order 


specified,  any  residue  should  be 
applied  to  the  payment  of  the  indi- 
vidual and  private  debts  of  the  as- 
signor or  of  either  of  them;  if  the 
remainder  should  prove  insuffi- 
cient for  that  purpose  then  the 
same  was  directed  to  be  applied 
pro  rata  to  the  payment  of  said 
debts ;  no  fraud  in  fact  was  shown. 
Held,  that  a  fair  construction  of 
the  instrument  was  that  after  pay- 
ment of  firm  debts,  if  there  was  a 
surplus,  the  share  of  each  partner 
therein  should  be  applied  to  the 
payment  of  his  individual  debts; 
that  while  the  instrument  was 
necessarily  the  joint  act  of  the 
members  of  the  firm,  so  far  as 
their  joint  property  was  concerned, 
it  was  the  individual  act  of  each  in 
dealing  with  his  individual  prop- 
erty, and  the  language  used  should 
be  construed  as  referring  to.  and 
expressing  only  their  individual 
wishes  with  reference  to  their  in- 
dividual property  and  liabilities, 
and  that  the  provision  in  question 
could  not,  in  any  event,  have  been 
intended  to  defraud  the  creditors 
of  the  firm.  Crook  v.  Rindskorf, 
105  N.  Y.  476,  reversing  34  Hun 
(N.  Y),  457. 

An  assignment  of  the  property  of 
a  firm  should  show  on  its  face  that 
it  was  intended  thereby  to  convey 
the  firm  property,  and  this  is  so 
although  the  business  is  transacted 
in  the  name  of  only  one  partner. 
Still  v.  Focke,  66  Tex.  715. 

An  assignment  by  a  firm  of  their 
individual  as  well  as  partnership 
property,  directing  the  property 
first  to  be  applied  to  the  payment 
of  firm  debts,  is  void  as  giving  a 
preference  to  the  partnership  cred- 
itors over  the  individual  creditors 
as    to    the    individual    property. 


284 


Cn.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


-129 


O'Kane  v.  Hyde,  70  Cal.  6.  See, 
however,  Becker  v.  Leonard,  42 
Hun,  221. 

An  assignment  by  two  partners 
of  all  their  assets,  both  separate 
and  partnership  property,  to  real- 
ize find  pay  all  the  joint  debts  of 
the  said  creditors  of  the  said  debt- 
ors, ratably  and  proportionably, 
without  preference  or  priority, 
held  not  void  in  providing  for  the 
payment  of  partnership  creditors 
only,  it  appearing  that  one  of  the 
partners  had  no  property  and  owed 
but  §110.  that  the  other  had  some 
household  furniture  which  was 
seized  for  rent,  which  it  satisfied, 
that  he  owed  less  than  §100,  and 
that  all  these  separate  debts  had 
been  satisfied.  Kerr  v.  Canada 
Bank  of  Commerce,  4  Ont.  652. 

It  is  no  objection  to  the  validity 
of  a  general  assignment  by  a  sur- 
viving partner  that  the  assignor, 
besides  the  partnership  property, 
devotes  his  own  individual  prop- 
erty to  the  payment  of  the  firm 
debts.  Haynes  v.  Brooks,  42  Hun 
(N.  Y.).  528;  S.  C.  17  Abb.  N.  C. 
152 ;  8  N.  Y.  Civ.  Proc.  106. 

An  assignment  by  a  firm  of  all 
the  partnership  estate  and  of  all  the 
goods  and  effects  of  one  partner  to 
pay  the  firm  creditors,  there  being 
separate  creditors,  is,  under  the 
R.  S.  O.  ch.  118,  sec.  25,  void:  and 
the  intent  of  the  parties  to  include 
separate  creditors  cannot  be  sup- 
plied by  parol  evidence.  Mills  v. 
Kerr,  82  TJ.  C.  C.  P.  68. 

A  deed  of  assignment  of  partner- 
ship property  is  not  invalid  for  the 
reason  that  it  is  assigned  for  the 
benefit  of  all  the  creditors  and  not 
the  firm  creditors  alone.  Hartzler 
v.  Tootle,  85  Mo.  23. 

An  assignment  directing  the  as- 


signee to  distribute  the  proceeds 
of  the  property  assigned  "ratably 
and  proportionably  among  all  the 
creditors  of  the  assignor  in  pay- 
ment and  satisfaction  as  far  as  pos- 
sible of  their  just  debts,  having 
due  regard  to  the  rights  of  partner- 
ship and  private  creditors,  and  dis- 
tributing the  same  as  between 
them  according  to  law,"  is  valid, 
since  it  provides  for  the  payment 
of  the  partnership  and  separate 
creditors  out  of  their  respective 
estate  appointed  for  that  purpose 
according  to  law.  Nellesr.  Maltby, 
5  Ont.  263. 

An  assignment  by  a  firm  of  all 
the  partnership  property  for  the 
benefit  of  the  creditors  of  the  firm 
is  not  invalid  merely  because  the 
individual  property  of  the  partners 
was  not  also  assigned.  Auley  v. 
Osterman,  65  Wis.  118;  Ex  parte 
Hopkins,  104  Ind.  157.  See,  how- 
ever, Still  v.  Focke,  66  Tex.  715;  Orr 
v.  Ferrell,  5  So.  West.  Rep.  (Tex.)  490. 

In  Texas  an  assignment  by  co- 
partners, under  the  act  of  March 
24,  1879,  must  convey  all  the  firm 
property  as  well  as  the  individual 
property  of  the  members  compos- 
ing the  firm,  except  such  as  is  ex- 
empt from  forced  sale.  Donaho  v. 
Fish,  58  Tex.  164;  Coffin  v.  Doug- 
lass, 61  Tex.  408.  See,  also,  Cleve- 
land v.  Battle,  3  S.  W.  Rep.  681. 

The  fact  that  a  firm  business  is 
done  in  the  name  of  one  of  its 
members  does  not  make  it  the  less 
necessary  that  an  assignment  of 
the  firm  property  shall  show  that 
it  was  intended  to  pass  the  part- 
nership property  than  when  the 
business  is  done  in  the  name  of 
all  the  partners.  Still  v.  Focke,  2 
S.  W.  R.  59. 

An  assignment  of  "  all  and  all 


285 


-129 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


manner  of  goods,  chattels,  debts 
and  effects,  and  other  estate  of 
what  kind  and  nature  soever,  and 
wheresoever  situated,  of  which  the 
assignee  is  the  lawful  owner,  ex- 
cepting only  what  and  so  much  as 
is  exempt  from  attachment,"  con- 
veys the  assignor's  interest  as 
copartner  in  the  property  of  his 
copartnership.  Stiness  v.  Pierce, 
13  R.  I.  452. 

An  exemption  clause  in  a  gen- 
eral assignment  by  partners  will 
not  invalidate  the  assignment 
where  all  the  property  has  in  fact 
been  delivered  to  the  assignee  and 
none  in  fact  has  been  claimed  as 
exempt.  First  National  Bank  v. 
Baker,  G8  Wis.  442. 

In  an  assignment  by  a  copartner- 
ship, a  reservation  of  such  articles 
"  as  are  by  law  exempt  from  seiz- 
ure and  sale  on  execution"  is  in- 
operative because  the  law  gives  the 
firm,  as  such,  no  exemptions ;  such 
a  reservation,  therefore,  does  not 
render  the  assignment  void  for  un- 
certainty. Goll  v.  Hubbell,  61 
Wis.  293. 

A  reservation  of  a  lot  (such  lot 
having  previously  been  held  by  the 
firm,  and  his  partner's  interest 
having  been  conveyed  to  him  be- 
fore the  assignment)  by  one  part- 
ner as  a  homestead  will  not  render 
an  assignment  for  the  benefit  of 
creditors  of  the  firm  void.  Weis- 
enfeld  v.  Stevens,  15  S.  C.  554. 

An  assignment  by  a  firm  for  the 
benefit  of  creditors  is  not  inval- 
idated by  a  provision  authorizing 
the  assignee  to  sign  the  partnership 
name  to  checks,  drafts,  etc..  where 
by  the  terms  of  the  assignment 
this  can  only  be  done  when  it  is 
necessary  to  carry  into  effect  the 
object,  design  and  purpose  of  the 


trust.  See  note  on  surviving  and 
deceased  partners,  17  Abb.  N.  C. 
172. 

As  to  the  power  of  the  assignee 
to  make  payments  to  creditors,  see 
First  National  Bank  v.  Hackett,  61 
Wis.  335. 

An  individual  creditor  of  a  sur- 
viving partner  cannot  maintain  a 
creditor's  action  to  set  aside  a  gen- 
eral assignment  of  the  assets  of  a 
firm  made  by  the  surviving  part- 
ner; the  right  to  do  so  is  in  the 
representatives  of  the  deceased 
partner  and  perhaps  in  the  partner- 
ship creditors.  Haynes  v.  Brooks, 
17  Abb.  N.  C.  152  ;'S.  C.  8  N.  Y. 
Civ.  Proc.  106. 

Two  brothers  constituting  a  firm 
had  been  individually  indebted  to 
their  mother  before  they  went  into 
partnership,  and  becoming  insolv- 
ent   as    a    firm    they    gave    their 
mother  a  partnership  note  secured 
by  chattel  mortgage  on  their  stock, 
and  shortly  afterwards  made  an 
assignment.     The  mother  knew  of 
their  insolvent  condition  when  the 
mortgage  was  given,  and  received 
on  the  note  and  mortgage  before 
the    assignment  was    made  more 
than  she  had  lent  the  firm.     Held, 
that  she  was  not  entitled  to  any 
preference  as  a  bona  fide  secured 
creditor.     Cron  v.  Cron,  56  Mich.  8. 
Where  the    surviving    partners 
formed  a  new  copartnership   and 
continued  to  carry  on  the  business 
and  subsequently  make  an  assign- 
ment for  the  benefit  of  their  indi- 
vidual creditors  and  the  creditors 
of  the  new  firm,  and  the  property 
conveyed  to  the  assignees  is  real 
estate,  the  title  to  which  is  vested 
in    the    surviving     partners     but 
which  belongs  to  the  old  firm,  the 
assignees    take    no    title    by    the 


286 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


129 


6.  Bills  of  exchange  and  promissory  notes. —  Every  mem- 
ber of  an  ordinary  trading  partnership1  has  implied  power 
to  bind  the  firm  by  drawing,  accepting  or  indorsing  bills  of 
exchange,  or  by  making  and  indorsing  promissory  notes  in 
its  name  and  for  the  purposes  of  the  firm,  (x)2     And  if  two 


assignment.  Tiemann  v.  Molliter, 
71  Mo.  512. 

Where  one  of  two  partners  sells 
his  interest  to  the  other,  who  gives 
a  mortgage  thereon  to  pay  the 
price,  and  assumes  all  the  part- 
nership debts,  and  subsequently 
assigns  the  assets  for  the  benefit  of 
creditors  generally,  the  assignee 
may  recover  the  assets  from  the 
mortgagee,  or  one  claiming  under 
him  who  was  not  a  bona  fide  pur- 
chaser for  value.  Hard  v.  Milligan, 
6  Abb.  N.  C.  58. 

An  assignee  for  the  benefit  of 
creditors  cannot  recover  under  the 
assignment  moneys  which  appear 
by  his  bill  to  have  been  due  from 
and  to  have  been  paid  by  his 
assignor  to  the  defendant,  on  the 
mere  allegation  that  his  assignor 
and  defendant  may  have  been 
partners  as  to  third  parties  in  the 
transaction  wherein  such  moneys 
were  paid  ;  for  if  such  partnership 
existed  the  complainant  does  not 
represent  its  creditors.  Grant  v. 
Crowell,  42  N.  J.  Eq.  Rep.  524. 

A  garnished  debtor  may  dispute 
the  validity  of  an  assignment  by  a 
firm  for  the  benefit  of  creditors. 
O'Kane  v.  Hyde,  70  Cal.  6. 

As  to  what  constitutes  a  volun- 
tary assignment  for  the  benefit  of 
creditors  so  as  to  invalidate  prior 
attachments,  see  Landauer  v.  Vie- 
tor,  34  N.  W.  Rep.  (Wis.)  229. 

1 A  manufacturing  partnership 
which  buys  and  sells  is  a  trading 


firm.  Holt  v.  Simmons,  16  Mo. 
App.  97. 

A  partnership  for  conducting  a 
theater  is  a  non-trading  partner- 
ship. Pease  v.  Cole,  53  Conn.  53. 
So  is  a  partnership  between  steve- 
dores. Benedict  v.  Thompson,  33 
La.  Ann.  196. 

(x)  See  Re  Riches,  4  D.  G.  J.  & 
S.  581,  and  5  N.  R.  287 ;  Pinckney 
v.  Hall,  1  Salk.  126 ;  Dickinson  v. 
Valpy,  10  B.  &  C.  128;  Sutton 
v.  Gregory,  2  Peake,  150;  Smith 
v.  Baily,  11  Mod.  401;  Lewis  v. 
Reilly,  1  Q.  B.  349;  Stephens  v. 
Reynolds,  5  H.  &  N.  513.  See, 
also,  The  Bills  of  Ex.  Act,  1882, 
§  23,  cl.  2. 

2  One  of  several  partners  has  an 
implied  authority  to  execute  or  in- 
dorse promissory  notes  in  the  name 
of  the  firm,  where  such  authority 
is  necessary  to  the  successful  carry- 
ing on  of  the  business  of  the  firm  ; 
or,  2,  according  to  the  usage  of 
similar  partnerships ;  or,  3,  accord- 
ing to  the  course  of  trade  of  that 
particular  partnership.  Gray  «t 
Ward,  18  111.  32 ;  Storer  v.  Hinkley, 
Kirby,  147;  Newell  v.  Smith,  23 
Ga.  170;  Dow  v.  Phillips,  24  111. 
249;  Miller  v.  Hughes,  1  A.  K. 
Marsh.  181 ;  Waldo  Bank  v.  Lum- 
bert,  16  Me.  416;  Coursey  v.  Baker, 
7  Har.  &  J.  28 ;  Bascom  v.  Young, 
7  Mo.  1;  Potter  v.  Dillon,  7  Mo. 
228;  Partin  v.  Leiterloh,  6  Jones' 
Eq.  341 ;  Kirkpatrick  v.  Turnbull, 
Aid.  259;  Williams  v.  Connor,  14 


257 


*130 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


partners,  unknown  to  each  other,  give  two  bills  in 
[*130]  the  name  of  the  firm  in  payment  *of  the  same  de- 
mand, the  firm  will  be  liable  on  both  bills,  if  held 
by  bona  fide  holders  for  value  without  notice  of  the  mis- 
take, (y) 


S.  C.  621 ;  Morse  v.  Hagenah,  68 
Wis.  603 ;  Stfmson  v.  Whitney,  130 
Mass,  591 ;  Levi  v.  Lottau,  15  Neb. 
509 ;  S.  C.  48  Am.  Rep.  361 ;  An- 
quilaWine  Co.  v.  Weippert,  14  Mo. 
App.  483;  Bradley  V.  Linn,  19 
Bradw.  322;  Feurt  v.  Brown,  23 
Mo.  App.  332;  First  Nat.  Bk.  v. 
Freeman,  47  Mich.  408;  Deardorf 
v.  Thacher,  78  Mo.  128 ;  S.  C.  47 
Am.  Rep.  95;  Deitz  v.  Regner,  27 
Kan.  94.  See,  also,  Little  Grocer 
Co.  v.  Johnson,  6  So.  West  Rep. 
(Neb.)  231. 

In  order  to  render  parties  liable 
as  partners  on  a  promissory  note, 
the  fact  that  they  were  partners,  or 
held  themselves  out  to  be  such, 
must  be  proved.  Sipfle  v.  Isham, 
46  Hun  (N.  Y.),  366. 

A  partnership  cannot  impeach  a 
note  signed  with  its  firm  name  by 
one  partner  when  its  course  of 
business  has  been  such  as  to  induce 
an  honest  belief  in  the  payee,  who, 
a,  prudent  man  and  familiar  with 
the  manner  of  conducting  its  af- 
fairs, believed  and  had  a  right  to 
believe,  from  his  own  knowledge 
of  such  conduct,  that  the  partner 
had  authority  to  so  sign.  Kelton 
v.  Leonard,  54  Vt.  230. 

Where  one  partner  has  authority 
to  bind  the  firm  by  note  in  settle- 
ment of  the  firm  debts,  the  change 
of  the  fprm  of  the  obligation  to 
that  of  an  indorsement  made  for 
the  same    purpose    is  within  the 


scope  of  his  authority  and  will 
bind  the  firm.  Trulliuger  v.  Cor- 
coran, 81  Pa.  St.  (32  P.  F.  Smith) 
395. 

Where  a  member  of  the  firm, 
having  charge  of  its  financial  busi- 
ness, took  up  firm  notes  by  ex- 
changing therefor  notes  of  a  third 
person,  indorsed  by  him  in  the  firm 
name,  such  indorsement  being 
without  the  knowledge  of  his  part- 
ner, held,  that  the  firm  was  liable 
upon  such  indorsement.  Steuben 
County  Banku.  Alberger,  101  N.  Y. 
202. 

Promissory  notes  payable  to  the 
firm  "  A.  &  B."  were  indorsed  in 
blank  by  B.  with  the  firm  name 
and  transferred  to  plaintiff  before 
maturity  to  secure  advances  to 
another  firm  of  a  different  name, 
of  which  A. ,  B.  and  C.  were  mem- 
bers. Subsequently  A.  &  B.  made 
an  assignment  of  all  their  assets  for 
the  benefit  of  their  creditors.  Held, 
whether  A.  knew  of  the  indorse- 
ment and  transfer  or  not,  the  notes 
were  the  property  of  plaintiffs, 
they  having  had  no  notice  of  mis- 
appropriation. Walker  v.  Kee,  14 
S.  C.     See,  also,  S.  C.   16  S.  C.  76. 

In  an  action  against  the  indorsers 
on  a  promissory  note,  as  copartners 
under  the  name  of  "Propeller  Ira 
Chaffee,"  where  the  execution  was 
denied  by  one  of  the  defendants. 
held,  that  in  submitting  the  case  to 
the  jury  the  powers  and  duties  of 


(y)  Davison  v.  Robertson,  3  Dow.  218. 

283 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


*130 


Acceptances  ill  blank. —  One  partner,  however,  has  no 
power  to  accept  bills  in  blank,  nor  to  bind  his  copartners, 


the  managing  owner  and  the  rights 
and  liabilities  of  the  owners  was 
immaterial,  but  that  the  case  should 
be  left  to  the  jury  with  proper  in- 
structions, dependent  upon  finding 
a  copartnership  in  fact  as  the 
foundation  of  any  right  to  recover. 
First  Nat.  Bank  v.  Freeman,  47 
Mich.  408. 

Each  partner  is  the  agent  of  the 
other  to  sign  the  partnership  name 
to  notes  given  within  the  scope  of 
the  partnership  business,  but  not  to 
sign  the  firm  name  to  notes  relat- 
ing to  business  outside  of  the  scope 
of  the  partnership.  Zuel  v.  Bowen, 
78  111.  234;  Blodgett  v.  Weed,  119 
Mass.  215;  Nat.  Union  Bank  v. 
London,  66  Barb.  189;  Ditts  v. 
Lonsdale,  49  Ind.  521 ;  Newman  v. 
Richardson,  4  Wood,  C.  C.  81; 
Union  Bank  v.  Buhner,  2  Manitoba 
Law.  380;  Bays  v.  Conner,  105 
Ind.  415;  Lerch  Hardware  Co.  v. 
Columbia  Bank,  16  Weekly  Not. 
Cas.  104;  S.  C.  42.  Leg.  Intel.  386 
(a  limited  partnership). 

Stipulations  between  the  part- 
ners restricting  the  power  of  sign- 
ing the  firm  name  to  negotiable 
paper  to  one  or  more  of  their  num- 
ber will  not  affect  third  parties 
without  notice.  Laler  v.  Jordan, 
44  Miss.  283 ;  Sylverstein  v.  Atkin- 
son, 45  id.  81 ;  Nat.  Union  Bank  v. 
London,  66  Barb.  189;  Wilson  v. 
Richards,  28  Minn.  337 ;  Stinson  v. 
Whitney,  130  Mass.  591. 

So  a  firm  is  bound  by  the  in- 
dorsement by  a  partner  to  a  bona 
fide  purchaser  for  value  of  a  bill  of 
exchange  payable  to  the  partner- 
ship; although,  as  between  the 
partners,  it  was  his  sole  property, 


and  they  had  agreed  that  no  mem- 
ber should  indorse  paper  to  make 
the  others  liable.  Barrett  v.  Rus- 
sell, 45  Vt.  43. 

Where  A.,  being  indebted,  forms 
a  partnership  withB.,  who  assumes 
half  of  the  indebtedness  of  A.,  and 
succeeds  to  half  of  the  property  of 
A.  in  the  business,  and  they  after- 
wards, as  partners,  execute  a  note 
to  a  creditor  of  A.  for  A.'s  debt, 
and  B.  then  sells  his  interest  in  the 
firm  to  C,  who  succeeds  to  all 
the  rights  and  liabilities  of  B.  in 
the  firm,  and  A.  then  sells  his  in- 
terest in  the  firm  to  D.,  who  suc- 
ceeds to  all  his  rights  and  liabilities 
in  the  firm  of  A.  &  C,  C.  and  D. 
taking  the  place  of  A.  and  B.,  the 
note  of  A.  &  B.  will  be  held  a  firm 
indebtedness  as  to  the  new  firm  of 
C.  &  D.,  and  either  one  of  such 
firm  will  be  authorized  to  give  a 
firm  note  in  place  of  the  note  given 
by  A.  &  B.  Silverman  v.  Chase, 
90  111.  37. 

If  a  firm  is  engaged  to  any  ex- 
tent in  making  collections,  even 
though  that  may  not  be  the  princi- 
pal business  of  the  partnership, 
one  of  the  partners  may  bind  the 
firm  by  a  promissory  note  given 
for  a  balance  of  money  collected  by 
it.  Van  Brunt  v.  Mather,  48  Iowa, 
503. 

Where  an  application  was  made 
to  an  insurance  company,  through 
a  broker,  for  insurance,  on  account 
of  a  firm  of  merchants,  on  a  ship, 
the  loss,  if  any,  payable  to  the  firm, 
and  the  company,  upon  the  receipt 
of  the  firm's  note,  signed  in  the 
name  of  the  firm  by  one  of  the 
partners,  issued  a  policy  upon  the 


Vol.  1—19 


289 


h130 


BIGHTS    AND    OBLIGATIONS. 


[book  ir. 


otherwise  than  jointly  with  himself.     A  bill  accepted  in 
blank  by' one  partner  in  the  name  of  the  firm  is  not  bind- 


ship  as  the  property  of  the  firm, 
held,  that  the  company  were  not 
put  upon  inquiry  as  to  whether  or 
not  the  firm  owned  the  ship,  or 
whether  or  not  the  insurance  was  a 
firm  transaction,  and  that  the  note 
'bound  all  the  partners,  whether 
part  owners  of  the  ship  or  not. 
Osgood  v.  Glover,  7  Daly,  367. 

"Where  a  partner  in  the  ordinary 
course  of  business  insures  property 
represented  to  the  insurer  to  belong 
to  the  firm,  and  gives  in  payment 
of  the  premium  the  firm's  promis- 
sory note,  the  other  partners  are 
liable  on  the  note,  even  though  the 
note  was  given  without  their  con- 
sent or  knowledge,  and  in  violation 
of  the  copartnership  articles,  if 
there  was  nothing  in  the  nature  of 
the  transaction  notifying  the  in- 
surer of  the  latter  facts.  Osgood 
v.  Glover,  7  Daly,  376. 

In  an  action  on  a  note  against 
several  copartners,  it  is  no  defense 
for  one  of  them  that  he  executed 
the  note  in  the  copartnership  name 
after  the  suit  was  instituted,  and 
antedated  it,  with  a  view  to  secure 
to  the  plaintiff,  in  preference  to 
other  creditors,  the  property  at- 
tached, without  the  knowledge  of 
the  others.  Barber  v.  Minturn,  1 
Day,  136. 

An  acting  partner  may,  for  the 
benefit  of  his  firm,  and  in  order  to 
raise  money,  use  the  name  of  the 
firm,  by  accepting  a  bill  of  ex- 
change, to  be  exchanged  for  the 
acceptance  of  another  firm.  Gano 
v.  Samuel,  14  Ohio,  592. 

Partnership  articles  of  S.  &  Co. 
stipulated  that  S.,  "in  his  capacity 
of  financier  of  the  concern,  shall 


provide  for  funds  to  carry  on  the 
business,  and  use  his  own  judg- 
ment in  obtaining  them.  He  shall, 
however,  be  obliged  to  use  his  indi- 
vidual name  alone  for  the  purpose 
of  procuring  money,  by  notes  or 
otherwise,  and  shall  thus  be  indi- 
vidually liable  for  all  the  debts 
contracted  in  such  manner,  and 
likewise  be  individually  responsible 
for  all  losses  which  may  occur  in 
consequence  of  such  indorsements." 
Held,  that  S.  was  not  thereby  au- 
thorized to  bind  the  firm  by  notes 
drawn  in  his  own  name,  or  to  in- 
volve them,  as  to  money  borrowed, 
except  when  actually  embarked  in 
its  affairs.  Dreyer  v.  Sander,  48 
Mo.  400. 

A  note  or  bill  made  by  one  part- 
ner in  the  name  of  the  firm  will  be 
presumed  to  have  been  made  in 
the  course  of  partnership  dealings, 
and  for  a  partnership  purpose,  and 
the  burden  of  proof  is  upon  him 
who  seeks  to  impeach  it  to  show 
the  contrary,  and  that  such  fact 
was  within  the  knowledge  of  the 
payee.  Gregg  v.  Fisher,  3  Brad. 
(111.)  261;  Carrier  v.  Cameron,  31 
Mich.  373;  Hamilton  v.  Summers, 
12  B.  Mon.  11 ;  Magill  v.  Merrie,  5 
B.  Mon.  168;  Laler  v.  Jordan,  44 
Miss.  283 ;  Sylverstein  v.  Atkinson, 
45  Miss.  81 ;  Waldo  Bank  v.  Gree- 
ley, 16  Me.  419;  Vallett  v.  Parker, 
6  Wend.  615;  Thurston  v.  Lloyd,  4 
Md.  283;  Knapp  v.  McBride,  7  Ala. 
19;  Barrett  v.  Swann,  17  Me.  180; 
Ensminger  v.  Marvin,  5  Blackf. 
210;  Littell  v.  Fitch,  11  Mich.  525; 
Hogg  v.  Orgill,  34  Pa.  St.  344; 
Whittaker  v.  Brown,  16  Wend.  505 ; 
Miller  v.  Hines,  15  Geo.  197;  Nat. 


290 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


*130 


ing  on  it  except  in  favor  of  a  bona  fide  holder  for  value 
without  notice  of  the  way  in  which  the  bill  was  accepted,  (s) 


Union  Bank  v.  London,  66  Barb. 
189;  Davis  v.  Cook,  14  Nev.  265; 
Nunn  v.  Lackey,  1  Tex.  App.  777; 
Rude  v.  Harvey,  12  Mo.  App.  576; 
Feurt  v.  Brown,  23  Mo.  App.  332; 
Davis  v.  Cook,  14  Nev.  265 ;  Deitz 
v.  Regner,  27  Kan.  94.  See,  also, 
Abpt  v.  Miller,  5  Jones'  L.  32 ;  Mc- 
Gill  v.  Dowdle,  33  Ark.  311. 

The  rule  is  the  same  in  the  case 
of  an  indorsement.  Manning  v. 
Hayes,  6  Md.  5. 

Where  one  takes  a  note  made  or 
indorsed  by  a  firm,  knowing  that 
it  was  not  made  or  indorsed  for 
partnership  purposes,  the  onus  is 
cast  upon  the  holder  of  proving 
that  the  partnership  signature  was 
given  with  the  knowledge  or  assent 
of  every  member  of  the  firm. 
Union  Bank  v.  Bulmer,  2  Manitoba 
Law,  380. 

When  the  fact  that  the  partner- 
ship name  was  not  signed  and  in- 
dorsed on  negotiable  paper  in  the 
regular  course  of  business  is  appar- 
ent on  the  face  of  the  instrument, 
or  necessarily  implied  from  the 
nature  of  the  transaction,  the  party 
taking  it  cannot,  though  he  has 
parted  with  value  on  the  faith  of 
the  paper,  charge  the  other  mem- 
bers of  the  firm  who  did  not  exe- 
cute it,  without  proof  that  they 
assented  to  the  transaction.  In 
such  case  the  taker  is  chargeable, 
as  a  matter  of  law,  with  notice  of 
want  of  authority  in  the  individual 
partner  to  bind  the  firm  without 
their  exj praas  assent.  St.  Nicholas 
National  Bank  v.  Savery,  45  N.  Y. 
Super.  Ct.  97. 


When  the  fact,  though  existing, 
that  such  name  was  not  signed  or 
indorsed  in  the  regular  course  of 
the  business  is  not  apparent  from 
the  face  of  the  instrument,  and  the 
nature  of  the  transaction  appears 
to  have  been  of  such  a  character 
as  to  give  the  plaintiff  a  right  to 
suppose  that  it  was  a  partnership 
transaction,  the  members  contest- 
ing their  liability  must  not  only 
show  that  in  fact  it  did  not  consti- 
tute such  a  transaction,  but  also 
that  the  plaintiff  had  in  some  way 
actual  notice  thereof.  In  every 
such  case  the  burden  is  shifted  to 
the  defendant  to  establish  such  no- 
tice. St.  Nicholas  National  Bank 
v.  Savery,  45  N.  Y.  Super.  Ct.  97. 

When  the  fact,  though  existing, 
that  such  name  was  not  signed  or 
indorsed  in  the  regular  course  of 
business  is  not  apparent  on  the  face 
of  the  instrument,  and  the  nature 
of  the  transaction  appears  to  be 
susceptible  of  different  conclusions, 
the  question  of  notice  is  one  of  fact 
for  the  jury.  In  every  such  case 
the  burden  is  with  the  plaintiff, 
though  he  may  have  parted  with 
value,  to  prove  either  that  the  cir- 
cumstances of  the  case  did  not  con- 
stitute notice  to  him,  or  that  if 
they  did  the  other  parties  assented 
to  the  transaction.  St.  Nicholas 
National  Bank  v.  Savery,  45  N.  Y. 
Super.  Ct.  97. 

In  an  action  against  two  persons 
as  partners,  on  a  note  signed  by 
one  in  the  firm  name,  a  verdict 
against  both  jointly  is  proper  if  it. 
appears  that  the  signer    was    an 


(z)  Hogarth  v.  Latham,  L.  R.  3  Q.  B.  D.  643. 

291 


*JL80  SIGHTS    AND   OBLIGATIONS.  [book   II. 

agent  authorized  to  si^n  the  note  ner.   Moorehead  v.  Gilmore,  77  Pa. 

aud  held  himself  out  to  payee  as  a  St.  iik.    Bee.  also,  Manhattan  Co, 

partner,  and  that  the  other  defend-  v.  Ledyord,  i  Cat  101. 

ant  was  the  only  member  of  the  A  partner  ia  not,  however,  an 

linn.    Nichols  v,  James,  n><>  Muss,  agent  for  his  copartner  to  Indorse 

.r)H(.).  other  than  partnership  paper,  nor 

When  a  promissory  nolo  not.  pur-     paper  OUtside  the  BOOpe  of  the  firm 

porting  to  have  been  executed  by  a  business.  Bowman  v,  Cecil  Bank, 
partnership  is  shown  (<>  have  been  8  Grant,  Cos.  88 ;  Newman u.  Rich- 
signed   by  One   partner   in  renewal     ai'dson,  4  Woods,  C.  C.  81 ;  S.  C.  9 

of  a  nolo  given  for  the  debt,  of  Fed.  Rep.  866. 

another  firm,  of  which  that  partner  The  assent  of  a  partner  to  the 

done  was  a  member,  the  burden  is  Indorsement  by  bis  copartner  of  a 

on  the  plaintiff  to  show  the  assent  note  given  out  of  the   course   of 

of  the  other  partners  to  its  execu-  the  partnership  business   must  be 

i.ion.    Tyree  v.  Lyon,  67  Ala.  L  proved,  not  presumed.    Morceinv. 

Upon  an  arrangement  by  which  Andrews,  10  Wend.  461. 

0.  is  to  do  certain  work  ami  P.  or  The  indorsement  by  one  member 

P.    &    S.    to    supply  the    means,    a     of  a.    Inn.    of  a    firm    nole    alter  it 

note  tor  the  necessary  equipments,  lias  passed  from  the  possession  of 

signed   by   the  former    with    P.'s  the  firm  and  is   the  property  of 

knowledge,  "C  &  Co.,"  will  bind  another,  without  the  knowledge  or 

P,    Brown  v.  Piokard,  1)  Pao.  R.  consent  of  Ins  oopartners,  will  not 

678.  bind    them.     South     Bend    Iron 

Where  A.,  in  the  storage  business  Works  v.  Paddock,   10  Pao.  Rep. 

and  a  grain   dealer,    made   an   ar-     (Kan.)    574. 

rahgement  with  the  owner  to  store  Whereabank  received  a  cheek 
corn  with  the  privilege  of  buying  by  one  partner  in  tin*  firm  name, 
the  same,  and  afterwards  formed  a    with  notice  he  was  using  firm  as- 

parlnership  with  li.  before  the  corn     sets   to   pay  his   own   debt,  it    took 

was  delivered,  and,  alter  Belling    the  risk  of  the  assent  of  the  other 

and    Shipping  the  grain,   Agave   *      partner;  and  where  the  transaction 

note  in  the  firm  name  for  the  price,  was  in  fraud  of  that  partner  he 

It  was  held  that  the  prior  arrange-  cannot  be  held.    Qraham  v.  Tag- 

ineni   did   not  Limit  his  power  as  gart,   10  Cent.   Rep.  (Pa.  St.)  84; 

partner,  and  thai  the  giving  of  the  S.  C.  li  Mi.  Rep.  868. 

linn    note    lor    price    amounted   to  Where     tin*    paper    of    a    firm   is 

a  purchase   lor  the  linn  and   made     given  by  One    member  on   business 

B.  liable  on  the  note.  Johnson  v.  not  pertaining  to  the  partnership, 
Barry,  83  ill.  188.  it  is  presumptive  evidence  of  want 

Eaoh  partner  lias  the  Same  right     Of  authority;  and  if  the  person  to 

to  raise  money  for  the  use  of  the    whom  the  paper  is  passed  knows 

linn  by  indorsement  of  negotiable  the  fad  at,  (ho  lime,  lie  is  charge- 
paper  as  to  do  so  by  ineansof  paper     able    with    notice    of  want    of    au- 

alreody  issued.  The  public  would  thority.  Sometimes  the  face  of 
,,,,t  be  affected  by  any  private  re-    the  contract  is  notice  to  the  holder, 

st  i  kI  ion  on  the  power  of  each  part-     and    sometimes    the    authority    of 

21)2 


on.  I,  SBC.  ii.]  LIABILITIES  <>K   PARTNBB8. 


f130 


oik'  person  i<>  i >i n<I  the  firm  may  •><>  tin-  circumstances.    In  every  such 

established  from  facts  and  circum-  case  the  burden  is  again  upon  the 

stances.    Miller  v.   limes,   15  9a.  plaintiff,    though    be    may    have 

197.    Bee,  also,  Osgood  v.  Glover,  parted   with   value,  to  satisfy  the 

7   Daly,  867;  post,  829,  note;  Oha-  jury,  either  that  the  circumstances 

/.mums  v.    Edwards,   :;    Pick.  5;  of  the  case  did  not  constitute  ntf- 

CJnion,  etc.  Bank  v.  dnderhill,  10  tice  to  him,  or  that  if  they  did, 

N.  y.  Weekly  Dig.  108.  tlio  other  members  of  the  firm  as 

in  the  oaseof  St.  Nicholas  Hank  sented  to  the  transaction. 
v.  Bavery,  the  following  proposi-       :*.  Whenthe  fact,  though  exisfc- 

i  ion  .  were  laid  down,  and  their  tag,  that  suoh  name  was  not  signed 

legal  oonclu  Ions  beld.    The  first  or  Indorsed  in  the  course  of  the 

and  second  were  beld  to  be  is  full  regular  business  of  the  firm  ia  not 

acoord  with  the  general  rule  ap-  apparent  from  the  faceof  tho  in- 

plicable   to   Individual    indorsers,  strument,  and  the  nature  of  the 

and  the  third  wasfounded  on  the  transaction  appears  to  bave  been 

law  merohant:  of  such  a  character  as  to  give  the 

i.  When  a  party  takes  negotiable  plaintiff  a  right  to  Buppose  that  it 

paper  made,  accepted  or  indorsed  was  a  partnership  transaction,  the 

by  one  oi' several   partners  in  or  members  contesting  their  liability 

with  the  partnership  name,  ami  must  not  only  show  that  in  fact  fft 

the  faot  that  suoh  name  was  not  did  not  constitute  such  a  transae> 

signed  <»r  indorsed  In  the  regular  tion,  but  also  that  the  plaintiff  had 

(•Mm  coi  the  business  of  the  firm  in  some  way  actual  notice  thereof. 

Is  apparent  on  the  face  of  the  to-  In  every  suoh  oase  the  burden  is 

strument  or  oece  sarily  implied  in  shifted  on  the  defendant  to  estab 

the  nature  of  the  transaction,  suoh  lish   suoh   notice.     See    Nicholas 

parly  eaimot,  though  be  mas    have  l'.auk  r.  Savery,   18  Jones   it  S.  97; 

parted  with  value  on  the  faith  of  S.  0.  Abb.  Vr.  Book,  1880,  829. 
the  paper,  oharge  the  other  mem-       Where  a  partnership  is  limited 

bera  of  the  firm,  except  upon  proof  bj  articles  to  a  particular  business, 

that  they  assented  to  the  transao-  if  one  partner  make  a  note  in  the 

tion.     in  every  such   case    he  Is  partnership  name  for  other  than 

chargeable,  as  matter  of  law,  with  suoh  business,  it  lies  with  the  per- 

n, ,i  ice  of  want  of  authority  in  the  Hon  suing  the  note  to  show  an  a* 

Individual  partner  to  bind  the  firm  sent,  express  or  implied,  on  the 

without  their  express  assent.  part  of  the  other  partners  to  the 

2.    When  the   faot,  though   exist-  transaction;   a    disclaimer   of   It  to 

tag,  that  such  name  was  not  signed  any  other  than  the   party  to  whom 

or  indorsed  in  the  regular  course  of  the   note   was  given    oannot   be 

the    business    of    the    firm    is  not  shown    in     evidence.       Waller    v. 

apparent    from    ll,,-    lac,  of  the  in-  Keyes,  G  Vt.  857. 
strument,    and   the   nature    of    the  W  hem  A.,  B.  and  C.  were  pari 

transaction  appears  to  bo  BUBcepfi-  ners  doin-  business  in   New  York, 

ble  of  different  conclusions,  the  where  A.  resided,  and  in  P.  in  "Vir* 

question  of  notice  is  one  of  fad,  to  ginla,  Where  B.  and  0.  resided,  ami 

be  determined  by  the  jury  upon  all  A.  indorsed  a  note  in  Now  York  in 

298 


*130 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


the  partnership  name,  without  the 
consent  or  knowledge  of  B.  and 
C.,as  the  mere  surety  of  D.,  for  a 
debt  previously  due  from  D.  to  the 
indorsee,  the  partnership  having  no 
interest  in  the  transaction,  held, 
in  an  action  by  the  indorsee  against 
all  the  partners  as  indorsers,  that 
the  plaintiff  could  not  recover,  al- 
though the  jury  should  find  that 
he  had  no  knowledge,  express  or 
implied,  of  A.'s  want  of  authority. 
New  York  Fire  Ins.  Co.  v.  Bennett, 
5  Conn.  574. 

M.  and  J.  were  partners  in  the 
storage  business.  M.,  the  manag- 
ing partner,  gave  a  firm  note  for 
the  value  of  grain  which  he  had 
received  and  receipted  for  in  the 
firm  name  and  which  had  since 
been  lost  or  converted.  Accounts 
in  the  transaction  kept  by  M.  in 
his  own  name,  and  letters  showing 
that  he  had  separate  dealings  with 
the  payee,  were  held  not  sufficient 
evidence  to  relieve  J.  from  liability 
on  the  note  as  an  obligation  of  the 
firm ;  the  onus  to  prove  it  not  to  be 
such  an  obligation  resting  upon  J. 
Pierce  v.  Jackson,  21  Cal.  636. 

Where  a  promissoiy  note  is  exe- 
cuted by  a  member  of  a  partner- 
ship in  the  name  of  the  firm  and 
with  the  firm  signature,  and  there 
is  nothing  to  show  that  the  note  was 
not  executed  by  the  firm  except  a 
want  of  knowledge  on  the  part  of 
a  book-keeper  of  the  firm  of  the 
due  execution  of  the  note,  and  of 
the  consideration  therefor,  and 
nothing  to  show  under  what  cir- 
cumstances or  upon  what  consid- 
eration the  holder  of  the  note  re- 
ceived it,  it  will  be  presumed  that 
the  note  was  duly  executed  by  the 
firm.  Adams  v.  Ruggles,  17  Kan. 
237. 


A.,  the  second  indorser  of  a 
promissory  note  made  by  B.,  pay- 
able to  his  own  order  and  by  him 
indorsed,  procured  it  to  be  dis- 
counted by  a  bank,  and  at  the  same 
time,  and  as  part  of  the  same  trans- 
action, delivered  to  the  bank,  as  col- 
lateral security  for  the  note  then 
discounted,  a  note  payable  to  A., 
signed  in  the  firm  name  of  a  part- 
nership by  one  of  the  partners 
without  the  knowledge  and  in 
fraud  of  the  firm,  and  given  to  A. 
as  security  for  the  note  of  B., 
which  had  been  previously  ob- 
tained by  A.  from  the  firm,  and 
had  been  passed  by  him  to  C,  the 
president  of  the  bank,  as  security 
for  a  loan  from  C,  and  was  in  pos- 
session of  the  latter  at  the  time  it 
was  discounted.  On  the  back  of 
the  note  of  the  firm,  at  the  time  it 
was  delivered  to  the  bank,  was  a 
memorandum  signed  by  A.,  stating 
that  the  note  was  held  by  him  as 
security  for  the  note  of  B.  Both 
notes  were  dated  on  the  same  day, 
were  for  the  same  amount,  and 
were  payable  at  the  same  time. 
The  bank  had  no  knowledge  of  the 
dealings  between  A.  and  the  firm. 
Held,  in  an  action  by  the  bank 
against  the  firm  on  the  note  of  the 
latter,  that  the  bank  was  charged 
with  notice  that  the  note  in  suit 
was  given  as  security  only  for  the 
payment  of  the  note  of  B. ;  and 
that  the  action  could  not  be  main- 
tained against  all  the  members  of 
the  firm  without  proof  that  the 
note  was  given  with  their  consent 
or  in  the  regular  course  of  the  part- 
nership business  security.  Bank 
v.  McDonald,  127  Mass.  82. 

L.,  a  member  of  the  firm  of  S.  & 
Sons,  and  also  of  the  firm  of  P.  & 
Co.,  made  in  his  own  name  two 


294 


CH.  I,  SEO.  II.]  LIABILITIES    OF   PARTNERS. 


*130 


promissory  notes,  payable  to  the 
order  of  the  latter  firm,  and  in- 
dorsed the  name  of  the  firm  of  S. 
&  Sons  upon  them  in  fraud  of  that 
firm.  D.,  a  member  of  the  firm  of 
P.  &  Co.,  indorsed  the  name  of  his 
firm  upon  the  notes  as  first  in- 
dorsers.  Both  notes  were  presented 
to  a  bank  before  maturity  for  dis- 
count, the  one  by  a  broker,  and  the 
other  by  D.,  who  was  known  by 
the  officers  of  the  bank  to  be  a 
member  of  the  firm  of  P.  &  Co. 
The  bank  discounted  both  notes. 
Held,  in  an  action  upon  the  notes 
by  the  bank  against  S.  &  Sons,  as 
second  indorsers,  that  neither  the 
form  of  the  notes,  nor  the  fact  that 
one  was  presented  by  a  broker,  nor 
the  fact  that  the  other  was  pre- 
sented by  D.,  was  conclusive  notice 
to  the  bank,  as  a  matter  of  law,  of 
the  invalidity  of  the  indorsements. 
Atlas  National  Bank  v.  Savery,  127 
Mass.  75. 

Since  the  statutes  of  1874,  chap- 
ter 404,  if  one  partner  signs,  as 
maker,  a  promissory  note  in  his 
individual  name,  payable  to  a  third 
person,  and  in  fraud  of  his  partner, 
signs  the  firm  name  on  the  back  of 
the  note,  above  the  name  of  the 
payee,  a  person  who  buys  the  note 
before  maturity  has  notice  from 
the  form  of  the  note  of  the  con- 
ditional liability  of  the  other  mem- 
bers of  the  firm  and  cannot  main- 
tain an  action  against  them  upon 
the  note.  National  Bank  of  Com- 
monwealth v.  Law,  127  Mass.  72. 

An  individual  acceptance  of  an 
order  on  two  firms,  to  pay  what 
might  be  in  their  hands,  or  in  the 
hands  of  any  partner,  by  a  partner 
of  both,  intrusted  with  the  settle- 
ment of  all  accounts  with  the 
drawer,   is  presumed  to  be  upon 


consideration  of  having  the  funds 
under  his  control,  and  is  therefore 
valid.  Prentiss  v.  Foster,  28  Vt. 
742. 

An  acceptance  of  an  order  by 
one  member  of  a  firm  will  not  bind 
the  company,  where  there  is  no 
allegation  that  the  defendants  were 
partners,  unless  the  partnership  be 
proved.  Meachen  v.  Batchelder,  3 
Chand.  316. 

A  note  in  common  form,  signed 
by  an  individual  in  whose  name  a 
partnership  is  carried  on,  and  who 
at  the  same  time  openly  transacts 
business  on  his  own  account,  does 
not,  prima  facie,  bind  his  copart- 
ners. Manufacturers',  etc.  Bank 
v.  Winship,  5  Pick.  11;  Yorkshire 
Bank  v.  Beatson,  22  Alb.  Law 
Jour.  9. 

But  where  the  name  of  the  indi- 
vidual and  of  the  firm  is  the  same, 
and  the  individual  carries  on  no 
business  apart  from  the  firm,  the 
presumption,  in  the  absence  of  evi- 
dence to  the  contrary,  is  that  a  bill 
bearing  such  a  name  is  the  bill  of 
the  firm.  There  is  no  difference 
in  this  respect  between  a  dor- 
mant and  an  ostensible  partner. 
Yorkshire  Bank  Co.  v.  Beatson, 
supra. 

To  support  an  action  against  two 
as  acceptors  of  a  draft  in  their 
partnership  name,  the  plaintiff 
must  prove  the  partnership,  and 
that  one,  at  least,  of  the  defend- 
ants accepted  the  draft.  Head  v. 
Sleeper,  20  Me.  314. 

A  promissory  note  made  by  one 
member  of  a  firm  in  the  firm 
name  is  valid  against  the  firm  in 
the  hands  of  a  bona  fide  holder  for 
value,  although  not  made  in  the 
partnership  business,  and  although 
the  other  partners  did  not  consent 


295 


130 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


to  and  did  not  know  of  the  making 
of  the  note.  The  note  is  presump- 
tive evidence  that  it  is  valid  busi- 
ness paper,  and  was  given  for  a 
debt  due  from  the  makers  to  the 
payee.  First  National  Bank  v. 
Morgan,  73  N.  Y.  593 ;  Duncan  v. 
Clark,  2  Rich.  587;  Haldeman  v. 
Bank  of  Middletown,  28  Pa.  St. 
440 ;  Collier  v.  Cross,  20  Ga.  1 ;  Rich 
v.  Davis,  4  Cal.  22;  S.  C.  6  Cal.  141 ; 
Hawes  v.  Dunton,  1  Bailey,  146; 
Marsh  v.  Thompson  Nat.  Bank,  2 
Brad.  (111.)  217 ;  Boardman  r.  Gore, 
15  Mass.  331;  Walworth  v.  Hen- 
derson, 9  La.  Ann.  339;  Roth  v. 
Colvin,  32  Vt.  125. 

The  rule  is  the  same  as  to  an  ac- 
commodation note  or  indorsement. 
First  Nat.  Bank  v.  Morgan,  supra; 
Austin  v.  Vandermark,  4  Hill,  259; 
Maudlin  v.  Branch  Bank,  2  Ala. 
502;  Stall  v.  Catskill  Bank,  18 
Wend.  466;  Wells  v.  Evans,  20  id. 
251;  S.  C.  22  id.  324;  Bank  of  St. 
Albans  v.  Gilliland,  23  id.  311; 
Emerson  v.  Harmon,  14  Me.  271 ; 
Catskill  Bank  v.  State,  15  id.  364 ; 
Gildersleeve  v.  Mahony,  5  Duer, 
383 ;  Whaley  v.  Moody,  2  Humph. 
495.  See,  also,  Pooley  v.  Whit- 
more,  10  Heisk.  629. 

One  partner  cannot  bind  the  firm 
by  an  accommodation  indorsement 
executed  without  his  knowledge 
or  consent,  the  creditor  having  no- 
tice of  that  fact.  Moynahan  v. 
Hanaford,  42  Mich.  329.  See  post. 
One  partner  has  no  right  for  his 
own  benefit  to  indorse  the  firm 
name  on  a  note  made  by  himself 
payable  to  the  order  of  the  firm ; 
and  the  other  partners  will  not  be 
liable  thereon  to  one  having  knowl- 
edge of  the  facts.  Federal  Bank 
v.  Northwood,  7  Ont.  389;  S.  C.  21 
C.  L.  J.  (N.  S.)  55. 


Where  one  partner  indorses  a 
note  in  the  name  of  the  firm,  for 
the  accommodation  of  a  third  per- 
son, without  express  authority 
from  his  copartners,  they  will  not 
be  bound  thereby  as  against  the 
partner  indorsing  the  note ;  and  the 
latter  having  paid  the  note,  a  judg- 
ment on  the  note  recovered  by  an 
innocent  holder  against  all  the 
members  of  the  firm,  is  not  evi- 
dence to  charge  such  copartners 
with  contribution.  Berrybill  v. 
McKee,  1  Humph.  31. 

A  security  or  payment  made  by 
one  partner,  in  the  name  of  the 
partnership,  for  a  debt  known  by 
the  person  taking  the  same  to  be 
his  individual  debt,  and  without 
the  consent  of  the  other  partners, 
whether  by  firm  note,  indorsement 
or  otherwise,  is  not  binding  upon 
the  partnership.  Livingston  v. 
Roosevelt,  4  Johns.  251;  Poin- 
dexter  v.  Waddy,  6  Munf.  418; 
Ferguson  v.  Thacher.  79  Mo.  511 ; 
Roberts  v.  Pepple,  55  Mich.  367; 
Himmelright  v.  Johnson,  40  Ohio 
St.  40 ;  Howell  v.  Sewing  Machine 
Co.  12  Neb.  177 ;  Atlantic  State  Bk 
v.  Savery,  18  Hun,  36;  S.  C.  82  N 
Y.  291 ;  Tyree  v.  Lyon,  67  Ala.  1 
Guice  v.  Thornton,  76  Ala.  466 
Spaulding  v.  Kelly,  43  Hun,  301 
Fordice  v.  Scribner,  108  Ind.  85 
Allen  v.  Cary,  33  La.  Ann.  1455 
Mechanics',  etc.  Co.  v.  Richardson 
33  La.  Ann.  1308;  S.  C.  39  Am 
Rep.  290. 

Where  a  firm  habitually  leaves 
the  management  of  the  business 
to  one  member  and  permits  him, 
whenever  he  wants  goods,  to  take 
them  and  charge  them  to  himself, 
the  firm  will  be  bound  for  goods 
purchased  by  such  partner  for 
which    he    executes    the   note  of 


296 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


:"130 


the  firm.     Hayner  v.  Crow,  79  Mo. 
293. 

Money  was  borrowed  on  the 
credit  of  a  firm  and  used  for  the 
purposes  of  the  firm,  but  the  indi- 
vidual note  of  one  partner  was 
given  for  it,  and  by  mistake  of  the 
lender  was  accepted.  Afterwards, 
when  the  mistake  was  discovered, 
the  lender  demanded  and  received 
from  that  partner  the  note  of  the 
firm  in  lieu  of  his  own  note.  Held, 
that  this  was  not  the  giving  of  a 
partnership  note  for  an  individual 
debt,  and  that  the  latter  note  was 
binding  on  the  firm.  Meader  v. 
Malcolm,  78  Mo.  550. 

A  partner  who  has  given  his  in- 
dividual note  payable  to  the  order 
of  the  firm  for  a  debt  contracted 
in  the  firm  business  due  by  him  to 
the  firm  has  power,  the  note  hav- 
ing been  indorsed  and  discounted 
by  the  firm  and  proceeds  used  in 
the  firm  business,  to  renew  the 
note,  and  the  firm's  indorsement 
thereon,  so  as  to  bind  the  other 
partners,  notwithstanding  the  new 
paper  was  indorsed  in  the  firm 
name  by  the  maker  and  delivered 
by  him  directly  to  the  indorsee. 
Wilson  v.  Kichards,  28  Minn.  337. 

Where  a  partnership  agreement 
provides  that  an  existing  individ- 
ual debt  of  one  partner  shall  be 
assumed  and  paid  by  the  firm, 
either  partner  may  execute  a  note 
of  the  firm  to  secure  such  indebt- 
edness. Randall  v.  Hunter,  66  Cal. 
512. 

It  is  the  duty  of  a  party  tak- 
ing a  promissory  note  from  one 
member  of  an  existing  firm  in 
payment  of  the  debt  of  a  prior 
firm',  before  taking  the  note,  to  as- 
certain affirmatively  that  all  the 
members   of    the  latter    firm    as- 


sented to  its  issue.     Kaiser  v.  Fen- 
drick,  98  Pa.  St.  528. 

Such  assent  may  be  express  or 
implied ;  but  mere  silence  when 
informed  of  the  existence  of  the 
note  is  not  evidence  of  assent. 
Tyree  v.  Lyon,  67  Ala.  1.  See, 
also,  Todd  v.  Lorah,  75  Pa.  St.  155. 

A  partnership  was  established 
composed  of  the  members  of  an  old 
firm  and  others,  and  did  business, 
under  different  firm  names,  at 
Tuscaloosa,  Mobile  and  New  York. 
The  new  partnership  was  indebted 
to  the  old.  A  member  of  the  old 
firm  drew  a  bill  in  the  name  of 
the  firm  at  Mobile,  in  payment  of 
a  debt  of  the  old  firm,  on  the  house 
at  New  York,  which  was  accepted 
in  the  firm  name  by  a  member  of 
the  old  firm.  Held,  that  this  was 
like  the  payment  of  any  other  in- 
debtedness of  the  partnership,  and 
noi  like  one  partner  giving  a  part- 
nership note  for  his  individual  debt. 
Hester  v.  Lumpkin,  4  Ala.  509. 

If  a  partner  give  a  negotiable 
note  in  the  name  of  the  partner- 
ship for  his  own  private  debt,  a 
bona  fide  indorsee  of  the  note,  who 
had  no  notice  of  the  purpose  for 
which  it  was  given,  may  recover 
the  amount  of  the  copartnership. 
Munroe  v.  Cooper,  5  Pick.  412; 
Chazournes  v.  Edwards,  3  id.  5; 
Livingston  v.  Roosevelt,  4  Johns. 
231 ;  Mechanics'  Bank,  etc.  v.  Foster, 
19  Abb.  Pr.  47 ;  S.  C.  29  How.  Pr. 
408 ;  Atlantic  State  Bank  v.  Savery, 
18  How.  36;  S.  C.  82  N.  Y.  291. 

So  all  the  partners  are  liable  on 
a  note  indorsed  in  the  name  of  the 
firm,  who  are  the  payees,  to  a  bona 
fide  indorser,  although  the  firm's 
name  be  used  by  one  of  the  part- 
ners without  authority.  State,  etc. 
Bank  v.  Thompson,  42  N.  H.  369. 


297 


'130 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Where  a  partner  makes  a  note 
in  the  name  of  his  firm,  without 
the  knowledge  or  consent  of  his 
partner,  and  not  in  the  course  of 
partnership  business,  one  seeking, 
as  indorsee,  to  recover  the  amount 
of  the  note  against  the  other  part- 
ner, must  show  that  he  took  it 
before  maturity,  for  value  and 
in  good  faith,  and  mere  proof  that 
the  note  "  was  passed  to  the  plaint- 
iff for  goods  sold  "  is  not  sufficient. 
Clark  v.  Dearborn,  6  Duer,  309. 

When  one  partner  makes  his  in- 
dividual note  to  his  own  order,  in- 
dorses thereon  his  own  name  and 
the  name  of  the  firm,  and  appropri- 
ates proceeds  to  his  own  use,  the 
firm  being  duly  notified,  will  be 
liable  to  an  indorsee  who,  in  good 
faith,  for  an  adequate  considera- 
tion, purchases  the  same  before 
maturity  without  notice  of  the 
circumstances  affecting  its  valid- 
ity. The  form  of  the  note  in 
such  case  is  not  notice  that  it  was 
given  for  the  maker's  accommoda- 
tion and  in  fraud  of  the  firm.  Red- 
Ion  v.  Churchill,  73  Me.  146;  S.  C. 
40  Am.  Rep.  345.  See  contra, 
Spaulding  v.  Kelly,  43  Hun,  301. 

A.  and  B.,  being  partners  in  trade 
with  S.  and  others,  A.  made  a 
promissory  note  in  the  name  of 
the  firm,  payable  to  B.,  to  secure  an 
alleged  balance  due  from  the  firm 
to  B.,  without  the  knowledge  or 
consent  of  S.  B.  indorsed  the  note 
to  a  third  person.  Held,  that  though 
no  action  would  have  lain  by  B. , 
yet  the  indorsees  might  bring  an 
action  against  the  firm  as  makers. 
Smith  v.  Lusher,  5  Cow.  688. 

A  partnership  note  was  made. 
after  the  dissolution  of  a  firm,  by 
one  of  the  partners,  accepted  by 
the  payee  with  knowledge  of  the 


fact,  and  transferred  by  him  in  pay- 
ment of  an  antecedent  debt,  under 
an  agreement  that,  if  the  note 
could  not  be  collected,  he  would  be 
liable  for  a  part  of  the  original 
debt.  Held,  that  the  assignee  was 
not  a  bona  fide  holder  in  that  sense 
which  would  enable  him  to  main- 
tain a  suit  on  the  note  against  the 
partners.  Bristol  v.  Sprague,  8 
Wend.  423. 

Indorsers  of  a  note  made  in  the 
name  of  a  firm  by  a  member 
thereof,  without  the  assent  of  his 
copartner,  and  passed  by  him 
for  his  individual  debt,  are  not 
liable  for  its  payment  to  a  holder 
with  notice.  Williams  v.  Wal- 
bridge,  3  Wend.  415.  See,  also, 
Chazournes  v.  Edwards,  3  Pick.  5; 
Livingston  v.  Hastie,  2  Cai.  246; 
Hager  v.  Mounts,  3  Blackf.  261. 
See,  however,  Bovven  v.  Mead,  1 
Mich.  432. 

A.  was  a  member  of  two  firms ; 
he  wrote  a  note  to  himself,  signed 
the  name  of  one  firm,  indorsed  it  by 
his  own  name,  and  by  the  name  of 
the  other  firm.  Held,  that  these 
facts  were  not  such  as  required  a 
holder  for  value  before  maturity  to 
prove  that  the  partners  assented 
to  the  indorsement,  or  that  the 
j>roceeds  were  used  for  their  bene- 
fit. Ihmsen  v.  Negley,  25  Pa.  St. 
297. 

There  were  three  successive  part- 
nerships; the  first  composed  of 
two  persons,  A.  and  B.,  and  styled 

A.  &  B. ;  the  second  of  three  per- 
sons A.,  B.  and  C,  and  styled  A. 

B.  &  Co. ;  the  third  of  two  persons, 
A.  and  B.,  and  styled  A.  &  B.  But 
A.  in  the  third  firm  was  not  the 
same  person,  but  had  the  same 
name,  as  A.  in  the  first  and  second 
firms.     B.   was  in    all  the    three 


298 


OH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


130 


firms.  B.  gave  a  note  by  the  name 
of  the  first  and  third  firms,  A.  & 
B.  Held,  that  the  note  was  prima 
facie  the  note  of  the  firm  existing 
when  the  note  was  given,  and  so 
not  binding  on  A.  of  the  first  firm ; 
but  if  it  was  in  fact  given  on  ac- 
count of  the  first  firm,  to  a  cus- 
tomer, without  notice,  A.  of  the 
first  firm  would  be  bound ;  and 
the  court  remanded  the  cause  to 
be  tried  again.  Pomeroy  v.  Coons, 
20  Mo.  598. 

An  affidavit  of  defense  to  an 
action  on  a  firm  note,  given  by  a 
partner  for  borrowed  money,  which 
avers  no  facts  that  ought  to  have 
put  the  plaintiff  on  inquiry  as  to 
whether  the  money  was  for  the  in- 
dividual use  of  such  partner,  is 
fatally  defective,  and  the  firm  is 
liable.  Potter  v.  Price,  3  Pittsb. 
136. 

The  rule  that  a  note  given  by 
one  partner  in  the  partnership 
name  for  his  individual  debt  is 
good  against  the  firm  in  the  hands 
of  a  bona  fide  holder  applies  only 
to  notes  of  mercantile  partner- 
ships, and  does  not  apply  to  those 
of  partnerships  for  keeping  tavern. 
Cocke  v.  Branch  Bank,  3  Ala.  175. 
If  one  of  two  partners  indorse  a 
note  in  the  name  of  the  firm  as  an 
accommodation  for  a  third  person, 
without  the  authority  or  consent 
of  his  partner,  the  latter  is  not 
bound  by  such  indorsement  as  to 
a  person  who  takes  the  note  with 
notice  that  the  indorsement  was 
made  in  the  character  of  surety; 
and  the  burden  of  proving  author- 
ity or  consent  of  the  copartner,  in 
such  a  case,  rests  on  the  person 
holding  the  note.  Hendrie  v.  Ber- 
kowitz,  37  Cal.  113;  Darling  v. 
March,  52  Me.  184;  Lang  v.  War- 


ing, 17  Ala.  145;  Chenowith  v. 
Chamberlin,  6  B.  Mon.  60;  Laverty 
v.  Burr,  1  Wend.  529;  Mechanics' 
Bank  v.  Livingston,  33  Barb.  485 ; 
Tutt  v.  Addams,  24  Mo.  186 ;  Hef- 
fron  v.  Hanaford,  40  Mich.  305. 

See,  however,  Flemming  v.  Pres- 
cott,  3  Rich.  307 ;  Freeman  v.  Ross, 
15  Ga.  252. 

The  fact  that  such  a  note  is 
found  by  a  third  person  in  the 
hands  of  the  maker  is  notice  to 
such  third  person  that  the  firm  in- 
dorsement was  for  the  accommo- 
dation of  the  maker.  Hendrie  v. 
Berkowitz,  37  Cal.  113. 

Accommodation  notes  made  to 
the  order  of  a  firm  at  the  request 
of  one  of  its  members  are  prima 
facie  for  the  accommodation  of 
the  firm ;  the  question  whether 
plaintiff  had  notice  that  they  were 
not  so  intended  is  for  the  jury. 
Clapp  v.  Brown,  11  Weekly  Not. 
Cas.  206. 

Where  an  accommodation  note 
is  made  payable  to  one  partner 
with  the  understanding  that  it  is 
for  the  firm's  benefit,  and  it  is  by 
him  fraudulently  appropriated  for 
his  own  use,  such  an  appropriation 
is  not  a  sufficient  defense  as  against 
an  innocent  holder  for  value. 
Leatherman  v.  Hecksher,  12  Atl. 
Rep.  (Pa.)  485. 

A  firm  will  be  liable  to  a  party 
who  makes  an  accommodation 
indorsement  of  the  promissory  note 
of  one  of  the  partners,  the  proceeds 
of  which  are  received  and  used  by 
the  firm  in  their  business.  Ellis  V. 
Gregory,  70  Ind.  140. 

An  indorsement  by  a  partner  of 
his  separate  accommodation  note, 
with  the  name  of  his  firm,  is  a 
sufficient  indication  of  the  nature 
of  the  transaction  to  make  it  the 


299 


^130 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


duty  of  the  bank  which  discounts 
it  to  inquire  into  his  authority  to 
use  the  firm  name  for  the  occasion, 
unless  there  are  circumstances 
from  which  the  authority  can  be 
implied.  Tanner  v.  Hall,  1  Pa.  St. 
417. 

A.  and  B.  were  partners.  A.  was 
the  active  partner,  and  B.  was  in 
the  habit  of  frequenting  the  store, 
but  not  managing  the  business.  A. 
was  accustomed  to  indorse  the 
partnership  name  as  sureties  for 
third  persons,  and  notices  of  the 
coming  due  of  such  liabilities  were 
often  left  at  the  store,  but  it  was 
not  proved  that  they  were  ever 
brought  to  the  knowledge  of  B.  ex- 
cept in  one  instance,  when  he  de- 
nied A.'s  authority  so  to  use  the 
name  of  the  firm.  Held,  that  the 
facts  were  not  sufficient  to  charge 
B.  in  an  action  on  one  of  such 
notes.  Andrews  v.  Planters'  Bank, 
15  Miss.  192. 

A  note  was  given  by  a  debtor  to 
an  execution  creditor  to  obtain  a 
release  from  a  levy,  and  was  in- 
dorsed in  the  name  of  a  firm  by 
one  of  the  partners.  There  was  no 
showing  that  the  firm  received  any 
consideration,  or  that  one  of  the 
partners  consented  to  the  indorse- 
ment. Held,  that  it  must  be 
presumed  that  it  was  merely  an 
accommodation  indorsement,  and 
that  the  creditor,  who  of  course 
was  not  a  bona  fide  holder,  was 
privy  to  all  the  facts.  Heffron  v. 
Hanaford,  40  Mich.  305. 

Where  one  partner  made  an 
accommodation  note  in  the  firm 
name  without  the  knowledge  of  his 
copartner,  which  was  discounted 
by  plaintiffs  without  notice  of  the 
irregularity,  and  subsequently 
plaintiffs,   with   notice,    after    the 


maturity  of  the  note,  took  a  re- 
newal signed  in  the  same  way, 
held,  that  the  partner  not  signing 
was  not  liable  on  such  renewal. 
Union  Bank  v.  Bulmer,  7  Can.  L. 
T.  277. 

A  partnership  note  continues 
binding  on  the  firm,  although  re- 
newed with  the  signature  of  one 
partner  only,  when  no  change  in 
the  liabilities  of  the  parties  is  in- 
tended. Horsey  v.  Heath,  5  Ohio, 
858. 

A  member  of  a  firm  may  renew  a 
note  originally  given  for  money  to 
be  applied  to  his  individual  uses, 
but  which  was  signed  with  the  firm 
name  by  his  only  partner,  with 
the  understanding  that  the  loan 
was  made  on  the  credit  of  the 
firm.  Tilford  v.  Ramsey,  37  Mo. 
563. 

In  an  action  against  A.  on  a 
promissory  note  executed  by  B.,  in 
the  name  of  himself  and  A.,  in 
renewal  of  a  prior  joint  note  exe- 
cuted by  them,  the  court  instructed 
the  jury  that  if  from  the  evidence 
they  believed  that  A.  &  B.  had  been 
carrying  the  note  alleged  to  have 
been  renewed,  and  that  A.  had  in- 
formed the  payee's  agent  that  if  it 
became  necessary  to  renew  the 
note  B.  had  authority  to  execute 
the  renewal  in  the  name  of  both  A. 
and  B.,  and  that  the  note  in  suit 
had  been  so  executed  prior  to  any 
revocation  of  such  authority,  A. 
was  bound  thereby.  Held,  on  evi- 
dence tending  to  show  such  a  state 
of  facts,  that  the  instruction  was 
correct.  Pate  v.  First  National 
Bank,  63  Ind.  255. 

Where  the  note  was  given  in 
renewal  of  another  made  by  the 
same  partner  who  signed  the  last, 
which  itself  was  in  renewal  of  a 


300 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


mo 


Joint  and  several  notes.—  A  joint  and  several  promis- 
sory note  signed  by  one  partner  for  himself  and  copartners 
does  not  bind  them  severally ;  (a)  but  it  does  bind  them  and 
him  jointly  (h)  and  himself  separately,  (c) l 


note  by  a  different  firm  of  which 
the  signer  had  been  a  member, 
upon  a  plea  of  non  est  factum  by 
the  copartner  the  onus  of  showing 
authority  to  sign  is  on  the  plaintiff. 
Bryan  v.  Tooke,  60  Ga.  437. 

A  renewal  note  given  in  the  firm 
name  after  dissolution,  by  a  part- 
ner without  his  copartner's  assent, 
and  bearing  a  higher  rate  of  inter- 
est than  the  note  renewed,  may  be 
regarded  as  divisible  and  held 
valid  to  the  extent  of  the  old  note 
at  the  old  rate  of  interest,  and  in- 
valid as  to  the  excess  of  interest. 
Wilson  v.  Forder,  20  Ohio  St.  89. 

(a)  See  Perring  v.  Hone,  4  Bing. 
32;  2  Car.  &  P.  401. 

{b)  Maclae  v.  Sutherland,  3  E.  & 

B.  1. 

(c)  See  Elliot  v.  Davis,  2  Bos.  & 
P.  338 ;  Gillow  v.  Lillie,  1  Bing.  N. 

C.  695. 

1  Each  member  of  a  firm  has  the 
implied  right  and  power  to  make 
bills  to  raise  money  to  carry  on  the 
business,  and  in  making  such  bills, 
whether  the  style  of  the  firm  or 
some  other  style  is  used,  it  does  not 
change  the  legal  rights  of  creditors 
nor  the  legal  responsibility  of  each 
of  the  partners.  Bacon  v.  Hutch- 
ings,  5  Bush,  595.  See,  also,  Kins- 
man v.  Dallom,  5  T.  B.  Mon.  382. 

Upon  the  formation  of  a  part- 
nership, until  a  firm  name  is 
adopted,  the  presumption  must  be 
that  in  the  transaction  of  the  firm 
business  each  member  is  the  agent 
of  the  others  to  transact  the  busi- 
ness, even  to  the   signing  of   the 


names  of  the  several  members  of 
the  firm  to  promissory  notes  exe- 
cuted in  the  legitimate  business  of 
the  firm.  Kitner  v.  Whitlock,  88 
111.  513.  See,  also,  Holden  v. 
Bloxum,  35  Miss.  381;  Nelson  v. 
Neely,  63  Ind.  195. 

A  note  payable  to  partners  in 
their  individual  names,  and  as- 
signed by  one  of  the  partners  in 
the  name  of  the  firm,  may  be  given 
in  evidence  by  the  assignee  in  a 
suit  against  the  maker,  without 
proof  of  the  authority  of  the  part- 
ner who  assigned  it,  although 
"non-assignment"  is  pleaded. 
Mick  v.  Howard,  1  Ind.  250. 

A  note  signed  by  two  partners 
with  their  individual  names  is  suf- 
ficient to  bind  the  firm.  Maynard 
v.  Fellows,  43  N.  H.  255.  See  the 
form  of  the  contract  considered, 
post. 

One  partner  may  legally  author- 
ize a  clerk  of  the  firm  to  accept 
bills  and  sign  and  indorse  notes  in 
the  name  of  the  company.  Tillier 
v.  Whitehead,  1  Dall.  269. 

The  acceptance  and  indorsement 
of  a  note  by  a  partner,  payee  of  the 
note,  does  not  prove  that  the  note 
executed  by  the  clerk  in  the  name 
of  the  firm  was  signed  by  the  au- 
thority of  the  firm.  Miller  v. 
House,  67  la.  737. 

Any  partner  in  a  firm  may  be 
the  agent  of  a  third  person  in 
drawing  bills  in  favor  of  the  firm 
for  advances  made  to  such  thud 
person  under  an  express  authority. 
Baring  v.  Tyman,  1  Story,  396. 


301 


mo 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    II. 


Powers  of  attorney  to  draw  bills,  etc. —  In  consequence 
of  the  doctrine  that  every  member  of  an  ordinary  trading 
partnership  has  authority  to  draw,  accept  and  indorse  bills 
in  its  name,  if  a  member  of  such  a  partnership  goes  abroad 
and  gives  his  copartner  a  power  of  attorney  to  manage  his 
affairs,  and  draw,  accept  or  indorse  bills  in  his  name,  this 
authority  warrants  the  attorney  in  putting  his  principal's 
name  to  non-partnership  bills  only;  his  authority  to  put 
the  partnership  name  to  partnership  bills  being  independent 
of,  and  unaffected  by,  the  letter  of  attorney,  (d) 

Bills,  etc.,  of  non-trading  partnerships. —  With  respect 
to  partnerships  which  are  not  trading  partnerships,  the 
question  whether  one  partner  has  any  implied  authority  to 
bind  his  copartners  by  putting  the  name  of  the  firm  to  a 
negotiable  instrument  depends  upon  the  nature  of  the  part- 
nership, (e) l     In  the  absence  of  evidence  showing  necessity 


(d)  Attwood  v.  Munnings,  7B.  & 
C.  278. 

(e)  See  Dickinson  v.  Valpy,  10  B. 
&  C.  128. 

1  One  partner  in  a  non-trading 
partnership  cannot  bind  his  copart- 
ner by  a  bill  or  note,  drawn,  ac- 
cepted or  indorsed  by  him  in  the 
firm  name,  even  though  it  be  for 
a  debt  of  the  firm,  unless  either  he 
has  express  authority  therefor  from 
his  copartner,  or  the  giving  of  such 
instruments  is  necessary  to  the  car- 
rying on  of  the  partnership  busi- 
ness, or  is  usual  in  similar  partner- 
ships ;  and  the  burden  is  upon  the 
party  suing  on  such  note  or  bill  to 
prove  such  authority,  necessity  or 
usage.  Smith  v.  Sloan,  37  Wis. 
285;  Bau  v.  Cole,  53  Conn.  53; 
Deardorf  v.  Thacher,  78  Mo.  128; 
S.  C.  47  Am.  Rep.  95;  Webb  v. 
Allington,  27  Mo.  App.  559.  See, 
also,  Prince  v.  Crawford,  50  Miss. 
344. 

The  rule  which   authorizes  one 


member  of  a  copartnership  to  bind 
the  firm  by  commercial  paper  is 
only  applicable  to  business  of  a 
trading  or  commercial  nature,  or 
the  ordinary  business  of  buying  or 
selling  for  a  profit.  It  has  no  ap- 
plication to  partnerships  formed 
for  agricultural  purposes  or  others 
of  a  similar  character.  Ulerg  v. 
Ginrich,  57  111.  531;  Hunt  v. 
Chapin,  6  Lans.  139;  McCrary  v. 
Slaughter,  58  Ala.  230,  a  partner- 
ship for  farming ;  Benton  v.  Rob- 
erts, 4  La.  Ann.  216,  where  land 
was  cultivated  by  joint  owners  in 
partnership. 

But  where  a  partnership  was 
formed  for  the  purpose  of  carrying 
on  a  farm  and  a  steam  saw-mill, 
and  the  firm  also  engaged  in  trade, 
as  the  jury  found,  and  the  manag- 
ing partner  drew  bills  in  the  name 
of  the  firm  on  an  accommodation 
acceptor  to  raise  money,  held,  that 
the  firm  were  bound  by  them. 
Kimbro  v.  Bullitt,  22  How.  256. 


302 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


■131 


or  usage,  the  power  has  been  denied  to  one  of  several 
mining  adventurers,  (/)  quarry  workers,  (g)  *farm-  [*131] 


Where  persons  are  engaged  as 
copartners  in  the  business  of  run- 
ning a  vessel,  paper  indorsed  by 
any  of  them  in  the  firm  name,  re- 
ceived in  the  regular  course  of 
the  business,  to  be  made  payable  to 
any  of  the  firm,  will  bind  the  other 
partners.  First  National  Bank  v. 
Freeman,  47  Mich.  408. 

Where  a  firm,  by  a  violation  of 
their  contract  of  agency,  become 
liable  for  their  principal  to  the 
amount  of  certain  notes  taken  by 
them  as  agents,  it  was  held  that 
either  party  had  authority  in  the 
settlement  of  the  claim  of  the 
principal  to  bind  the  firm  by  sign- 
ing its  name  to  the  notes  as  co- 
makers, although  the  execution  of 
notes  was  no  part  of  the  firm  busi- 
ness. Brayley  v.  Hedges,  62  la. 
623. 

A  partnership  in  the  business  of 
buying  cattle  and  slaughtering 
them  for  sale,  and  dealing  in  vege- 
tables and  like  commodities,  is  a 
commercial  partnership,  each  mem- 
ber of  which  has  the  right  to  draw, 
accept  or  indorse  bills  of  exchange 
in  the  firm  name,  and  bind  the 
partnership  as  to  third  persons, 
dealing  fairly  and  in  good  faith  as 
to  matters  usually  incident  to  the 
business;  and  it  is  immaterial  in 
such  a  case,  as  to  a  person  thus 
dealing  with  one  of  the  partners, 
that  the  other  was  not  informed  of 
the  transaction  and  repudiated  it 
as  soon  as  it  came  to  his  knowl- 


edge. Wagner  v.  Simmons,  61 
Ala  143. 

A  partner  gave  the  note  of  the 
firm  for  a  debt  contracted  by  him 
in  the  cultivation  of  sugar  upon  a 
plantation  of  the  firm  which  had 
been  previously  used  for  the  culti- 
vation of  cotton.  It  was  contended 
that  there  was  no  evidence  that 
the  copartners  had  consented  to  this 
change  in  the  business,  and  that 
the  making  of  the  note  was  there- 
fore unauthorized,  there  being  no 
partnership  articles  or  agreement 
restricting  the  business  to  the  cul- 
tivation of  cotton.  Held,  that  it  was 
a  question  of  the  continuance  of 
the  partnership,  and  upon  the  evi- 
dence that  it  did  not  appear  that 
the  partnership,  and  the  conse- 
quent power  of  one  partner  to  bind 
the  firm,  had  ceased.  Burnley  v. 
Rice,  18  Tex.  481. 

Two  persons  were  partners  in  the 
milling  business,  one  owning  the 
mill,  and  the  other  furnishing  the 
money  for  carrying  on  the  busi- 
ness, but  having  no  interest  in  the 
mill.  The  former,  without  the 
knowledge,  consent  or  ratification 
of  the  latter,  gave  the  firm  note  to 
a  third  person  for  a  lightning-rod 
put  up  on  the  mill.  These  facts 
being  proved  on  a  trial  of  an  action 
on  the  note  against  the  makers, 
wherein  the  partner  who  furnished 
the  money  answered  under  oath 
denying  the  execution  of  the  note, 
held,  that  there  could  be  no  recov- 


(/)  Brown  v.  Byers,  16  M.  &  W. 
252 ;  Dickinson  v.  Valpy,  10  B.  & 
C.  128.  Compare  Brown  v.  Kidger, 
3  H.  &  N.  853. 


(g)  Thicknesse  v.  Bromilow,  2  Cr. 
&  J.  425. 


303 


131 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


ers,  (A)  solicitors,  (i)  l  Where  two  firms  agreed  to  accept 
each  other's  drafts,  and  to  share  the  profits  arising  from 
their  sale,  it  was  held  that  one  of  these  firms  was  not  liable 
to  a  person  who  had  purchased  a  bill  drawn  on  it  by  the 
other  firm,  but  which  the  drawees  had  not  accepted,  (k) 

If,  however,  a  member  of  a  non-mercantile  firm  concurs 
in  drawing,  or  authorizes  his  partner  to  draw,  a  bill  in 
the  name  of  the  firm,2  he  impliedly  authorizes  its  indorse- 


ery  thereon  against  him,  the  trans- 
action not  being  one  within  the 
scope  of  the  ordinary  affairs  of  the 
partnership.  Graves  v.  Kellen- 
berger,  51  Ind.  66. 

Where  one  member  of  a  firm 
had  put  in  as  stock  his  saw-mill 
and  a  quantity  of  saw-logs,  against 
a  money  equivalent  put  in  by  the 
other,  held,  that  a  firm  note  the 
former  had  given  for  a  balance  due 
upon  the  saw-logs  would  not  bind 
the  firm  although  it  had  received 
the  benefit  of  the  logs,  no  acqui- 
escence of  the  copartner  being 
shown.  Wittram  v.  Van  Wormer, 
44  111.  525. 

The  mere  fact  that  the  business 
of  a  firm  is  that  of  commission 
merchants  to  sell  cotton  is  not  suf- 
ficient to  raise  the  presumption 
that  one  partner  has  authority  to 
accept  a  bill  in  the  name  of  the 
firm  where  they  have  not  funds  of 
the  drawer  in  their  hands.  Hib- 
bler  v.  De  Forest,  6  Ala.  92. 

So  there  is  nothing  in  the  busi- 
ness of  a  firm  of  coffee  brokers 
from  which  it  can  be  implied,  as  a 
matter  of  law,  that  one  partner  has 
authority  to  bind  the  other  by  nego- 
tiable paper  in  the  name  of  the 
firm.  Third  National  Bank  v.  Sny- 
der, 10  Mo.  App.  211. 

A  partner  in  the  practice  of 
physic  has  no  power  to  bind   his 


copartner  by  the  execution  of  a 
note  in  the  name  of  the  firm  for 
the  purpose  of  raising  money  foi 
his  own  accommodation.  Cros- 
thwait  v.  Ross,  1  Humph.  23. 

One  attorney  has  no  authority  to 
bind  his  firm  by  bill  or  promissory 
note.  Wilson  v.  Brown,  6  U.  Can. 
App.  411;  S.  C.  1  Can.  L.  T.  609; 
Breckenridge  v.  Shrieve,  4  Dana, 
375. 

A  partnership  between  steve- 
dores is  not  a  commercial  but  only 
an  ordinary  partnership,  and  one 
partner  cannot  bind  the  firm  by 
promissory  note  in  the  firm  name 
without  authority  from  his  copart- 
ner. Benedict  v.  Thompson,  33  La. 
Ann.  196. 

(/i)  Greenslade  v.  Dower,  7  B.  & 
C.  635. 

(i)  Hedley  v.  Bainbridge,  3  Q.  B. 
316;  Levy  v.  Pyne,  Car.  &  Marsh. 
453;  Harman  y.  Johnson,  2  E.  & 
B.  61,  and  3  Car.  &  Kir.  272. 

1See  Friend  v.  Duryee,  17  Fla. 
Ill;  S.  C.  35  Am.  Rep.  89;  Smith 
v.  Sloan,  37  Wis.  285;  S.  C.  19  Am. 
Rep.  757.  See,  however,  Miller  v. 
Hines,  15  Ga.  197. 

(fc)  Nicholson  v.  Ricketts,  2  E.  & 
E.  497. 

2  Where  three  persons  were  en- 
gaged in  carrying  on  a  steam  saw- 
mill in  copartnership  for  a  specified 
term,  and  during  its  continuance 


304 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


*131 


ment  in  the  same  name  for  the  purpose  for  which  it  was 
drawn.  (I) 


the  note  of  the  firm  was  given, 
with  the  concurrence  of  two  of  the 
partners,  for  necessary  supplies  or- 
dered by  one  of  them  for  the  hands 
engaged  in  carrying  on  the  busi- 
ness, the  partnership  was  held 
bound  by  it.  Johnston  v.  Dutton, 
27  Ala.  245. 

An  accommodation  indorsement, 
with  several  prior  indorsers,  was 
given  by  a  firm,  with  assent  of  all 
the  members,  on  a  note  which  was 
discounted  by  the  plaintiff  with 
knowledge  of  the  facts;  and  the 
firm's  name,  with  assent  of  all  the 
members,  was  indorsed  on  several 
successive  notes  given  in  renewal, 
on  which  changes  and  omissions 
were  occasionally  made  in  the 
names  of  some  of  the  prior  indors- 
ers. Held,  that  the  members  of 
the  firm  were  all  liable  on  an  in- 
dorsement by  one  of  their  mem- 
bers on  a  note  subsequently  given 
in  renewal,  from  which  one  of  the 
previous  indorsers  was  omitted, 
which  had  been  on  the  previous 
notes,  without  proof  of  their  as- 
sent to  the  particular  indorsement, 
under  such  a  change  of  circum- 
stances. Dundass  v.  Gallagher,  4 
Pa.  St.  205. 

Where  a  note  was  given  for 
money  loaned  to  a  firm,  and  for 
wheat  sold,  which  was  used  in 
erecting  their  mill  and  in  making 
flour  for  the  use  of  the  firm,  and 
the  amount  thereof  was  entered  in 
the  firm  books  as  an  indebtedness 
of  the  firm,  which  books  were  ex- 
amined from  time  to  time  by  a 
partner  denying  the  execution  of  a 
note  by  him,  it  was  held,  if  he  was 


informed  of  the  making  of  the 
note,  and  made  no  objection,  he 
was  estopped  from  denying  its  va- 
lidity, even  if  his  name  was  in  fact 
signed  by  a  copartner.  Kitner  v. 
Whitlock,  88  111.  513. 

A  note  was  executed  by  one 
partner  in  the  name  of  the  part- 
nership. Afterwards  the  other 
partner,  on  presentation  of  the 
note  to  him,  promised  to  pay  it, 
not  denying  that  it  was  a  partner- 
ship note.  In  a  subsequent  suit  on 
it  he  denied  by  answer  that  it  was 
a  partnership  note,  alleging  that  it 
was  executed  for  the  separate  debt 
of  the  other  partner,  without  his 
knowledge  or  consent.  Held,  that 
the  execution  of  the  note  was  the 
only  matter  in  issue,  and  that  the 
promise  to  pay  was  admissible  to 
prove  it,  and  was  not  inadmissible 
as  a  parol  promise  to  pay  the  debt 
of  another.  McGill  v.  Dowdle,  33 
Ark.  311. 

If  one  of  the  partners  of  a  firm 
has  been  in  the  habit  of  indorsing 
the  name  of  the  firm  on  bills  of  ex- 
change, it  is  a  fact  from  which  the 
jury  may  legally  infer  that  he  had 
authority  from  the  other  partners 
to  do  so.  Bank  of  Kentucky  v. 
Brooking,  2  Litt.  41. 

A  single  bill,  executed  by  one 
partner  in  the  name  of  the  firm, 
binds  the  firm  if  he  had  authority 
to  execute  it;  and  this  may  be 
shown  by  the  consideration,  bene- 
ficial to  both,  and  their  course  of 
dealing  in  reference  to  other  such 
bills.     Fant  v.  West,  10  Rich.  149. 

Where  a  note  is  made  in  the 
partnership  name  by  one  member 


(0  See  Garland  v.  Jacomb,  L.  R.  8  Ex.  216;  Lewis  v.  Reilly,  1  Q.  B.  349. 
Vol.  1  —  20  305 


•131 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Authority  to  transfer  bill.— It  must  be  borne  in  mind 
that  a  person  who  has  no  authority  to  use  the  name  of  an- 
other, so  as  to  render  him  liable  on  a  bill  or  note,  may 
nevertheless  have  sufficient  authority  to  transfer  the  prop- 
erty therein.  (-/??) l 


without  the  authority  of  the  other, 
who,  however,  makes  no  objection 
when  informed  thereof,  he  is,  if 
benefited  as  partner,  jointly 
bound.  Otherwise  where,  in  the 
absence  of  authority,  he  has  not 
impliedly  ratified  or  been  bene- 
fited by  the  transaction.  Stewart 
v.  Caldwell,  9  La.  Ann.  419. 

(to)  See,  on  this  subject,  Smith  v. 
Johnson,  3H.&N.  222;  Heilbut  v. 
Nevill,  L.  R.  5  C.  P.  478,  where, 
however,  the  property  was  held 
not  to  pass. 

i  P.  was  authorized  by  E.  to  sell 
a  patent-right  in  five  counties,  and 
account  to  E.  for  one-half  the  pro- 
ceeds, and  was  authorized  to  in- 
dorse such  notes  as  were  received 
upon  sales,  for  the  purpose  of  turn- 
ing them  into  money.  The  parties 
in  no  way  held  themselves  out  as 
partners.  As  a  part  of  the  con- 
spiracy to  defraud  E.,  P.,  without 
the  knowledge  of  E.,  indorsed  the 
name  of  P.  and  E.,  as  accommoda- 
tion indorsers,  on  a  note  received 
in  the  business.  Held,  that  the 
agreement  did  not  constitute  P. 
and  E.  partners,  and,  even  if  they 
were  so,  the  indorsement  was 
entirely  outside  of  the  apparent 
authority  of  P.,  and  E.  was  not 
v>  liable  thereon,  even  to  an  innocent 
'  holder  for  value.  Hotchkiss  v. 
English,  6  Thomp.  &  C.  658 ;  S.  C. 
4  Hun,  369. 

The  indorsement  of  a  promissory 
note  by  one  of  a  firm,  even  with- 
out the  knowledge  of  the  other 


partner,  vests  the  title  in  the  in- 
dorsee when  it  is  made  to  pay  a 
debt  of  the  firm,  and  it  is,  as  be- 
tween them,  a  lawful  application 
of  the  partnership  property.  Com- 
mercial Bank  of  Manchester  v. 
Lewis,  21  Miss.  226. 

Where  the  individual  note  of  a 
partner,  made  after  the  dissolution 
of  the  partnership,  was  transferred 
by  the  holder  to  the  firm  in  pay- 
ment of  a  debt,  held,  that  such 
note,  being  payable  to  bearer, 
might  be  legally  transferred  to  a 
third  person  by  another  partner, 
who  was  authorized  to  settle  the 
accounts  of  the  partnership.  Par- 
ker v.  Macomber,  18  Pick.  505. 

An  assignment  of  a  note  payable 
to  a  partnership,  in  the  name  of 
one  of  the  partners,  will  not  pass  a 
legal  interest  in  the  note.  M'Intire 
v.  M'Laurin,  2  Humph.  71. 

Where  a  note  is  made  by  a  firm 
payable  to  a  member  of  the  firm, 
who  indorses  it,  the  indorsee  takes 
only  such  rights  as  the  indorser 
had,  and  cannot  enforce  it  against 
the  partnership  until  after  the  pay- 
ment of  the  partnership  debts. 
Simrall  v.  O'Bannons,  7  B.  Mon. 
608.  See,  however,  Blake  V. 
Wheaton,  1  Tayl.  70. 

One  member  of  the  firm  may 
order  the  contents  of  a  note,  made 
payable  to  the  firm  or  order,  to  be 
paid  to  himself,  and  maintain  a 
suit  in  his  own  name.  Burnham 
v.  Whittier,  5  N.  H.  334. 

A  copartner    has  not   only   au- 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*131 


Before  leaving  the  subject  of  negotiable  instruments  it 
may  be  observed  that  it  is  often  difficult  to  say  whether 
they  purport  to  be  the  paper  of  a  firm,  or  only  that  of  some 
one  or  more  of  the  partners.  Unless  the  paper  purports  to 
be  the  paper  of  a  firm,  no  one  whose  name  is  not  on  the 
paper  is  liable  to  be  sued  on  it.  (n)  This  subject  will  be 
adverted  to  hereafter. 

7.  Bonds. —  See  Borrowing  Money  and  Deeds. 

8.  Borrowing  money —  General  power  to  borrow. —  One  of 
the  most  important  of  the  implied  powers  of  a  partner  is 
that  of  borrowing  money  on  the  credit  of  the  firm.1     The 


thority  to  indorse  notes  in  the 
name  of  the  firm,  but  also  to  waive 
notice  of  non-payment,  or  direct 
any  particular  mode  of  dishonor, 
and  such  indorsement  and  waiver 
is  binding  upon  the  firm,  if  the 
holder  did  not  know  that  they 
were  fraudulently  done;  and  it 
makes  no  difference  that  the  note 
in  suit  was  not  running  at  the  time 
of  the  waiver.  But  a  partner  has 
no  right  as  against  his  copartners 
to  waive  notice  upon  a  note  in- 
dorsed by  him  for  his  own  benefit. 
Windham  County  Bank  v.  Ken- 
dall, 7  R.  I.  77. 

Where  a  note  is  indorsed  by  a 
partnership  in  the  partnership 
name,  an  agreement  by  one  of  the 
partners  to  receive  notice  at  a  par- 
ticular place  is  binding  upon  his 
copartners.  Nutt  v.  Hunt,  12  Miss. 
702. 

A  partner  may  waive  grace  upon 
a  firm  note  given  by  him.  Pierce 
v.  Jackson,  21  Cal.  636. 

Where  a  bill  of  exchange,  ac- 
cepted by  a  firm,  and  indorsed  in 
the  name  of  the  payee,  is,  before 
its  maturity,  put  in  circulation  by 
one  of  the  partners,  his  act  is  to  be 
considered  the  act  of  his  copart- 


ners, and  estops  them,  when  sued 
on  the  bill,  from  denying  the  gen- 
uineness of  the  indorsement. 
Sprague  v.  Zunts,  18  Ala.  382. 

(n)  Bills  of  Ex.  Act,  1882,  §  23. 

1  In  ordinary  commercial  part- 
nerships, each  partner  has  the 
right  to  pledge  the  partnership 
property,  or  to  borrow  money  and 
give  notes  in  the  firm  name  for  part- 
nership purposes  and  for  no  other. 
Gregg  v.  Fisher,  3  Bradw.  261 ; 
McConnell  v.  Wdkins,  13  U.  C. 
App.  438 ;  Deitz  v.  Regner,  27  Kan. 
94 :  Benninger  v.  Hess,  41  Ohio  St. 
64;  Morse  v.  Hagenah,  32  N.  W. 
Rep.  634;  Walsh  v.  Lennon,  98  IU. 
27 ;  S.  C.  38  Am.  Rep.  75 ;  Holt  v. 
Simons,  16  Mo.  App.  97 ;  Palmer  v. 
Scott,  68  Ala.  380. 

And  when  credit  is  extended  to  a 
partnership  within  the  scope  of  its 
business,  it  will  bind  all  the  part- 
ners, notwithstanding  any  secret 
arrangement  they  may  have 
among  themselves,  unknown  to 
those  giving  the  credit.  Gregg  v. 
Fisher,  supra;  Beninger  v.  Hess, 
supra;  Deitz  v.  Regner,  supra. 

A  partner,  unless  he  is  a  mem- 
ber of  a  commercial  firm,  or  one 
engaged  in    general   promiscuous 


*131 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


sudden  exigencies  of  commerce  render  it  absolutely  neces- 
sary that  such  power  should  exist  in  the  members  of  a 


trading,  has  no  implied  authority 
to  bind  his  firm  by  borrowing 
money  and  executing  promissory 
notes,  mortgages  or  other  securi- 
ties, unless  the  money  is  necessary 
for  the  business,  and  such  pledge 
of  the  credit  of  the  firm  is  usual. 
Davis  v.  Richardson,  45  Miss.  499. 

However,  in  Haskinsonv.  Elliott, 
62  Penn.  St.  393,  it  was  held  that 
the  rule  that  the  partnership  is 
liable  for  money  borrowed  by  one 
of  its  members  on  the  credit  of  the 
firm,  within  the  general  scope  of 
its  authority,  and  according  to  the 
usual  course  of  its  business,  applies 
as  well  to  partnerships  formed  for 
mechanical  or  manufacturing  pur- 
poses as  to  commercial  partner- 
ships, and  to  special  as  well  as 
general  partnerships. 

So,  in  Leffier  u.  Rice,  44  Ind.  103, 
it  was  held  that  money  may  prop- 
erly be  borrowed  by  a  partner  to 
purchase  middlings  and  grain  for  a 
mill  owned  by  the  partnership,  and 
the  latter  will  be  liable  therefor. 
See,  also,  Morse  v.  Hagenah,  68 
Wis.  603. 

When  a  loan  is  made  by  two 
members  of  a  commercial  firm,  in 
a  matter  foreign  to  the  business  of 
the  firm,  and  in  disregard  of  the 
express  opposition  of  the  third 
member,  the  two  members  making 
the  loan  are  justly  chargeable  with 
its  amount.  Cooke  v.  Allison,  30 
La.  Ann.  963. 

One  who  in  good  faith,  at  the 
request  of  a  partner,  advances 
money  to  pay  what  is  apparently  a 
firm  debt,  may  recover  from  the 
firm.      Blinn  v.  Evans,  24  111.  317. 

A  note  given  by  two  partners, 


jointly,  for  money  borrowed  for, 
and  used  in,  the  firm  business,  is 
a  partnership  liability,  notwith- 
standing they  signed  the  note  be- 
fore commencing  the  firm  business, 
and  in  their  several  names.  So 
held  in  reference  to  application  of 
assets  to  debts  in  bankruptcy.  In 
re  Thomas,  17  Bankr.  Reg.  54.  See, 
also,  Ex  parte  Nason,  70  Me.  363; 
Re  Thomas,  8  Biss.  139 ;  Carson  v. 
Byers,  67  id.  606 ;  Berkshire  Woolen 
Co.  v.  Juillard,  75  N.  Y.  535;  Ex 
parte  First  Nat.  Bank,  70  Me.  369. 
See  post. 

One  partner  has  not,  however, 
implied  power  to  charge  a  copart- 
ner by  borrowing  money  in  the 
name  of  the  firm  to  pay  debts  in- 
curred before  the  copartner  en- 
tered the  firm,  and  which  he  has  in 
no  way  assumed  or  made  himself 
liable  for.  Elkin  v.  Green,  13 
Bush,  612. 

Where  H.,  as  managing  partner 
of  a  firm,  in  order  to  procure  a  loan 
from  a  third  party,  brought  to 
plaintiffs  a  note  payable  to  such 
third  party,  and  signed  by  himself 
individually,  and,  to  induce  them 
to  become  sureties  of  the  firm  for 
such  loan,  represented  that  the 
proposed  loan  was  on  partnership 
account  and  for  its  use,  and  that 
his  partner  would  also  sign  said 
note  individually,  which  he  subse- 
quently did,  that  being  the  usual 
mode  of  their  executing  partner- 
ship obligations,  and  upon  the  faith 
of  such  representations  the  plaint- 
iffs became  liable  as  sureties  by 
signing  said  note  on  the  credit  of 
the  partnership,  and  the  money  is 
borrowed,  received  and  used  in  its 


308 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*131 


trading  partnership,  and  accordingly  in  a  comparatively 
early  case  this  power  was  clearly  recognized,  (o)     It  has 


business  held,  that  this  created  a 
partnership  liability,  and  plaintiffs 
became  sureties  of  such  partner- 
ship. McKee  v .  Hamilton,  33  Ohio 
St.  7. 

If  a  partner  borrows  money 
upon  the  security  of  his  firm's  ac- 
ceptance of  another's  draft,  the  ac- 
ceptance, in  the  absence  of  matter 
■which  will  avoid  it,  establishes  the 
relation  of  debtor  and  creditor  to 
the  amount  of  the  draft  between 
the  firm  and  the  lender.  Saltmarsh 
v.  Bower,  22  Ala.  221. 

A  note  given  in  the  name  of  the 
firm  by  one  of  its  members,  for 
moneys  collected  by  him  as  agent 
of  the  payee,  is  a  valid  note  against 
the  firm  where  such  moneys  were 
in  the  nature  of  a  loan  to  the  firm. 
Whitaker  v.  Brown,  16  Wend. 
505. 

C,  about  to  go  into  business 
with  his  brother  J.,  put  in  "as 
stock  for  the  purpose  of  forming  a 
partnership  with  equal  shares"  cer- 
tain "gold  dust"  sent  to  his  wife 
from  his  brother  R.,  for  which  C. 
subsequently  gave  his  individual 
note.  After  the  dissolution  of  the 
partnership  and  the  death  of  C,  R. 
brought  suit  against  the  surviving 
partner  for  the  loan  to  C,  claim- 
ing it  to  be  a  firm  debt.  On  the 
trial  it  was  proved  that  J.  used  the 
"gold  dust"  to  buy  goods;  that  he 
encouraged  C.  to  embark  it  as  cap- 
ital, and  had  advised  the  plaintiff 


to  permit  his  brother-in-law,  C. ,  to 
put  it  in  the  firm  as  such,  but  there 
was  no  evidence  that  J.  ever  as- 
sumed any  responsibility  in  regard 
to  it.  Held,  that  the  loan  was  a 
personal  credit  to  C. ,  and  not  a  loan 
to  the  firm ;  hence  J.  was  not  liable 
as  surviving  partner.  Donnelly  v. 
Ryan,  41  Pa.  St.  306. 

A.  and  B. ,  being  copartners,  A. 
upon  his  individual  credit  obtains 
a  loan  from  C.  of  $1,200,  which  is 
used  in  the  partnership  business, 
but  is  credited  to  A.  personally  on 
the  partnership  books,  and  so  re- 
mains with  A.'s  knowledge  and 
without  any  dissent  on  his  part  for 
five  years ;  at  the  end  of  that  time 
A.  and  B.  enter  into  an  agreement 
for  the  settlement  of  the  partner- 
ship affairs,  by  which  B.,  among 
other  things,  agrees  in  one  year  to 
satisfy  and  dischai'ge  all  the  liabil- 
ities of  the  firm.  Held,  that  the 
loan  of  $1,200  was  personal  to  A., 
and  that  B.  was  not  obliged,  under 
his  agreement,  to  pay  the  amount 
to  C,  A.'s  claims  against  the  firm 
having  been  expressly  excepted 
from  it.  Gibbs  v.  Bates,  43  N.  Y. 
192. 

Where  one  agent  of  a  firm  signs 
a  note  in  his  own  name,  and  an- 
other agent  indorses  it  in  blank  in 
the  name  of  the  firm,  and  a  check 
payable  to  the  firm  is  delivered  to 
the  agent,  who  signs  individually, 
this  is  prima  facie  loan  to  firm. 


(o)  See  Lane  v.  Williams,  2  Vern. 
277,  292;  Rothwell  v.  Humphries, 
1  Esp.  406;  Denton  v.  Rodie,  3 
Camp.  493 ;  Lloyd  v.  Freshfield,  2 
Car.  &  P.  333 ;  Ex  parte  Bonbonus, 


8  Ves.  540.  See,  too,  De  Ribeyre  «. 
Barclay,  23  Beav.  125;  Gordon  v. 
Ellis,  7  Man.  &  Gr.  607 ;  Brown  «. 
Kidger,  3  H.  &  N.  853. 


809 


*131 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


been  already  seen  that  one  partner  can  bind  the  firm  by 
a  bill  or  note,  upon  which  money  may  be  obtained,  by  the 


Neal  v.  Wilson,  Sup.  Ct.  Ga.,  Oct. 
4,  1887. 

Where  at  the  time  of  obtaining 
the  loan  the  reason  for  the  loan 
and  the  uses  to  which  it  was  to  be 
applied  were  distinctly  stated  to  be 
for  a  partnership,  and  so  under- 
stood by  both  borrower  and  lender, 
and  the  money  was  in  fact  so  used, 
the  inference  is  a  fair  one  that  the 
advance  was  on  the  credit  of  the 
partnership.  Maffet  v.  Leuckel, 
93  Pa.  St.  468 ;  S.  C.  8  Weekly  Not. 
Cas.  513. 

A  person  giving  credit  to  an  in- 
dividual has  no  equity  against  the 
firm  of  which  the  debtor  is  a  mem- 
ber. Scoville  Mfg.  Co.  v.  Lindsey, 
4  Atl.  Rep.  (N.  J.)  98.  See,  also, 
cases  next  cited. 

Where  money  has  been  borrowed 
by  one  partner  from  his  wife  the 
mere  fact  that  it  has  been  bona 
fide  applied  to  partnership  purposes 
is  not  sufficient  to  warrant  him  in 
debiting  the  partnership  and  cred- 
iting her  with  the  amount  on  the 
firm  books,  where  this  is  done 
without  her  consent  or  the  consent 
of  his  copartner.  Silver  v.  Silver, 
1  Russell's  Eq.  169.  See,  also, 
Pritchell  v.  Pollock,  82  Ala.  169. 

Declaration  by  one  borrowing 
money  that  he  intends  to  use  it  in 
the  business  or  for  the  benefit  of 
the  firm  of  which  he  is  a  member 
is  not  evidence  that  he  borrows 
upon  the  credit  of  the  firm. 
Fisher  v.  Hume,  8  Cent.  Rep.  (D.  C.) 
725. 

But  where  a  married  woman 
lent  money  to  her  husband  for  the 
firm  of  which  he  was  a  member  on 
his  representation  that  it  was  bor- 


rowed for  the  firm,  it  was  held  that 
she  might  recover  it  from  the  firm. 
Gould  v.  Gould,  36  N.  J.  Eq.  380; 
S.  C.  35  id.  37. 

A.  and  B.,  in  1847,  were  partners 
in  buying  wheat.  One  C.  let  A. 
have  $300,  and  a  few  days  after- 
wards took  his  individual  note  for 
it.  The  money  was  used  to  pay 
for  grain  that  A.  had  purchased. 
In  the  fall  of  1848  A.  failed,  and  in 
the  winter  following  paid  part  of 
the  note,  and  gave  his  note  for  the 
balance,  $198.  In  1849  C.  sold  the 
note  last  named  to  D.  for  $140, 
which  D.  then  paid  him.  After  D. 
had  kept  the  note  some  time,  C,  by 
an  instrument  in  writing,  assigned 
to  D.  all  his  claim  against  A.  and 
B.  for  moneys  loaned  them  in  the 
spring  of  1847.  The  consideration 
expressed  in  the  instrument  was 
$193.25,  but  no  new  consideration 
was  then  received.  Held,  that  C. 
at  the  time  of  the  sale  of  the  note 
to  D.  had  a  valid  claim  against  the 
partners  A.  and  B. ,  and  that  this 
claim  was  transferred  by  the  sale 
of  the  note;  or,  if  not,  that  it 
passed  by  the  subsequent  assign- 
ment.   Rose  v.  Baker,  13  Barb.  230. 

The  complainant  avers,  in  sub- 
stance, that  on,  etc.,  S.,  as  partner 
in  the  then  existing  firm  of  W.  & 
S.,  borrowed  from  the  plaintiff,  for 
and  on  account  of  and  for  the  use 
of  the  said  firm,  a  certain  sum, 
which  loan  was  evidenced  by  a 
note  for  the  amount,  signed  by  S., 
dated  on  the  same  day ;  and  that 
the  money  so  loaned  was  expended 
for  the  use  of  the  firm.  Held,  that 
under  these  averments  plaintiff 
may  show    that  the    money  was 


310 


•CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


132 


every*day  process  of  discounting;   and  the   power  [*132] 
of  one  partner  to  pledge  partnership  goods  for  ad- 


loaned  by  him  to  and  upon  the 
credit  of  the  firm.  There  is  no  ad- 
mission that  the  note  was  taken  in 
payment;  and  the  complaint  is 
good  on  demurrer.  Hoeflinger  v. 
Wells,  47  Wis.  628. 

Where  partners  borrow  money  to 
be  used  in  the  business  which  they 
are  jointly  carrying  on,  it  becomes 
a  partnership  fund,  and  no  matter 
how  they  stand  on  the  security 
given  to  the  lender,  they  are  ac- 
countable to  one  another  as  part- 
ners. Bailey  v.  Brownfield,  20  Pa. 
St.  41. 

Where  an  administrator,  who  is 
a  member  of  a  partnership,  applies 
to  the  partnership  concerns  money 
which  belongs  to  the  estate  of  his 
intestate,  and  afterwards  gives  the 
note  to  the  creditor  of  the  intestate 
to  whom  such  money  was  due,  in 
discharge  of  such  creditor's  claim 
on  the  estate  of  the  intestate,  the 
firm  is  bound  to  pay  the  note,  al- 
though the  money  was  not  in  the 
hands  of  the  firm  when  the  note 
was  given.  Richardson  v.  French, 
4  Mete.  577. 

If  a  partner  carries  on  a  private 
and  a  partnership  business  in  the 
same  name,  and  borrows  money  in 
that  name,  it  is  deemed  to  be  bor- 
rowed for  the  partnership,  no  evi- 
dence being  given  to  the  contrary. 
Mifflin  v.  Smith,  17  Serg.  &  R.  165. 
This  power  of  borrowing  may 
extend  to  other  things  than 
money.  Thus,  where  two  parties 
are  jointly  interested  in  the  opera- 
tion of  buying  and  shipping  oats, 
one  party  may  bind  both  in  bor- 
rowing oats  to  be  paid  in  oats,  in 
their    common    business    and  for 


their    common    benefit.     Adee  v. 
Demorest,  54  Barb.  433. 

A  partner  may  borrow  a  note  or 
bill  for  the  purpose  of  raising 
money  for  the  use  of  the  firm,  pro- 
vided not  more  than  legal  interests 
be  paid  for  such  note  or  bill.  , 
Hutchins  v.  Hudson,  8  Humph. 
426. 

Where  the  managing  partner  of 
a  concern  who  had  been  in  the 
habit  of  borrowing  checks  for  the 
purpose  of  meeting  the  firm's  lia- 
bilities, a  short  time  before  the 
firm  dissolved  called  at  the  office 
of  S.  and  requested  his  check, 
which  he  received,  at  his  request, 
made  payable  "to  currency," 
promising  to  return  the  amount 
within  an  hour  or  so,  until  he  col- 
lected some  bills  of  the  firm,  which 
he  failed  to  do,  held,  that  the  other 
partner  was  liable  to  pay  it,  the 
check  having  been  borrowed  on  the 
credit  of  the  firm,  though  the  pro- 
ceeds were  not  appropriated  to  the 
business  of  the  firm.  Stark  v. 
Corey,  45  111.  431. 

B. ,  who  was  a  partner  in  a  firm, 
obtained  from  R.  three  bonds  of 
the  United  States,  which  were 
made  payable  to  bearer,  to  be  used 
by  the  firm,  and  to  be  returned  to 
R.  upon  request.  B.  was  on  his 
way  to  San  Francisco  to  purchase 
a  stock  of  goods  for  the  firm  at 
the  time  the  bonds  were  delivered 
to  him,  and  he  proposed  pledging 
them,  or  in  some  other  way  raising 
money  upon  them,  and  to  use  the 
money  so  obtained  in  the  purchase 
of  goods.  B.  lost  his  life  before 
reaching  San  Francisco,  and  the 
bonds  were  lost.     Held,  that  the 


311 


132 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


vances  is  equally  well  established,  (p)     At  the  same  time 
the  power  of  borrowing  money,  like  every  other  implied 


firm  was  liable  to  R.  for  the 
amount  of  the  bonds.  Roney  v. 
Buckland,  4  Nev.  45. 

A  misapplication,  by  one  part- 
ner, of  the  funds  borrowed,  con- 
stitutes no  defense  to  suit  for  pay- 
ment of  the  note  given  therefor, 
unless  it  be  shown  that  the  plaint- 
iff at  the  time  he  loaned  the  money 
had  knowledge  or  reasonable 
grounds  to  believe  that  the  same 
was  to  be  used  for  other  than  part- 
nership purposes,  or  the  circum- 
stances were  such  as  to  put  him 
upon  inquiry,  and  he  neglected 
to  inquire.  Wagner  v.  Fresche,  56 
N.  H.  495 ;  Gregg  v.  Fisher,  3  Brad. 
(111.)  261;  Hay  ward  v.  French,  12 
Gray,  453;  Onondaga  Bank  v. 
De  Puy,  17  Wend.  47 ;  Whitaker  v. 
Brown,  16  id.  505;  Steel  v.  Jen- 
nings, Cheves,  183;  Church  v. 
Sparrow,  5  Wend.  223;  Haldeman 
v.  Bank  of  Middletown,  28  Penn. 
St.  440;  Gavin  v.  Walker,  14  Lea, 
643 ;  Bartholow  v.  St.  Joseph  Lead 
Co.  12  Mo.  App.  587;  Lindth  v. 
Crowley,  29  Kan.  756;  S.  C.  26  id. 
47. 

Whei-e  a  person  became  surety 
to  a  bond,  given  to  secure  money 
borrowed  by  one  partner  profess- 
edly for  the  firm,  and  so  under- 
stood by  the  lender  and  the  surety, 
but,  in  truth,  for  the  individual 
use  of  the  borrower,  held,  that 
though  the  creditor  could  not  re- 
-cover the  money  from  the  firm,  for 
want  of  authority  in  the  partner 
to  bind  the  firm  by  deed,  yet  the 
surety,  upon  paying  the  bond,  even 
voluntarily  and  without  suit, 
might  recover  the  amount  from 


the  firm.     Wharton  v.  Wood  burn, 
4  Dev.  &  B.  Eq.  507. 

So  the  partnership  is  liable  if  one 
of  the  firm  borrows  money,  not 
expressly  on  his  individual  credit, 
if  it  was  used  for  the  benefit  of 
the  firm.  Church  v.  Sparrow,  5 
Wend.  223. 

If  one  partner,  in  negotiating  a 
loan  for  the  partnership,  deceives 
his  copartner  without  the  privity  of 
the  lender,  by  inserting  in  the  se- 
curity a  private  debt  of  his  own, 
the  remedy  of  such  copartner  is 
against  the  fraudulent  partner 
only.  Dowdall  v.  Lenox,  2  Edw. 
267. 

Upon  a  dissolution  of  partnership 
a  new  firm  was  formed,  consisting 
of  the  same  partners  except  one. 
The  debts  of  the  old  firm  were  not 
assumed  by  the  new  firm ;  but  one 
of  the  partners  induced  the  plaint- 
iff to  furnish  him  with  money  to 
purchase  notes  of  the  former  firm, 
representing  that  they  could  be 
bought  at  a  discount.  Instead  of 
buying  up  such  notes,  the  partner 
mentioned  made  and  indorsed,  in 
the  name  of  the  old  firm,  antedated 
notes,  which  he  delivered  to  the 
plaintiff  as  notes  bought  by  him  in 
the  market;  and,  depositing  the 
money  received  from  the  plaintiff 
in  bank  to  the  credit  of  the  new 
firm,  afterwards  drew  it  out  in  the 
firm  name  and  applied  it  to  the 
payment  of  the  debts  of  the  old 
firm.  The  other  partners  had  no 
knowledge  of  the  transactions  be- 
tween the  partner  mentioned  and 
the  plaintiff.  Held,  that  the  new 
firm  was  not  liable  upon  the  notes, 


(p)  See  infra,  Mortgage  and  Pledge. 

312 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*132 


power  of  a  partner,  only  exists  where  it  is  necessary  for  the 
transaction  of  the  partnership  business  in  the  ordinary  way; 

in  an    action    upon  them  by  the    Leg.  Intel.  434 ;  Norwalk  Nat.  Bk. 


plaintiff.  Dounee  v.  Parsons,  45 
N.  Y.  180. 

"Where  one  of  two  copartners  ob- 
tained money  on  a  note  payable  at 
a  future  day,  signed  by  him  with 
the  name  of  the  firm  and  with  a 
forged  indorsement  of  a  third  per- 
son, the  lender  was  held  entitled,  on 
discovering  the  forgery,  to  an  ac- 
tion for  money  had  and  received, 
even  before  the  maturity  of  the 
note,  against  the  partners  to  whose 
use  the  money  had  gone.  Manu- 
facturers' &  Mechanics'  Bank  v. 
Gore,  15  Mass.  75.  See,  also,  Board- 
man  v.  Gore,  15  Mass.  331,  where 
there  was  no  evidence  that  the 
money  went  to  the  use  of  the  firm. 

Though  the  payee  of  a  partner- 
ship note  believed  that  the  proceeds 
of  the  note  were  to  be  applied  to 
the  individual  debts  of  one  of  the 
firm,  the  note  would  still  be  bind- 
ing on  the  firm  if  the  proceeds 
were  in  fact  used  by  the  firm. 
Hamilton  v.  Summers,  12  B.  Mon. 
11. 

A  firm  is  not  rendered  liable  for 
money  lent  or  goods  furnished  to  a 
member  upon  his  individual  credit 
by  the  fact  that  the  money  or 
goods  were  afterwards  applied  to 
the  benefit  of  the  firm.  Union, 
etc.  Bank  of  Memphis  v.  Day,  12 
Heisk.  413;  Peterson  v.  Roach,  32 
Ohio  St.  374 ;  Clark  v.  Taylor,  68 
Ala.  453;  Robertson  v.  Jones,  4 
Pugs.  &  B.  (N.  B.)  267;  Guice  v. 
Thornton,  76  Ala.  466;  McLinden 
v.  Wentworth,  51  Wis.  170;  Cof- 
fin's Appeal,  15  Weekly  Not.  Cas. 
52;  S.  C.  15  id.  191;  14  id.  140;  40 


v.  Sawyer,  38  Ohio  St.  339.  See, 
also,  Brock  v.  Brock,  19  Weekly 
Not.  Cas.  356;  S.  C.  9  Atl.  Rep. 
486. 

And  the  rule  is  not  different 
where  the  money  is  loaned  for  the 
purpose  of  enabling  such  partner 
to  pay  to  the  firm  his  portion  of  a 
specified  sum  which  each  partner 
has  agreed  to  contribute  in  order 
to  increase  the  firm's  capital.  Nor- 
walk National  Bank  v.  Sawyer,  38 
Ohio  St.  339. 

The  question  in  such  cases  is,  To 
whom  was  the  credit  given?  Clark 
v.  Taylor,  68  Ala.  453.  See,  also, 
cases  above  cited. 

The  fact  that  a  member  of  a  firm 
in  giving  a  note  for  money  bor- 
rowed used  the  form,  "  I  promise  to 
pay,"  and  subscribed  his  own  name, 
and  then  the  firm  name  under- 
neath it,  is  a  circumstance  to  be 
considered  by  the  jury  in  deter- 
mining whether  the  lender  had 
notice  that  the  money  was  bor- 
rowed for  the  partner's  individual 
use;  the  other  partners  are  not 
necessarily  holden  on  the  note. 
Sherwood  v.  Snow,  46  Iowa,  481. 

Money  obtained  on  the  personal 
credit  of  a  partner  which  goes  into 
the  firm  funds  and  is  used  for  the 
exclusive  benefit  of  the  firm  is, 
however,  a  good  consideration  for 
a  subsequent  promise  of  the  firm 
to  pay  the  debt.  Siegel  v.  Chidsey, 
28  Pa.  St.  279;  Lint  v.  Shultz,  38 
Leg.  Intel.  426. 

One  partner  cannot  bind  the  firm 
for  money  borrowed  by  him  to  pay 
for  his  share  of  the  capital  stock, 
13 


*132 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


and  consequently,  if  money  is  borrowed  by  one  partner  for 
the  declared  purpose  of  increasing  the  partnership  capital,  (q) 
or  of  raising  the  whole  or  part  of  the  capital  agreed  to 
be  subscribed  in  order  to  start  the  firm,  (r)  or  if  the  busi- 
ness is  such  as  is  customarily  carried  on  on  ready-money 
principles,  e.  g.,  mining  on  the  cost-book  principle,  (V)  or 
without  borrowing,  as  in  the  case  of  solicitors  (t),  the  firm 
will  not  be  bound  unless  some  actual  authority  or  ratifica- 
tion can  be  proved.  Still  less  will  the  firm  be  bound  where 
borrowing  is  prohibited  and  the  person  advancing  the 
money  is  aware  of  the  prohibition,  (u) 


especially  where  the  lender  knows 
the  purpose  for  which  the  money- 
is  borrowed.  McLinden  v.  Went- 
worth,  51  Wis.  170. 

Where  money  has  been  loaned 
to  a  party  individually,  such  party 
being  at  the  time  a  member  of  the 
partnership,  he  is  the  one  who  owes 
the  debt  therefor,  no  matter  what 
representations  he  made  at  the 
time  as  to  how  or  for  what  purpose 
it  was  to  be  used.  Ah  Lep  v.  Gong 
Choy,  9  Pac.  R.  483. 

Where  the  individual  note  of  one 
partner  is  taken  for  a  loan  made  at 
the  time  to  the  firm,  the  presump- 
tion is  that  it  was  not  taken  as  pay- 
ment. Hoeflinger  v.  Wells,  47  Wis. 
628. 

A  member  of  a  commercial  firm 
has  no  implied  authority  to  bind 
the  firm  by  a  promissory  note  ex- 
ecuted for  the  purpose  of  borrow- 
ing money  to  protect  and  retire 
dishonored  paper  of  the  customers 
of  the  firm  where  the  payee  of  the 
note  has  notice  of  such  fact. 
McConnell  v.  Wilkins,  5  Can.  L.  T. 
580. 

The  liability  of  a  partner  for  the 
acts  of  his  copartner  done  in  behalf 


of  the  firm  cannot  be  held  to  ex- 
tend to  illegal  contracts;  and, 
therefore,  where  money  was  bor- 
rowed at  usurious  interest,  by  one 
member,  without  the  knowledge  or 
consent  of  the  other,  the  member 
not  participating  in  such  contract 
is  not  responsible  for  the  money 
borrowed.  Hutchins  v.  Turner,  8 
Humph.  415. 

But  a  partner  who  knowingly 
and  without  objection  allows  the 
financial  partner  to  continually 
raise  money  at  usurious  rates 
thereby  impliedly  gives  his  author- 
ity to  bind  the  firm  to  pay  usurious 
interest,  from  which  he  can  only 
escape  by  pleading  usury.  Hurd 
v.  Haggerty,  24  111.  171. 

(q)  Fisher  v.  Taylor,  2  Ha.  218. 

(r)  Greenslade  v.  Dower,  7  B.  & 
C.  635. 

(s)  Hawtayne  v.  Bourne,  7  M.  & 
W.  595 ;  Burmester  v.  Norris,  6  Ex. 
796;  Ricketts  v.  Bennett,  4  C.  B. 
686. 

(t)  Plumer  v.  Gregory,  18  Eq.  624, 
as  to  the  1,700?. 

(u)  Worcester  Corn  Exchange  Co. 
3  De  G.  M.  &  G.  180.  See,  also,  the 
cases  in  the  next  note. 


314 


CH.  I,  SFC.  II.]  LIABILITIES    OF    PARTNERS.  *133 

Overdrawing  banking  account. —  Overdrawing  a  bank- 
ing account  is  borrowing  money,  (a?)1 

Increasing  capital. —  Connected  with  the  subject  of  bor- 
rowing money  is  that  of  increasing  capital.  A  sole  trader 
who  borrows  money  for  the  purpose  of  his  trade  cannot 
with  propriety  be  said  to  increase  his  capital;  but  if  two  or 
more  persons  are  in  partnership,  and  each  borrows  money 
on  his  own  separate  credit,  and  the  money  is  then  thrown, 
into  the  common  stock,  the  capital  of  the  firm,  as  distin- 
guished from  the  separate  capitals  of  the  persons  composing 
it,  may  with  propriety  be  said  to  be  increased.  But,  in  this 
case,  the  firm  is  not  the  borrower,  nor  is  it  debtor  to  the 
lender  for  the  money  borrowed.  If  a  firm  borrows  money 
so  as  to  be  itself  liable  for  it  to  the  lender,  the  capital  of 
the  firm  is  no  more  increased  than  is  the  capital  of  an  ordi- 
nary individual  increased  by  his  getting  into  debt. 
"When,  therefore,  *it  is  said  that  one  partner  has  no  [*133] 
implied  power  to  borrow  on  the  credit  of  the  firm 
for  the  purpose  of  increasing  its  capital,  what  is  meant  is 
that  one  partner,  as  such,  has  no  power  to  borrow,  on  the 
credit  of  himself  and  copartners,  money  which  each  was 
to  obtain  on  his  individual  credit,  and  then  to  bring  into  the 
common  stock,  (if)  Unless  the  expression  means  this  it 
means  nothing,  (s) 

(x)  Blackburn   Building    Soc.  v.  shown   by  such  surrounding   cir- 

Cunliffe,  Brooks  &  Co.  22  Ch.  D,  cumstances  as  would  put  a  reason- 

61,  and  9  App.  Cas.  827;  Waterlow  able  man  on  inquiry,  if  such  in- 

v.  Sharp,  8  Eq.  501;  and  Re  Cefn  quiry  would  have  resulted  in  actual 

Cilcen  Mining  Co.  7  Eq.  88,  contra,  notice.     Darlington  v.  Garrett,  14 

must  be  considered   as  overruled.  Bradvv.  238. 

1  In  case  of  an  overdraft  drawn        The  mere  fact  that    overdrafts 

payable  to  the  order  of  one  partner,  are  payable  to  the  member  making 

where  the  power  exists  to  overdraw  them  is  not  sufficient  notice  of  such 

in  the  name  of  the  firm,  notice  to  partner's  bad  faith.     Darlington  v, 

the  drawee  of  bad  faith  in  the  part-  Garrett,  14  Bradw.  238. 
ner  overdrawing  is  necessary  in  or-        (y)  See  Greenslade  v.  Dower,  7  B. 

der  to  release  the  defrauded  part-  &  C.  635 ;  Fisher  v.  Taylor,  2  Ha. 

ners  from  liability  on  the  draft.  218,  as  to  the  power  of  one  partner 

Darlington  v.  Garrett,  14  Bradw.  238.  to  do  this. 

Such   notice  may,   however,  be        (z)  See  Bryon  v.  Metropolitan  Sa- 

315 


*134  EIGHTS    AND    OBLIGATIONS.  [iJOOK    II. 

Difference  between  borrowing  and  obtaining  goods, 
etc.,  on  credit. —  There  is  a  practical  difference  between 
borrowing  money  and  procuring  works  and  materials  on 
credit,  which  requires  notice.  The  difference  consists  in 
this:  that  he  who  possesses  power  to  borrow  on  the  credit 
of  another  has  a  much  more  extensive,  and  therefore  more 
easily  abused,  trust  reposed  in  him  than  one  who  is  empow- 
ered only  to  pledge  the  credit  of  another  for  value  received 
when  the  pledge  is  given.  A  power,  therefore,  to  incur 
debt,  which  is  necessarily  incidental  to  almost  every  part- 
nership, by  no  means  involves  a  power  to  borrow  money; 
and  the  cases  which  show  that  adventures  in  cost-book 
mines  are  liable  for  supplies  furnished  to  the  mine,  (a)  but 
not  for  money  borrowed  for  the  purposes  of*  the  mine,  (b) 
show  that  the  difference  here  alluded  to  is  judicially  recog- 
nized. 

The  effect  of  having  had  the  benefit  of  money  improp- 
erly borrowed  will  be  noticed  hereafter.     See  infra,  §  6. 

See,  further,  as  to  borrowing  money,  infra,  Mortgages 
and  Pledges. 

9.   Checks}  —  One  partner  has  implied  power  to  bind  the 

firm  by  checks,  not  post-dated,  (c)  drawn  on  the  bankers 

of  the  firm  in  the  partnership  name;  (d)  and  if  one  partner 

directs  the  bankers  of  the  firm  not  to  pay  a  check 

[*134]  of  the  firm,  the  ^bankers  incur  no  liability  to  the 

firm  if  they  follow  such  directions,  (e) l 

loon  Omnibus  Co.  8  De  G.  &  J.  (c)  See  Forster  v.  Mackreth,  L.  R. 

123.  2  Ex.  163 ;  Bull  v.  O'Sullivan,  L.  R. 

(a)  Tredwen  v.  Bourne,  6  M.  &  W.  6  Q.  B.  209. 

461 ;  Hawken  v.  Bourne,  8  id.  703.  (d)  Laws  v.  Rand,  3  C.  B.  N.  S. 

(6)  Hawtayne  v.  Bourne,  7  M.  &  442 ;  Backhouse  v.  Charlton,  8  Ch. 

W.  595 ;  Burmester  v.  Norris,  6  Ex.  D.  444.     As  to  checks  drawn  by 

796;  Ricketts  v.  Bennett,  4  C.  B.  directors,  see  Re  Gloucester,  Abe- 

686 ;  Brown  v.  Byers,  16  M.  &  W.  rystwith,  etc.  Rail.  Co.  18  Jur.  815, 

252.     See,  also,  Beldon  v.  Campbell,  L.  J. 

6  Ex.  886.  (e)  Before  the  Jud.  Acts,  an  ac- 

1  See  ante.  Bills  and  Notes.  tion    for    dishonoring    the    check 

l\i  a  partner  consents  that  a  check  individual  debt  of  his  copartner  he 
of  the  firm  may  be  applied  on  an    may  at  any  time  before  such  appli- 

316 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PAETNEES. 


nu 


must  have  been  brought  in  the 
names  of  all  the  partners,  and  in 
the  case  supposed  such  an  action 
could    not    have    been    sustained. 


See  infra,  book  ii,  ch.  3.  It  is  con- 
ceived that  the  statement  in  the 
text  is  correct,  notwithstanding  the 
modern  rules  as  to  parties. 


cation  is  in  fact  made,  or  the  rights 
of  third  parties  intervene,  with- 
draw such  consent,  and  after  notice 
by  him  not  to  so  apply  the  check 
it  cannot  be  so  applied.  National 
Bank  of  Jacksonville  v.  Mapes,  85 
111.  67. 

When  a  banker  has  the  funds  of 
a  firm  deposited  with  him  for  the 
purpose  of  its  special  business,  and 
knows  that  one  of  the  firm  is  en- 
gaged in  individual  speculations, 
and  transfers  these  funds  to  the 
separate  account  of  this  member, 
and  with  a  knowledge  that  the  lat- 
ter appropriates  the  funds  to  such 
speculations,  the  banker  is  liable  to 
the  firm  for  the  funds  thus  mis- 
applied, unless  they  first  assure 
him  of  their  consent.  Billings  v. 
Meigs,  53  Barb.  272. 

A  firm  whose  articles  require 
that  all  negotiable  paper  shall  be 
executed  in  the  firm  name  will 
not  be  liable  upon  a  check  drawn 
upon  the  firm  by  one  partner  for 
his  own  private  purposes  and  ac- 
cepted, not  in  the  firm  name,  espe- 
cially where  the  evidence  shows 
that  the  holder  did  not  acquire  it 
in  good  faith.  Hovey  v.  Cassels, 
30  U.  C.  C.  P.  230.  See,  also,  Fer- 
guson v.  Thacher,  79  Mo.  511. 

If  a  bank  pays  out  the  money  of 
a  partnership  to  one  of  the  part- 
ners upon  his  check,  in  fraud  of 
the  rights  of  the  other  partners,  an 
action  at  law  cannot  be  main- 
tained in  the  firm  name  against 
the  bank,  but  resort  must  be  had 
to  a  court  of  equity  for  the  relief  of 
those  partners  claiming  to  be  in- 


jured. Church  v.  First  National 
Bank,  etc.  87  111.  68.  See  Miller  v. 
Price,  20  Wis.  117,  as  to  the  neces- 
sary parties. 

G.,  a  member  of  a  firm,  made  a 
check  in  the  firm  name,  payable  to 
H.  or  bearer,  for  the  purpose  of 
paying  an  account  due  from  the 
firm  to  H. ;  but,  instead  of  using 
the  check  for  that  purpose,  paid 
H.'s  account  by  an  account  which 
he  held  individually  against  H., 
and  by  payment  of  the  balance  in 
cash,  and  subsequently  transferred 
the  check  to  the  plaintiff  to  pay  an 
individual  debt.  Held,  that  as  it 
appeared  that  the  check  was  drawn 
in  good  faith  to  pay  a  partnership 
debt,  an  action  would  lie  upon  it 
against  the  firm.  Gale  v.  Miller, 
44  Barb.  420. 

Where  there  are  two  establish- 
ments in  the  same  place  for  carry- 
ing on  the  same  business,  both 
conducted  by  the  same  person,  in 
one  of  which  he  is  a  partner,  and 
in  the  other  sole  proprietor,  and  he 
obtains  money  from  a  bank  on 
checks  drawn  by  him  and  signed 
with  his  own  name  as  agent,  in  an 
action  by  the  bank  against  the  firm 
they  may  show  that  they  are  not 
indebted  to  the  bank,  if  they  did 
not  know  the  mode  in  which  the 
checks  were  drawn.  Mechanics', 
etc.  Bank  v.  Dakin,  24  Wend.  411. 

A  person  who  is  a  member  of 
two  firms  gives  the  check  of  one 
firm  to  pa3T  the  note  of  the  other, 
which  had  been  deposited  with  a 
banker  for  collection.  In  this  case  a 
mutual  understanding  between  the 


317 


*13A  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

10.  Contracts. —  One  partner  can  bind  his  copartners  by 
varying  a  contract  made  with  both  in  the  ordinary  course 
of  business,  (f)1 


firms  may  well  be  presumed,  and 
the  person  receiving  the  proceeds 
of  the  note  is  not  liable  in  an  action 
by  the  former  firm  to  restore  them. 
Nor  is  the  notorious  insolvency  of 
the  member  who  drew  the  note 
and  the  check  constructive  notice 
of  his  want  of  authority.  Murphy 
V.  Camden,  18  Mo.  122. 

(/)  Leiden  v.  Lawrence,  2  N.  R. 
283,  Ex. 

1 A  partner's  consent  to  the  can- 
cellation of  an  insurance  policy  in 
which  the  firm  is  interested  is  con- 
clusive on  the  firm.  Hillock  v. 
Traders'  Ins.  Co.  54  Mich.  532. 

An  instruction  that  one  partner 
cannot  bind  the  firm  by  agreement 
to  rescind  a  contract  cannot  be  sus- 
tained where  it  is  not  shown  by 
undisputed  testimony  that  the  busi- 
ness done  under  the  contract  was 
the  whole  business  of  the  firm,  and 
that  a  rescission  thereof  would 
work  a  practical  dissolution  of  the 
firm.  Shellito  v.  Sampson,  61  la. 
40. 

One  member  of  a  firm  of  paving 
contractors  cannot,  by  his  subse- 
quent individual  contract,  vary  or 
affect  the  joint  obligations  which 
have  been  already  incurred,  though 
he  may  bind  himself  thereby. 
Detroit  v.  Robinson,  42  Mich.  198. 

One  partner  in  a  firm  not  com- 
mercial has  no  authority  to  consent 
to  a  material  alteration  of  a  prom- 
issory note  made  by  the  firm  so  as 
to  bind  his  copartner.  Horn  v. 
Newton  City  Bank,  32  Kan.  518. 

Where  one  of  four  partners  as- 
sumed an  indebtedness  of  another 


partner  to  the  firm,  the  partners 
so  dealing  together  will  have  no 
right  to  credit  the  debtor  partner 
to  the  amount  of  his  indebtedness 
on  the  books  of  the  firm,  unless  it 
is  actually  paid  into  the  firm,  or  is 
in  some  way  authorized  or  ratified 
by  the  other  two  partners ;  nor  can 
such  indebtedness  be  charged  or 
transferred  to  a  new  firm  not  com- 
posed of  the  same  members,  with- 
out the  consent  or  ratification  of 
all  the  partners.  McCall  v.  Moss, 
112  111.  493. 

One  partner  has  a  right  to  bind 
the  firm  to  any  extent  by  contracts 
within  the  scope  of  the  partner- 
ship. Bank  v.  Gore,  15  Mass.  75; 
Boardman  v.  Gore,  id.  331 ;  Gallo- 
way v.  Hughes,  1  Bailey,  553 ;  Win- 
ship  v.  Bank,  5  Pet.  529;  Storer  v. 
Hinkley,  Kirby,  147. 

A  contract  to  convey  lands  be- 
longing to  a  firm,  signed  with  the 
firm  name  by  one  partner,  under  a 
verbal  authority  from  the  other 
partner,  is  binding  on  both.  Law- 
rence v.  Taylor,  5  Hill,  107. 

See  Ewell's  Evans  on  Agency, 
*17,  note. 

Contract  of  firm,  for  rent,  will 
not  be  implied  from  use  and  occu- 
pation had  under  express  contract 
with  partner.  Brooks  v.  Allen,  5 
N.  Eng.  Rep.  (Mass.)  747. 

Unless  one  partner  has  express 
authority  to  promise  to  pay  for 
medical  services  of  employees,  or 
such  authority  is  usually  incident 
to  like  partnerships,  the  other  part- 
ner is  not  bound  thereby.  Wood- 
ruff v.  Scaife,  3  So.  Rep.  (Ala.)  311. 


318 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


-134 


Payment    to    one    partner    [or    by   one    partner].1  — 

11.  Debts. —  If  a  debt  is  owing  to  a  firm,  payment  by  the 
debtor  to  any  one  partner  extinguishes  the  claim  of  all,  each 
partner  being  ostensibly  the  agent  of  all  the  rest  to  get  in 
debts  owing  to  the  firm,  {g)2     After  a  dissolution,  payment 


Where  two  persons  as  partners 
in  the  erection  of  buildings  have 
dealt  largely  with  a  person  in  the 
roofing  business,  and  one  of  the 
partners  employs  such  person  in 
and  about  a  building  of  his  own, 
and  tbe  person  doing  such  work 
has  no  notice  that  the  work  is  for 
the  individual  partner,  but  does 
the  work  upon  the  credit  of  the 
firm  as  in  prior  dealings,  a  recov- 
ery by  him  for  his  services  against 
the  firm  will  not  be  disturbed. 
Bartlett  v.  Powell,  90  111.  331 ;  Spru- 
hen  v.  Stout,  52  Wis.  517. 

1  One  partner  may  discharge  a 
liability  of  a  firm.  Hardy  v.  Nor- 
folk Mfg.  Co.  80  Va.  404. 

One  of  two  joint  makers  of  a 
promissory  note,  the  two  makers 
being  partners,  cannot  discharge 
himself  from  liability  thereon  by 
paying  the  money  due  to  the  payee 
to  the  other  partner  upon  his  in- 
forming him  that  he  is  the  agent 
for  the  payee.  Nelson  v.  Tumlin, 
74  Ga.  171. 

One  member  of  a  firm  who  has 
paid  a  judgment  recovered  on  a 
firm  debt  against  the  members  of 
the  firm  cannot  keep  the  judg- 
ment alive  and  enforce  it  against 
his  copartners,  either  in  his  own 
name  or  in  that  of  a  third  person 
to  whom  he  may  cause  it  to  be  as- 
signed, unless,  perhaps,  under  spe- 
cial circumstances  disclosing  some 
equity  entitling  him  to  hold  it  as 
security  to  the  extent  of  the  sum 
which  may  be  found  due  to  him 


from  his  copartners  on  an  account- 
ing. Booth  v.  National  Bank,  74 
N.  Y.  228.  See,  however,  Brown 
v.  Black,  96  Pa.  St.  482. 

A  member  of  an  ordinary  firm 
who  contracts  a  partnership  debt, 
and  who  is  the  financier  and  busi- 
ness manager  of  the  firm  and  the 
only  member  having  an  individual 
credit,  should  he  pay  this  debt  with 
his  own  money,  cannot  legally 
avoid  such  payment  on  the  ground 
of  not  knowing  at  the  date  of  the 
contract  that  he  was  only  bound 
for  his  virile  share  and  not  the 
whole  of  the  debt.  Schmidt  v. 
Foucher,  38  La.  Ann.  93. 
(g)  Anon.  12  Mod.  446. 
2  Each  partner  is  the  agent  and 
trustee  of  the  firm  and  of  the  other 
partners  as  to  the  collection  of  its 
assets  for  payment  of  its  debts. 
Prentice  v.  Elliott,  72  Ga.  154. 

Payment  of  a  debt  to  one  part- 
ner of  a  firm  is  good  against  the 
other  partners,  and  a  release  by 
one  partner  to  a  debtor  of  the  firm 
is  obligatory  on  the  others.  Scott 
v .  Trent,  1  Wash.  (Va.)  77 ;  Salmon 
v.  Davis,  4  Binn.  375;  Gregg  v. 
James,  Breese,  167;  Yandes  v. 
Lefavour,  2  Blackf.  371 ;  White  t>. 
Jones,  14  La.  Ann.  681 ;  Vander- 
burg  v.  Bassett,  4  Minn.  242 ;  Allen 
v.  Farrington,  2  Sneed,  526;  Rowell 
v.  Fuller,  5  N.  Eng.  Rep.  (Vt.)  217. 
Where  one  of  two  partners  re- 
ceives money  on  an  executory 
contract,  and  the  other  partner 
subsequently  ratifies  the  contract, 


319 


*m 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


to  any  one  of  the  partners  discharges  the  debtor,  (A)  even 
thouo-h  a  third  person  is  appointed  to  collect  the  debts 
owing  to  the  firm,  and  the  creditor  is  aware  of  that  fact,  (i) l 


both  are  liable,  if  the  contract  is 
not  fulfilled,  though  the  money 
may  not  have  been  paid  over  from 
one  partner  to  the  other.  Lawrence 
v.  Taylor,  5  Hill,  107. 

Where  several  persons,  either  as 
copartners  or  joint  contractors, 
have  done  work  under  an  agree- 
ment with  a  railway  company,  a 
payment  to  one  of  them  in  town- 
ship aid  bonds  binds  the  rest,  if 
with  full  knowledge  of  the  fact 
they  decline  to  repudiate  the  pay- 
ment and  make  a  distinct  claim 
upon  the  company.  Mich.  Air 
Line  R'y  Co.  v.  Mellen,  44  Mich.  321. 
One  partner  has  authority,  on  be- 
half of  the  firm,  to  agree  with  a 
debtor  of  the  firm  as  to  the  appli- 
cation to  be  made  of  payments  of 
money  by  the  debtor  on  demands 
owing  to  the  firm.  Wittkowsky  v. 
Reid,  82  N.  C.  116. 

If  a  partner  receives  more  than 
he  is  entitled  to  within  the  scope 
of  the  partnership  the  firm  must 
refund  the  same.  Williams  v. 
Whitmore,  9  Lea  (Tenn.),  262. 

(h)  Duff  v.  The  East  India  Co.  15 
Ves.  198 ;  Brasier  v.  Hudson,  9  Sim. 
1.  See  Phillips  v.  Phillips,  3  Ha. 
281,  as  to  the  receipts  of  a  surviv- 
ing partner. 

(t)  Bristow  v.  Taylor,  2  Stark.  50 ; 
Porter  v.  Taylor,  6  M.  &  S.  156; 
King  v.  Smith,  4  Car.  &  P.  108. 

i  Neither  the  insolvency  of  the 
partner  receiving  the  money  nor 
the  application  he  makes  of  it  af- 
fects his  right  to  receive  it.  Major 
v.  Hawkes,  12  111.  298;  Heartt  v. 
Walsh,  75  III.  200. 

A.  and  B.  were  partners,  and  on 


a  dissolution  of  the  firm  trans- 
ferred to  C.  all  the  partnership  ef- 
fects for  the  purpose  of  paying  and 
collecting  the  debts  of  the  firm.  C. 
afterwards  transferred  the  partner- 
ship property  to  B.  D.,  a  debtor 
of  the  firm,  after  notice  of  the 
transfer  to  C,  paid  his  debt  to  A. 
B.  sued  D.  for  the  debt.  Held, 
that  as  C.  was  not  vested  with  the 
title  of  the  partnership  effects  as 
assignee,  payment  to  A. ,  as  one  of 
the  firm,  was  a  good  discharge  of 
the  debt.  Gordon  v.  Freeman,  11 
111.  14. 

After  the  dissolution  of  a  firm 
which  had  indorsed  a  note,  the 
maker  paid  a  sum  of  money  to  one 
of  the  late  partners,  and  took  a  re- 
ceipt signed  with  the  firm  name, 
by  which  it  was  agreed  that  the 
money  should  be  applied  to  the 
payment  of  the  note.  Held,  that 
another  partner  was  not  liable  on 
this  receipt  for  the  misapplication 
of  the  money,  the  maker  of  the 
note  not  being  a  dealer  with  the 
firm,  and  being  bound  to  take  no- 
tice of  its  dissolution.  Sanders  v. 
Ward,  23  Ark.  241. 

A  power  of  attorney  for  the  sale 
of  land  was  transmitted  through 
the  hands  of  a  partner  to  the  at- 
torney. The  attorney  sold  the  land, 
and  afterwards,  in  the  settlement 
of  his  accounts  with  the  partner- 
ship, accounted  for  the  money  re- 
ceived for  the  land  with  the  part- 
ner from  whom  he  had  received 
the  papers,  and  took  from  him  a 
receipt,  signed  as  if  for  the  partner- 
ship, which  had  been  dissolved. 
Held,  that  the  partnership  was  not 


320 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*m 


But  if  on  a  dissolution  a  debt  due  to  the  partnership  is 
assigned  to  one  of  the  partners,  and  the  debtor  has  notice 


liable  for  the  money.     Hutchins  v. 
Gilinan,  9  N.  H.  359. 

Conversely,  payment  of  a  firm 
debt  by  one  member  of  the  firm  is 
a  payment  by  the  firm.  Thus,  if 
one  member  of  a  partnership  sign 
a  note  representing  a  partnership 
debt,  all  the  other  partners  are,  as 
between  themselves,  under  the 
same  obligation  to  pay  the  note  as 
the  signer.  Consequently  a  pay- 
ment of  the  note  by  a  partner  other 
than  the  signer,  although  from  his 
private  funds,  extinguishes  the 
note ;  nor  will  it  be  revived  by  a 
bare  promise,  made  by  the  signer  to 
the  partner  who  paid  the  note,  to 
pay  the  same.  Sprague  v.  Ains- 
worth,  40  Vt.  47.  See,  also,  Woods 
v.  Woods,  127  Mass.  141. 

Where  the  members  of  a  firm 
gave  a  bond,  individually,  for  a 
debt  of  the  firm,  and  property  was 
delivered  by  them  and  accepted  as 
a  payment  thereof,  held,  that  the 
bond  was  thereby  discharged,  and 
that  it  was  not  in  the  power  of  one 
of  the  obligors,  by  agreement  with 
the  obligee,  to  withdraw  the  pay- 
ment, and  thus  again  put  the  bond 
in  force.  Jarman  v.  Ellis,  7  Jones, 
L.  77. 

Where  one  member  of  a  copart- 
ship  pays  a  judgment  rendered 
upon  a  firm  debt  against  the  mem- 
bers of  the  firm,  he  cannot  keep  the 
judgment  alive  and  enforce  it 
against  his  copartners,  either  in  his 
own  name  or  in  that  of  a  third  per- 
son to  whom  he  may  cause  it  to  be 
assigned;  unless,  perhaps,  under 
special  circumstances  disclosing 
some  equity  entitling  him  to  hold 
it  as  6ecuritv  to  the  extent  of  the 


sum  which  may  be  found  due  to 
him  from  his  copartners  on  an  ac- 
counting. Prima  facie  the  judg- 
ment was  discharged  by  the  pay- 
ment, and  in  the  absence  of  proof 
of  such  special  circumstances  it 
will  be  held  to  be  satisfied.  Booth 
v.  Farmers'  Bank,  74  N.  Y.  228. 

A  promissory  note  was  executed 
by  three  of  four  members  of  a 
firm,  and  indorsed  by  the  fourth, 
for  the  purpose  of  raising  money 
for  the  firm  business ;  it  was  dis- 
counted by  defendant  and  its  pro- 
ceeds were  so  used.  An  action  was 
brought  thereon  against  the  makers 
and  indorser,  judgment  was  per- 
fected against  the  makers,  and  sub- 
sequently a  separate  judgment  was 
entered  against  F.,  the  indorser. 
F.  procured  the  judgment  to  be  as- 
signed to  plaintiff,  who  had  notice 
of  the  character  of  the  judgment. 
Plaintiff  paid  nothing  to  the  defend- 
ant for  the  assignment,  but  trans- 
ferred to  F.  an  interest  in  certain 
real  estate.  F.,  at  or  subsequent 
to  the  time  of  the  assignment,  paid 
to  defendant  the  amount  of  the 
judgment.  The  assignment  pro- 
vided that  it  should  not  affect  F.'s 
liability  to  defendant.  Defendant 
subsequently  executed  a  satisfac- 
tion of  the  judgment,  which  was 
discharged  of  record.  In  an  action 
to  recover  damages,  held,  that  the 
payment  by  F.  had  the  same  effect 
as  if  there  had  been  but  one  joint 
judgment  against  all  the  partners, 
and  inured  to  the  benefit  of  all; 
that  if  payment  was  made  after  the 
assignment  it  none  the  less  oper- 
ated to  discharge  the  judgment, 
and  the  receipt  of  it  by  defendant,. 


Vol.  1  —  21 


321 


*135  EIQHTS    AND    OBLIGATIONS.  [BOOK    II. 

of  the  assignment,  he  can  only  pay  the  assignee,  (k)  '  If 
there  are  two  firms  with  one  common  partner,  and  a  bill  of 
exchange  is  given  to  one  firm  and  is  indorsed  by  it  to  the 
other,  payment  to  the  first  firm  is  an  answer  to  an  action 
brought  on  the  bill  by  the  second.  (/) 

Payment  to  one  partner  of  debt  not  due  to  firm. — 
Moreover,  when  it  is  said  that  payment  to  one  partner  is 
payment  to  all,  it  is  supposed  that  the  payment  is  made  in 
discharge  of  a  debt  due  to  the  firm.  If  it  is  due,  not  to  the 
firm,  but  to  one  of  the  partners,  the  rule  does  not  hold. 
Therefore,  if  an  owner  of  goods  sells  them,  the  purchase 
money  must  be  paid  to  him  or  his  agent;  and  payment  to 
a  person  interested  with  him  in  the  profits  accruing  from 
the  sale  will  not  do;  for  though  the  two  may  be  liable  as  if 
they  were  partners  by  reason  of  their  community  of 
[*135]  interest  in  the  profits,  it  does  not  there*fore  follow 
that  he  who  is  to  share  the  profits  is  entitled  to  re- 
ceive the  proceeds  of  the  sale  of  the  goods  themselves 
which  belong  exclusively  to  the  other,  (m)  So,  where  a 
court  orders  payment  to  be  made  to  one  partner  by  name, 
the  order  must  be  strictly  obeyed,  and  payment  to  the  part- 
not  being  in  violation  of  its  con-  firm,  held,  that  the  draft  should 
tract,  did  not  render  it  liable  to  be  considered  as  having  been  given 
plaintiff ;  nor  did  the  giving  of  in  part  payment  for  the  goods,  and 
the  satisfaction  piece,  as  he  could  allowed  for  in  settlement.  Getchell 
not  have  enforced  the  judgment  v.  Foster,  106  Mass.  42. 
against  any  of  the  partners,  at  least  (k)  See  Duff  v.  East  India  Co.  15 
in  the  absence  of  an  indebtedness    Ves.  213. 

from  them  to  F.  on  the  partnership  l  If  one  partner  receives  from  a 
accounts.  Booth  v.  Farmers'  Bank,  third  person  payment  of  a  debt 
supra.  owing  by  him  to  the  firm,  whicli 

A  party  who  had  entered  into  a  has  been  allotted  to  his  copartner, 
contract  for  the  sale  of  goods  with  the  latter  may  maintain  an  action 
one  of  the  members  of  a  firm  who  against  him  to  recover  the  amount 
was  acting  for  the  firm  drew  a  so  received.  Crosby  v.  Nichols,  3 
draft  on  that  member  of  the  firm    Bosw.  450. 

before  any  payment  was  due  on  the  (I)  See  Jacaud  v.  French,  12  East, 
contract,  who  in  turn  gave  a  draft    317. 

on  his    partners,    which  was    ac-        (m)  See  Smith  v.  Watson,  2  B.  & 
cepted.     In   an  action   to  recover    C.  401. 
the  price  of  the  goods  against  the 

322 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


^135 


ner  of  the  person  named  in  the  order  will  not  suffice, 
though  both  are  defendants  in  the  action  in  which  the  order 
is  made,  (n) 

Receipts  given  by  one  partner. —  As  one  partner  can 
accept  payment  of  a  debt  due  to  the  firm,  so  he  can  effect- 
ually release  (o) l  and  give  a  valid  receipt  for  such  debt,  (p)"2 
It  is,  however,  to  be  remembered  that  although  one  partner 
has  implied  authority  to  get  in  debts  owing  to  the  firm  and 
to  give  discharges  for  them,  still  a  receipt  is  not  conclusive 
evidence  of  payment;  so  that  if  one  partner  gives  a  receipt 
in  fraud  of  his  copartners  it  will  not  preclude  the  firm  from 
recovering  the  money,  (q)  Nor  will  a  release  given  by  one 
partner  bind  the  firm  if  the  releasing  partner  acts  in  fraud 
of  his  copartners  and  in  collusion  with  the  debtor,  (r) 

Assent  to  creditors'  deed. —  If  one  of  several  partners 
assent  to  a  deed  executed  by  a  debtor  of  the  firm  in  favor 
of  his  creditors  the  firm  is  bound  by  the  deed;  (s)  and  the 


(n)  See  Showier  v.  Stoakes,  2 
Dowl.  &  L.  3.  As  to  payments  by 
the  paymaster-general  to  one  of 
several  partners,  see  Supreme 
Court  Fund  Rules,  18S6,  rule  63. 

(o)  See  Hawkshaw  v.  Parkins,  2 
Swanst.  539,  and  post,  Release. 

1  See  ante. 

The  law  firm  of  T.  &  A.  rendered 
service  for  S.,  and  A.  charged  them 
on  the  books  of  the  firm.  T.  made 
a  several  claim  for  the  same  services 
after  the  death  of  S.,  against  his 
estate,  which  was  allowed  and 
paid,  T.  executing  a  release  under 
seal  in  the  name  of  T.  &  A.  Held, 
that  the  release  was  binding  on  the 
firm,  as  no  collusion  between  T. 
and  the  administrator  of  S.  was 
shown,  although  the  release  was 
made  long  after  the  dissolution  of 
the  firm  of  T.  &  A.,  and  T.  was  in 
embarrassed    circumstances,    and 


had  no  attachable  property.  Thrall 
V.  Seward,  37  Vt.  573. 

(p)  Henderson  v.  Wild,  2  Camp. 
561. 

2  A  receipt  being  signed  by  a 
firm,  and  the  question  being 
whether  the  members  were  bound 
or  only  the  one  signing  it,  in  the 
absence  of  all  explanatory  evi- 
dence the  court  should  give  it  the 
construction  which  will  operate 
most  strongly  against  those  pur- 
porting to  be  bound  by  it.  Hogan 
v.  Reynolds,  8  Ala.  59. 

(q)  Farrar  v.  Hutchinson,  9  A.  & 
E.  641;  Henderson  v.  Wild,  2 
Camp.  561. 

(r)  Aspinall  v.  The  London  &  N. 
W.  Rad  Co.  11  Ha.  325.  And  see 
post,  Release. 

(.s)  See  Morans  v.  Armstrong, 
Arms.  M'Art.  &  Ogle,  Ir.  N.  P. 
Rep.  25 ;  Dudgeon  v.  O'Connell,  12 
Ir.  Eq.  566. 


323 


*136  EIGHTS    AND    OBLIGATIONS.  [dOOK  II. 

doctrine  that  one  partner  has  no  implied  authority  to  bind 
his  copartners  by  an  instrument  under  seal  has  no  applica- 
tion to  such  a  case,  (t) 

Assent  to  transfer  of  debt.—  One  partner  can  bind  the 
firm  by  assenting  to  a  transfer  of  a  debt  due  to  it,  as,  for 
example,  to  a  transfer  of  the  firm's  account  from  their 
banker  to  his  successor  in  business,  (u)  So  where  a  cred- 
itor of  the  firm  assigns  the  debt  due  to  him,  and 
[*136]  *one  of  the  partners  recognizes  the  transfer  and 
promises  to  pay  the  transferee,  the  firm  is  bound  by 
this  promise,  (a?) 

Taking  bill  in  payment. —  Again,  one  partner  may  re- 
ceive a  bill  in  payment  of  a  debt  due  to  the  firm,  and  so 
preclude  the  firm  from  suing  for  the  debt  so  long  as  the 
bill  is  running,  (y) 

Payment  to  an  agent  of  a  firm  of  a  bill  drawn  in  his 
own  name  and  payable  to  his  own  order  in  respect  of  a 
debt  due  to  the  firm  is  not  payment  to  the  firm  unless  he 
has  authority  to  draw  in  that  way,  or  the  firm  gets  the 
money,  (s) 

Settling  debts. —  Although,  each  partner  has  power  to 
receive  payment  of  a  partnership  debt,  and  to  give  a  dis- 
charge for  it  on  payment,  it  does  not  follow  that  he  has 
power  to  compromise  or  settle  the  debt  in  any  way  he  likes 
without  payment.1    As  a  general  proposition,  an  authority 

(t)  Dudgeon  v.  O'Connell,  12  Ir.  party.     Noyes  v.  New  Haven,  etc. 

Eq.  566.  R.  R.  Co.  30  Conn.  1 ;  Doremus  v. 

(u)  Beala  v.  Caddick,  2  H.  &  N.  McCormick,  7  Gill,  49 ;  Hawn  v. 

326.    See,  also,  Backhouses.  Charl-  Land  Co.  16  Pac.  Rep.  (Cal.)  196. 
ton,  8  Ch.  D.  444.  Where  one  member  of  the  firm 

(x)  Lacy  v.  McNeile,  4  Dow.  &  has  taken  a  chattel  mortgage  on  a 

Ry.  7.  stock  of  goods  to  secure  a  debt  to 

(y)  See  Tomlins  v.  Lawrence,  3  the  firm,  he  has  authority  as  part- 
Moo.  &  P.  555.  ner  to  take  goods  in  payment  of 

(z)  See  Hogarth  v.  Wherley,  L.  the  debt  and  to  create  an  agency 

R.  10  C.  P.  630.  for  their  sale  by  putting  them  in 

1  A  partner  has  power  to  com-  the  mortgagor's  charge ;  and  if  he 

promise  and  discharge  a  claim  of  thinks  that  keeping  up  the  stock  is 

the   partnership    against    a    third  the  best  way  to  sell  the  goods  to 

324 


CH.  I,  SEC.  II. J  LIABILITIES   OF    PARTNERS. 


*136 


to  receive  payment  of  a  debt  does  not  include  an  authority 
to  settle  it  in  some  other  way ;  (a)  and  a  partner  has  no 


advantage,  slight  evidence  of  his 
partner's  assent  is  sufficient  to 
make  the  firm  responsible  for  the 
agent's  acts  in  purchasing  goods 
for  that  purpose.  Banner  Tobacco 
Co.  v.  Jenison,  48  Mich.  459. 

In  the  case  of  a  partnership  in  a 
single  contract  it  is  beyond  the 
power  of  one  partner,  in  closing  up 
the  firm  affairs,  to  take  a  note  for 
money  due  under  the  contract  to 
himself  alone,  and  to  extend  the 
time  of  payment  without  interest ; 
the  giving  of  such  note  is  no  de- 
fense to  an  action  by  the  firm  on 
the  original  debt  before  the  expira- 
tion of  the  extension.  Lamiette  v. 
Starr,  33  N.  West.  Rep.  (Mich.)  832 ; 
S.  C.  10  West.  Rep.  213. 

A  partner  cannot  compromise  by 
receiving  land  from  a  debtor  in- 
stead of  money,  money  being  due. 
Russell  v.  Green,  10  Conn.  269. 

Where  one  partner  makes  a  set- 
tlement of  matters  due  the  firm  by 
taking  a  note  for  the  sum  due,  his 
misapplication  of  the  note  will  not 
invalidate  the  settlement  unless 
fraudulently  made  by  the  other 
party  to  enable  a  fraud  to  be  prac- 
ticed on  the  firm.  Heartt  v.  Walsh, 
75  111.  200. 

If  a  member  of  a  commercial 
firm  receives  from  a  debtor  of  the 
firm  the  note  of  a  stranger,  receipt- 
ing therefor  in  firm  name  and  giv- 
ing him  the  receipt  to  collect  and 
return  the  proceeds  to  the  debtor 
less  the  amount  of  his  debt,  this 
does  not  bind  his  partners  who  have 

(a)  See  the  last  note,  and  Pearson 
«,  Scott,  9  Ch.  D.  198;  Young  v. 
White,  7  Beav.  506;  Underwood  v. 


no  notice  of  the  transaction,  al- 
though he  applies  the  proceeds  to 
firm  debts.  Pickels  v.  McPherson, 
59  Miss.  216. 

A  settlement  by  one  partner  with 
a  debtor  of  the  firm  is  not  binding 
on  the  firm,  so  as  to  call  upon  the 
other  partners  to  falsify  it  by  par- 
ticular allegations  of  mistake  or 
fraud,  when  it  compromises  indi- 
vidual transactions,  which  the  par- 
ties engaged  in  the  settlement  knew 
should  not  enter  into  the  firm  ac- 
counts. Rust  v.  Hanselt,  41  N.  Y. 
Superior  Ct.  467.  See  next  note, 
infra. 

B.,  C.  &  Co.  having  a  claim  on  a 
railroad  company,  under  a  contract 
for  the  construction  of  the  road, 
which  was  payable  in  stock  of  the 
company,  assigned  it  to  W.  to  se- 
cure an  indebtedness  to  him  of 
about  $10,000,  with  full  power  to 
collect  of  the  company  the  whole 
amount  due.  The  railroad  com- 
pany and  W.  were  afterwards  fac- 
torized  by  certain  creditors  of  B. , 
C.  &  Co.,  whose  claims  amounted 
to  about  $28,000.  After  finishing 
the  work  all  the  members  of  the 
firm  except  B.  went  away  to  dis- 
tant parts,  having  first  given  writ- 
ten notice  to  the  railroad  company 
not  to  pay  any  money  or  stock,  or 
dispose  of  any  property  of  the  firm, 
upon  the  authority  of  B.  Some- 
time after,  B.,  assuming  to  act  for 
B.,  C.  &  Co.,  W.,  as  assignee  of 
their  claim,  the  attaching  creditors 
and  the  railroad  company  made  a 


Nicholls,   17  C.   B.    239;   Story  on 
Agency,  §  98. 


325 


•130 


EIGHTS    AND    OBLIGATIONS. 


[BOOK  II. 


implied  authority  to  discharge  a  separate  debt  of  his  own 
by  agreeing  that  it  shall  be  set  against  a  debt  due  to  his 
firm.  (l>) ' 


general  settlement  of  the  affairs  of 
B.,  C.  &  Co.  with  the  railroad  com- 
pany, in  which  the  attaching  cred- 
itors assigned  their  claims  to  W., 
the  railroad  company  transferred 
to  W.  $30,000  of  the  stock  of  the 
road,  and  B.,  C.  &  Co.,  by  B.,  re- 
leased the  railroad  company  from 
all  further  claim  under  the  contract. 
The  settlement  was  made  by  all 
parties  fairly,  and  B.  intended  to 
benefit  B. ,  C.  &  Co.  and  did  in  fact 
benefit  them  by  the  settlement. 
All  the  stock  received  by  W.  was 
applied  in  payment  of  his  own 
claim  and  the  claims  so  assigned  to 
him.  The  other  members  of  the 
firm,  three  years  afterwards,  in  the 
name  of  the  firm,  assigned  to  an- 
other creditor  their  claim  on  the 
railroad  company  and  on  W.  on  a 
bill  in  chancery  brought  by  him 
against  the  railroad  company  and 
"W. ,  praying  that  the  settlement  be 
6et  aside,  and  that  the  accounts  be 
adjusted,  it  was  held,  dismissing 
the  bill,  that  B.  had  full  power  to 
make  the  settlement,  and  that  the 
notice  of  the  other  members  of  the 
firm  that  nothing  should  be  paid 
out  on  the  authority  of  B.  could 
not  affect  the  right  already  pos- 
sessed by  W.  under  the  assignment 
previously  executed  by  the  firm, 
t  >  receive  the  full  amount  of  the 
claim  from  the  railroad  company. 
Whether,  if  the  other  members  of 
the  firm   had  given  notice  to  the 


railroad  company  that  they  should 
not  assent  to  any  settlement  made 
by  B.,  a  settlement  made  by  him 
should  be  binding  on  them,  quere? 
Cannon  v.  Wildman,  28  Conn.  472. 

A.  was  member  of  the  firms  A. 
and  B.,  and  A.  and  C,  and  was 
managing  partner  in  both  concerns. 
Both  firms  had  dealing  with  the 
firm  of  D.  and  E.  The  firm  of  A. 
and  B.  was  dissolved  by  the  death 
of  B.,  and  was,  at  the  time,  largely 
indebted  to  A.  and  C,  who  were 
also  indebted  to  D.  and  E.  A.,  after 
B.'s  death,  having  done  the  same 
thing  before,  transferred  the  in- 
debtedness of  A.  and  C.  to  the  firm 
D.  and  E.,  from  the  account  be- 
tween them  to  the  account  between 
D.  and  E.,  and  A.  and  B.,  and 
credited  the  same  amount  to  the 
last-named  firm,  on  the  account 
between  A.  and  B.,  and  A.  and  C. 
Held,  that  A.  had,  under  the  cir- 
cumstances of  the  case,  authority 
to  do  this.  Peyton  v.  Stratton,  7 
Gratt.  380. 

One  member  of  a  firm  of  at- 
torneys, authorized  by  his  client, 
has  authority  to  compromise  a  case 
without  the  co-operation  or  consent 
of  his  copartner.  Jeffries  v.  Mutual 
Life  Insurance  Co.  of  N.  Y.  110 
U.  S.  305. 

The  creditors  of  an  insolvent 
firm,  believing  one  of  the  partners 
to  be  a  special  partner  only,  but 
who  was  a  general  partner,  in  con- 


lb)  Piercy  v.  Fynney,  12  Eq.  69. 
S^e,  also,  Kendal  v.  Wood,  L.  R.  6 
Ex.  243.  Compare  Wallace  v.  Kel- 
sall,  7  M.  &  W.  £6i. 


1  A  partner  cannot  employ  the 
partnership  property,  whether 
credits  or  otherwise,  to  pay  or 
secure  his  own  pre-existing  debt, 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


'136 


Promise  by  one  partner  to  pay  a  debt  of  the  firm. —  A 

promise  by  one  partner  to  pay  a  debt  owing  by  the  firm 


sideration  of  his  note  for  twenty- 
five  per  cent,  of  their  demands 
against  the  firm,  assigned  him 
those  demands.  His  note  was  duly 
paid.      Held,    that    the    creditors 


could  not  hold  him  responsible  as 
general  partner  for  the  de  mands  so 
assigned  to  him.  Allison  v.  Abend- 
roth,  15  N.  E.  Rep.  (N.  Y.)  606; 
S.  C.  11  Cent.  Rep.  278. 


without  the  express  or  implied  as- 
sent of  the  other  partners.  Rogers 
v.  Batchelor,  12  Pet.  221;  Pierce  v. 
Pass,  lPort.  232;  Dobu.  Halsey,  16 
Johns.  34;  Leonard  v.  Winslow,  2 
Grant,  Cas.  139;  Purdy  v.  Powers, 
6  Pa.  St.  492 ;  McKinney  v.  Brights, 
16  Pa.  St.  399 ;  Sauntry  v.  Dunlap, 
12  Wis.  364;  Bur  well  v.  Spring- 
field, 15  Ala.  273 ;  Nail  v.  Mclntyre, 
31  Ala.  532;  Filley  v.  Phelps,  18 
Conn.  294 ;  Bourne  v.  Woolbridge, 
10  B.  Mon.  492;  Jackson  v.  Hollo- 
way,  14  id.  133;  Jones  v.  Lusk,  2 
Mete.  356 ;  Minor  v.  Gaw,  19  Miss. 
322 ;  Buck  v.  Mosley,  24  Miss.  170 ; 
Goode  v.  McCartney,  10  Tex.  193; 
Gallagher's  Appeal,  114  Pa.  St.  353 ; 
Deeter  v.  Sellers,  102  Ind.  458; 
Higgins  v.  Cartwright,  25  Mo.  App. 
609;  Bartholow  v.  Harvey,  12  Mo. 
App.  588;  Chase  v.  Buhl  Iron 
Works,  55  Mich.  139;  Sanger  v. 
Ker,  1  Tex.  App.  (Civ.)  612;  Noble 
v.  Metcalf,  20  Mo.  App.  360 ;  Davis 
V.  Smith,  27  Minn.  390 ;  S.  C.  29  id. 
201 ;  Thomas  v.  Stetson,  62  la.  537; 
S.  C.  49  Am.  Rep.  148;  Johnson  v. 
Crichton,  56  Md.  108;  Buchanan 
v.  Meisser,  105  111.  638;  Binns  v. 
Waddell,  32  Gratt.  588;  Hagar  v. 
Graves,  25  Mo.  App.  164;  Manhat- 
tan Co.  v.  Laimbeer,  5  N.  Eng. 
Rep.  (N.  Y).  712;  Roberts  v.  Pep- 
ple,  55  Mich.  367 ;  Moline  Wagon 
Co.  v.  Rummel),  2  MeCrary,  C.  Ct. 
307;  S.  C.  14  Fed.  Rep.  155;  12  id. 
658.     See,  also,  post. 


A  firm  may  make  an  agreement 
that  a  debt  due  the  firm  shall  be 
offset  against  a  debt  by  one  part- 
ner to  the  firm  debtor.  Morrill  v. 
Merrill,-3  N.  Eng.  R.  160. 

Whoever  deals  with  a  partner, 
who  uses  the  partnership  name  to 
direct  the  partnership  property  to 
be  applied  to  his  individual  pur- 
poses is  put  on  his  guard  by  the  very 
nature  of  the  transaction,  which  is 
beyond  the  scope  of  partnership 
authority.  If  he  carries  out  such 
instruction  he  does  so  at  his  peril. 
Carter  v.  Galloway,  36  La.  Ann. 
730.  See,  also,  Cannon  v.  Lindsey, 
3  So.  Rep.  (Ala).  676. 

A  partner  cannot  bind  the  part- 
nership for  his  private  debts  with- 
out the  assent  of  his  copartners; 
and  if  such  assent  is  given  it  is 
the  province  of  the  jury  to  judge 
of  the  extent  of  it,  and  it  is  error 
for  the  court  to  rule  upon  the  point 
as  a  question  of  law.  Noble  v. 
M'Clintock,  2  Watts  &  S.  152. 

The  burden  in  such  case  is 
on  the  creditor  to  show  the  con- 
sent of  the  other  partners.  Davis 
v.  Smith,  27  Minn.  390;  S.  C.  29 
id.  201. 

If  the  other  partners,  on  becom- 
ing aware  of  such  appropriation, 
adopt  and  ratify  the  act,  the  firm 
will  be  bound.  The  other  partners 
may  also  by  their  conduct  estop 
themselves  from  claiming  that 
there  has  been  no  adjustment  of 


327 


13G 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


undoubtedly  binds  the  firm,  (c)  How  far  a  promise  by  one 
partner  will  prevent  the  statute  of  limitations  from  running 
in  favor  of  the  others  will  be  seen  hereafter,  (d) 


the  debt  owed  to  the  firm.  Noble 
v.  Metcalf,  20  Mo.  App.  360. 

An  agreement  by  a  partner  that 
goods  purchased  of  the  firm  may 
be  applied  in  payment  of  the  indi- 
vidual debt  of  his  copartner  to  the 
purchaser  is  not  within  the  statute 
of  frauds  and  may  be  established 
by  parol.  Rhodes  v.  McKean,  55 
la.  547. 

A  custom  on  the  part  of  the  sev- 
eral members  of  a  firm  that  when 
a  member  was  indebted  his  ac- 
count would  be  taken  in  and 
charged  against  him  on  the  books 
of  the  firm  does  not  authorize  one 
of  the  partners  to  dispose  of  the 
goods  of  the  firm  in  payment  of 
his  private  debt.  Forney  v.  Adams, 

74  Mo.  138. 

The  consent  of  one  partner  to 
the  application  by  the  other  part- 
ner of  the  price  of  firm  goods  in 
payment  of  the  individual  debt  of 
the  latter  to  the  buyer  will  not  be 
inferred  from  the  mere  knowledge 
of  the  transaction.    Todd  v.  Lorah, 

75  Pa.  St.  155.  See,  also,  Tyree  v. 
Lyon,  67  Ala.  1. 

If  a  partner  consents  that  a  check 
of  the  firm  may  be  applied  on  an 
individual  debt  of  his  copartner, 
he  may  at  any  time  before  such 
application  is  in  fact  made,  or  the 
rights  of  third  parties  intervene, 
withdraw  such  consent,  and  after 
notice  by  him  not  to  so  apply  the 
check  it  cannot  be  so  applied.    Na- 


tional Bank  of  Jacksonville  v. 
Mapes,  85  111.  67. 

The  defendant's  agent  sold  and 
delivered  to  one  of  the  partners  of 
a  grocery  firm,  to  which  the  de- 
fendant was  indebted  for  groceries, 
certain  cattle  belonging  to  the  de- 
fendant, agreeing  to  receive  the 
price  thereof  in  groceries  at  the 
store  of  the  firm,  and  that  the 
amount  already  due  should  be  in- 
cluded as  part  payment  of  such 
price.  Held,  that  such  agreement 
was  not  binding  upon  the  firm, 
without  affirmative  proof  of  their 
knowledge  and  consent  thereto, 
and  that,  in  the  absence  of  such 
proof,  their  assignee  in  insolvency 
might  recover  against  the  defend- 
ant the  whole  amount  of  his  ac- 
count. Cadwallader  v.  Kroesen, 
22  Md.  200. 

An  attempt  by  one  partner  to 
sell  his  interest  in  partnership 
property  in  payment  of  his  indi- 
vidual debt  is  a  breach  of  the  part- 
nership agreement;  and  if  the 
purchaser  knew  that  the  property 
conveyed  was  partnership  prop- 
erty, he  is  deemed  to  have  had 
notice  of  the  trust,  and  is  held 
to  have  purchased  only  what  his 
vendor  could  i  equitably  convey, 
i.  e.,  the  legal  estate  of  the  vendor, 
subject  to  the  state  of  the  partner- 
ship accounts.  Ross  v.  Henderson, 
77  N.  C.  170. 

An  agreement  between  one  mem- 


(c)  Anon.  v.  Layfield,  Holt,  434; 
Lacy  v,  McNeile,  4  Dow.  &  Ry.  7. 

(d)  A  promise  to  one  inures  for 


the  benefit  of  all.    White  v.  Will- 
iams, Willm.  WolL  &  Hod.  52. 


328 


CH.  I,  SEC.  II.]  LIABILITIES    OF    TARTNEKS. 


"136 


ber    of  a    mercantile    partnership     funds  belonged  to  the  partnership. 


and  a  practicing  physician,  who 
has  knowledge  of  the  partnership, 
that  the  latter  shall  obtain  goods 
from  the  partnership  in  payment 
for  professional  services  rendered 
and  to  be  rendered  to  such  partner 
individually,  is  outside  of  the  part- 
nership business,  and  beyond  the 
partner's  authority;  and  such 
agreement  is  not  binding  on  his 
copartner,  or  the  partnership,  un- 
less expressly  authorized  or  sub- 
sequently ratified.  In  such  case, 
an  offer  by  the  other  partner,  when 
trying  to  collect  the  account  due 
to  the  partnership,  to  allow  the 
physician's  as  a  credit  or  set-off,  if 
he  will  pay  the  balance  in  money, 
is  not  a  ratification  of  the  un- 
authorized agreement  under  which 
the  account  was  contracted.  Hust 
v.  Clarke,  56  Ala.  19. 

One  of  the  partners  being  in- 
debted to  the  plaintiff,  it  was 
agreed  that  he  might  take  goods 
out  of  the  store  in  payment  of  the 
debt,  and  that  the  same  should  be 
charged  to  the  individual  partner. 
Upon  dissolution  the  partner 
originally  indebted  transferred  his 
interest  to  his  copartner,  who  after- 
wards assigned  for  the  benefit  of 
creditors.  Held,  that  the  assignee 
was  not  entitled  to  recover  for 
goods  sold  before  the  assignment, 
but  that  for  those  sold  afterwards 
he  could  recover,  unless  it  was 
shown  that  they  were  sold  by  him 
in  pursuance  of  the  original  agree- 
ment. Woodward  v.  Horst,  10 
Iowa,  120. 

If  a  partner  applies  partnership 
funds  to  the  payment  of  his  own 
debts,  the  money,  it  is  said,  may 
be  recovered  back  although  the 
creditor  did    not  know  that    the 

3 


Moriarity  v.  Bailey,  46  Conn.  592; 
Bartholow  v.  Harvey,  12  Mo.  App. 
588;  Binnsu.Waddill,  32Gratt.  588. 

See  contra,  Wiley  v.  Allen,  26 
Geo.  568. 

But  this  rule  would  seem  to  need 
some  qualification  to  prevent  in- 
justice to  a  creditor  who  has  re- 
ceived payment  of  his  debt,  and 
parted  with  security  held  for  it, 
while  having  no  knowledge  or  rea- 
son to  suspect  that  the  debt  was 
paid  with  partnership  funds.  Mo- 
riarity v.  Bailey,  supra. 

Where  a  private  debt  thus  paid 
was  a  note  payable  to  A.  or  order, 
and  A.  had  it  discounted  upon  his 
indorsement  at  a  bank,  and  the 
maker  paid  it  to  the  bank  when 
due  with  partnership  funds,  it  was 
held  that  it  was  not  chargeable 
with  the  partnership  funds  thus 
used,  although  he  was  indorser  of 
the  note  and  interested  in  its  pay- 
ment, the  money  having  been  re- 
ceived by  the  bank  and  not  by  him. 
Moriarity  v.  Bailey,  supra. 

If  a  partner  transfers  goods  of 
the  firm  in  payment  of  his  private 
debt,  without  the  consent  of  his 
copartner,  the  firm  may,  it  is  held, 
treat  the  transaction  as  a  sale  by 
the  firm  and  recover  the  value  of 
the  goods  from  any  one  receiving 
them  with  the  knowledge  of  their 
true  ownership.  Forney  v.  Adams, 
74  Mo.  138. 

Where  one  partner  uses  the 
effects  of  the  firm  in  the  payment 
of  his  private  debts,  with  the 
consent  and  knowledge  of  his  co- 
partner, an  action  by  the  firm,  for 
the  price  of  these  effects,  will  be 
barred.  Carter  v.  Beaman,  6  Jones, 
L.  44.  See  post. 
It  is  competent  for  partners  in 


*136 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


trade,  who  have  taken  a  note  of  a 
customer  for  goods  sold,  to  make 
an  agreement,  while  they  still  hold 
the  note,  that  it  shall  be  satisfied 
by  work  done  by  the  maker  for 
one  of  the  partners  individually. 
If  one  of  the  partners  make  this 
agreement  and  the  other  assents, 
and  the  customer  does  work  enough 
to  cover  the  note,  the  note  is  im- 
mediately thereby  discharged. 
Camp  v.  Page,  42  Vt.  739. 

The  assent  of  a  partner  cannot 
be  implied,  from  the  partnership 
relations,  to  the  payment  by  his  co- 
partner of  his  individual  indebted- 
ness out  of  the  partnership  funds. 
Such  assent  must  be  proved  by  ex- 
traneous evidence.  And  in  the  ab- 
sence of  such  assent,  such  payment 
will  pass  no  property  to  the  sepa- 
rate creditor  as  against  the  partner 
without  whose  assent  the  payment 
was  made,  whether  he  knew  that 
the  payment  was  made  out  of  part- 
nership funds  or  not.  Brewster  v. 
Mott,  4  Scam.  378. 

A  contract  by  one  of  two  part- 
ners in  the  business  of  budding 
houses,  made  without  the  knowl- 
edge of  the  other,  to  build  a  house 
in  payment  of  a  private  debt  of  his 
own,  is  a  fraud  upon  the  partner- 
ship and  void,  if  the  creditor 
knows  that  the  two  are  partners  in 
that  business ;  and  if  both  partners 
actually  do  the  work,  they  or  their 
assignee  in  insolvency  may  recover 
therefor  of  such  creditor,  without 
proving  the  terms  of  their  copart- 
nership, or  that  the  partner  who 
made  the  contract  agreed  that  the 
work  should  be  done  by  the  part- 
nership. Williams  v.  Brimhall,  13 
Gray,  462. 

See,  however,  Greeley  v.  Wyeth, 
10  N.    H.   15,  where  it  was  held 


that  where  one  partner,  without 
the  knowledge  of  his  copartner, 
makes  a  special  contract  to  per- 
form labor  or  sell  goods  of  the 
partnership,  and  to  take  in  pay 
specific  articles  for  his  own  use, 
and  the  contract  is  executed  by 
the  parties  who  make  it,  an  action 
cannot  be  maintained  in  the  name 
of  the  partners,  to  recover  the 
value  of  the  goods  so  sold  or  labor 
performed,  on  the  ground  that  the 
partner  has  no  authority  to  make 
such  contract. 

Neither  can  a  member  of  a  firm 
apply  a  debt  due  from  his  cred- 
itors to  the  firm  of  which  he  is  a 
member,  to  cancel  his  private  debt, 
without  the  assent  or  ratification 
of  the  other  partners.  Pierce  v. 
Pass,  1  Port.  232;  Pierce  v.  Hick- 
enburg,  2  id.  198;  Norment  v. 
Johnson,  10  Ired.  L.  89;  Jones' 
Case,  1  Overt.  455 ;  McNair  v.  Piatt, 
46111.  211 ;  Halls  v.  Coe,  4  McCord, 
136;  Sims  v.  Smith,  12  Rich.  685; 
Harper  v.  Wrigley,  48  Ga.  570; 
Thomas  v.  Pennich,  28  Ohio  St. 
55;  Everingham  v.  Ensworth,  7 
Wend.  326.  See,  however,  Beck- 
ham v.  Perry,  2  Bailey,  133. 

In  Homer  v.  Wood,  11  Cush.  62, 
it  was  held  that  if  one  member  of 
a  partnership  settles  a  demand  duo 
from  him  individually,  by  setting 
off  and  discharging  a  demand  due 
from  his  creditor  to  the  partner- 
ship, although  this  is  a  fraud  upon 
the  partnership,  no  action  at  law 
can  be  maintained  in  the  name  of 
the  partnership  to  recover  the  de- 
mand due  it  from  such  creditor, 
the  latter  having  acted  in  good 
faith. 

In  Strong  v.  Fish,  13  Vt.  277,  at- 
torneys  who   were   partners    ren- 
dered services  for  a  client,  and  af  ter- 
333 


CH.  I,  SEC.  II.]  I.IA  BILITIE8    OF   PARTNERS. 


*136 


wards  an  agreement  was  made  be-    promissory  note,  the  property  of 
tween    one    of   the  partners  and    the  firm,  in  settlement  of   his  in- 


such  client  that  the  services  so 
rendered,  and  services  thereafter 
to  be  rendered,  should  be  applied 
in  payment  of  a  debt  due  from 
such  partner  alone  to  the  client, 
which  agreement  was  not  known 
to  the  other  partner,  and  it  was 
held,  after  the  death  of  the  part- 
ner making  the  agreement,  that 
the  surviving  partner  could  not  re- 
cover for  services  rendered  by  the 
firm  after  such  agreement ;  but  as 
the  agreement  was  executory  and 
without  consideration  as  to  the 
services  previously  rendered,  he 
could  recover  for  them.  Strong  v. 
Fish,  13  Vt.  277. 

After  the  dissolution  of  a  part- 
nership, A.,  one  of  the  partners, 
bought  a  horse  of  B. .  and  gave  his 
note  for  the  price,  agreeing  that  if 
anything  should  be  due  from  B.  to 
the  firm,  A.'s  note  should  be  ap- 
plied as  a  credit  on  the  copart- 
nership debt.  It  appeared  that  the 
partnership  claims  on  B.  had  been 
•deposited  with  C,  another  partner, 
for  collection  after  the  dissolution, 
but  prior  to  the  sale  of  the  horse ; 
but  there  being  no  proof  that  B. 
had  notice  of  this  trust,  or  even  of 
the  dissolution,  held,  that  A.'s 
contract  with  B.  was  binding. 
Combs  v.  Boswell,  1  Dana,  473. 

The  rule  that  when  a  member  of 
a  partnership  settles  a  demand, 
due  from  him  individually,  by  set- 
ting off  and  discharging  a  demand 
due  from  his  creditor  to  the  part- 
nership, such  settlement  cannot  be 
rescinded  in  a  suit  at  law  in  the 
name  of  the  firm,  was  also  applied 
in  Craig  v.  Hulschiger,  34  N.  J.  L. 
363,  to  a  case  where  one  partner 
indorsed  a  partial  payment  upon  a 


dividual  indebtedness  to  the  maker, 
A  credit  given  to  one  partner  on 
his  own  separate  account  is  not  a 
discharge,  pro  tanto,  of  a  demand 
against  the  partnership,  unless  it 
were  intended  or  accepted  as  such ; 
and  if  a  creditor  receive  the  effects 
of  one  of  the  partners,  which  he 
may  apply  to  the  payment  of  his 
demand  against  the  partnership, 
yet,  if  he  relinquish  and  restore 
the  property,  he  may  still  hold  all 
the  partners.  Barker  v.  Blake,  11 
Mass.  16. 

Where  it  appeared  that  one  part- 
ner received  of  the  plaintiff  certain 
promissory  notes  to  collect,  for 
which  he  gave  a  receipt  in  his  own 
name,  and  the  plaintiff,  to  evince 
the  liability  of  the  partners,  by 
showing  that  the  transaction  had 
relation  to  the  partnership  business, 
offered  to  prove  that  such  notes 
were  delivered  to  the  partner  while 
he  was  attending  to  other  concerns 
of  the  partnership,  to  be  collected 
and  applied  in  satisfaction  of  a  note 
due  from  the  plaintiff  to  the  part- 
nership, and  that  that  partner  did 
accordingly  collect  one  of  such 
notes,  and  indorse  the  avails  on  the 
plaintiff's  note  to  the  partnership, 
held,  that  such  evidence  was  ad- 
missible. Brown  v.  Lawrence,  5 
Conn.  397. 

Arrangements  between  one  of  a 
firm,  on  his  individual  account, 
and  the  maker  of  a  note  owned  by 
the  firm,  that  the  former,  in  con- 
sideration of  a  sale  to  him  by  the 
latter  of  a  lumber  interest,  should 
pay  and  take  up  the  note,  in  the 
absence  of  any  agreement  by  the 
firm  to  accept  their  partner  as 
debtor  in  place  of  the  maker  and 


331 


-136 


EIGHTS   AND    OBLIGATIONS. 


[BOOK   II. 


indorser  of  the  note,  cannot  operate    partner,  who  also  knew  that  the 


as  a  novation  to  discharge  such 
maker  and  indorser.  Lewis  V. 
Westover,  29  Mich.  14. 

An  ordinary  partnership  cannot 
be  held  liable  for  the  individual 
debt  of  one  of  its  members  because 
of  an  agreement  to  that  effect  be- 
tween that  member  and  his  cred- 
itor, unless  it  be  proved  that  the 
member  was  authorized  to  make 
the  agreement  by  his  copartners, 
or  that  his  agreement  was  ratified 
by  them,  or  that  the  partnership 
was  benefited  by  the  transaction. 
Hamilton  v.  Hodges,  30  La.  Ann. 
1290. 

Where  one  of  two  attorneys,  who 
were  partners,  received  his  own 
notes  in  part  payment  of  a  demand 
left  for  collection,  and  gave  the 
receipt  of  the  firm  to  the  debtor 
for  the  claim,  and  a  suit  was 
brought  against  the  attorneys  for 
the  amount  of  the  demand,  held, 
that  one  partner  could  not  show 
that  the  other  had  received  his  own 
notes  in  payment.  Cook  v.  Blood- 
good,  7  Ala.  683. 

A  partner  may  make  a  valid  ar- 
rangement, with  the  consent  of 
his  copartner,  with  a  creditor  of 
the  former,  that  a  debt  due  by  the 
creditor  to  the  partnership  may  be 
discharged  by  crediting  it  as  a  pay- 
ment upon  the  debt  of  the  partner 
to  him.  Bates  v.  Halliday.  3  Ind. 
159. 

Where  one  of  two  partners  was 
individually  indebted,  and  his 
creditor  charged  the  debt  to  the 
firm  and  informed  both  partners 
that  he  had  done  so,  and  subse- 
quently the  indebted  partner  de- 
livered to  the  creditor  property  of 
the  firm  in  payment  of  the  debt, 
and  this  was  known  to  the  other 


creditor  supposed  that  he  was  re- 
ceiving the  property  in  payment  of 
the  debt,  held,  in  an  action  on  book 
account,  brought  by  the  firm 
against  the  creditor,  and  in  which 
they  claimed  to  recover  for  the 
property  so  delivered,  that  the 
creditor  was  entitled  to  be  allowed 
for  the  charge  thus  made  by  him 
against  the  firm.  Miller  v.  Dow, 
17  Vt.  235. 
Where  B.  is  indebted  to  A.,  and 

A.  is  indebted  to  the  firm  of  which 

B.  is  a  copartner,  and  it  is  agreed 
between  A.  and  B.  that  the  one  de- 
mand shall  be  set  off  or  extin- 
guished by  the  other,  held,  that 
such  an  agreement  is  binding  upon 
a  subsequent  assignee  of  A.'s  de- 
mand against  B.,  if  the  assent 
thereto,  express,  implied  or  to  be 
inferred,  of  the  other  members  of 
the  firm  can  be  shown.  Wilson  v. 
Dargan,  4  Rich.  544. 

Partners  proved  to  have  known, 
or  to  have  had  good  reason  to 
know,  that  a  creditor  has  relied 
upon  an  agreement  of  one  of  the 
firm  to  allow  his  individual  debt  to 
be  applied  as  a  credit  on  the  indebt- 
edness of  the  creditor  to  the  firm, 
will  not  be  permitted  to  repudiate 
it,  unless  they  show  that  they  had 
given  notice,  at  the  earliest  practi- 
cable period  after  it  had  come  to 
their  knowledge,  that  they  would 
not  sanction  the  arrangement. 
Casey  v.  Carver,  42  111.  225. 

Where  an  indebtedness  from  an 
individual  partner  to  a  third  person 
is  canceled  by  passing  a  like  sum 
to  the  credit  of  such  third  person 
in  the  books  of  the  firm,  he  may 
recover  the  amount  in  an  action  of 
assumpsit  against  the  firm,  if  the 
transaction    was    had    with    the 


332 


Cn.  I.  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*137 


Tender. —  If  a  debt  is  owing  to  a  firm,  tender  to  one 
partner  is  tender  to  all;1  and  if  a  debt  is  owing  by  a  firm, 
tender  by  one  partner  is  tender  by  all;  (e)  and  if,  after 
tender  by  a  firm,  the  creditor  demands  the  sum  tendered,  a 
refusal  to  pa}r,  made  by  the  partner  on  whom  the  demand 
is  made,  is  a  refusal  by  the  firm,  (f) 

12.  Deeds. —  One  partner  has  no  implied  authority 
to  bind  *his  copartners  by  deed;  (g)2  but  a  release  of  [*137j 


knowledge  or  ratification  of  the 
other  partners.  Corbin  v.  McChes- 
ney,  26  111.  231. 

Where  two  firms  have  dealt  with 
each  other,  and  each  firm  has  dealt 
with  the  members  of  the  other, 
under  an  understanding  and  agree- 
ment of  the  firms  and  all  the  mem- 
bers that  the  individual  account  of 
any  partner  with  the  other  firm 
should  be  considered  and  treated 
as  matter  of  firm  account  against 
his  firm,  and  dealings  and  settle- 
ments have  from  time  to  time  been 
made  on  this  basis,  the  balance 
found  on  such  a  settlement,  made 
in  good  faith  on  the  strength  and 
in  pursuance  of  such  antecedent 
agreement  and  practice,  is  a  legiti- 
mate demand  as  between  the  par- 
ties, on  behalf  of  the  creditor  firm 
against  the  other,  for  which  an  ac- 
tion will  lie.  Such  an  understand- 
ing is  not  within  the  provision  of 
the  statute  of  frauds  as  to  promises 
by  one  party  to  answer  for  the  debt 
of  another;  purchases  and  sales 
made  in  strict  pursuance  and  on 
the  faith  of  such  an  agreement  are 
entitled  to  be  considered  as  original 
transactions  on  the  part  of  the 
members  of  the  firm  charged. 
Davis  v.  Dodge,  30  Mich.  267. 

A  surety  for  a  firm,  who  is  also 
surety  for  one  of  its  members  indi- 
vidually, receiving  funds  belong- 


ing to  the  firm,  has  no  right  to 
apply  them  to  the  payment  of  the 
individual  debt  without  the  con- 
sent of  the  other  partner;  if  he 
does  so,  and  afterwards  pays  the 
firm  debt  with  his  own  money,  he 
will  be  considered  as  having  paid 
it  with  the  partnership  funds. 
Downing  v.  Linville,  3  Bush,  472. 

1  Wyckoff  v.  Anthony,  9  Daly, 
417. 

(e)  Douglas  v.  Patrick,  3  T.  R. 
653. 

(/)  Peirse  v.  Bowles,  1  Stark.  332. 

(g)  Harrison  v.  Jackson,  7  T.  R. 
207 ;  Steiglitz  v.  Eggington,  Holt, 
141.  As  to  presuming  an  authority 
given  by  deed,  see  Holt,  141. 

2  One  partner  cannot  bind  his  co- 
partner by  deed  without  special 
authority,  or  unless  executed  in  his 
presence  and  by  his  consent.  Fitch- 
burn  v.  Boyer,  5  Watts,  159 ;  Mac- 
kay  v.  Bloodgood,  9  Johns.  285 ; 
Little  v.  Hazard,  5  Harr.  291; 
United  States  v.  Astley,  3  Wash. 
508;  Fleming  v.  Dunbar,  2  Hill  (S. 
C),  532;  Modisett  v.  Lindley,  2 
Blackf.  119;  Posey  v.  Bullitt,  1  id. 
99;  Donaldson  v.  Kendell,  2  Ga. 
Dec.  227;  Napier  v.  Catron,  2 
Humph.  534;  Morris  v.  Jones,  4 
Harr.  428 ;  Trimble  v.  Coons,  2  A. 
K.  Marsh.  375 ;  Lambden  v.  Sharp, 
9  Humph.  224;  Snyder  v.  May,  19 
Penn.  St.  235 ;  Blackburn  v.  McCal- 


333 


*137 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


a  debt  or  demand  stands  on  a  peculiar  ground,  and  will 
bind  the  firm  though  executed  by  one  partner  only,  (h) ' 


lister,  Peck  (Term.).  371 ;  Gerard  v. 
Basse,  1  Dall.  119;  Hartr.  Withers, 

2  N.  J.  L.  285 ;  Button  v.  Hampson, 
Wright,  93;  McDonald  v.  Eggles- 
ton,  26  Vt.  154;  Pierson  v.  Hooker, 

3  Johns.  68;  Baldwin  v.  Richard- 
son, 33  Tex.  16;  Hobson  v.  Porter, 
2  Col.  Ter.  28;  Person  v.  Carter,  3 
Murph.  321 ;  Lay  ton  v.  Hastings,  2 
Harr.  147 ;  Doe  v.  Tupper,  12  Miss. 
261 ;  Morse  v.  Bellows,  7  N.  H.  550 ; 
Lucas  v.  Saunders,  1  McMull.  311; 
Lee  v.  Onstott,  1  Ark.  206 ;  Mont- 
gomery v.  Boone,  2  B.  Mon.  244; 
McCart  v.  Lewis,  id.  267 ;  Cummins 
v.  Cassily,  5  B.  Mon.  74;  Bentrinv. 
Zierlin,  4  Mo.  417;  Turbeville  v. 
Ryan,  1  Humph.  113;  Herzog  V. 
Sawyer,  61  Md.  344 ;  Walsh  v.  Len- 
non,  98  111.  27;  S.  C.  38  Am.  Rep. 
75;  Weeks  v.  Rake  Co.  58  N.  H. 
101 ;  Printup  v.  Turner,  65  Ga.  71 ; 
Stroman  v.  Varn.  19  S.  C.  307;  Sut- 
live  v.  Jones,  61  Ga.  676;  Sibley  v. 
Young,  2  S.  East.  Rep.  (S.  C.)  314. 
See,  however,  Donnelly  v.  Elsee,  6 


S.  West.  Rep.  (Tex.)  563.  See,  also, 
Allen  v.  Cheever,  61  N.  H.  82  (fol- 
lowing Morse  v.  Bellows,  7  id.  549), 
where  it  was  held  that  one  partner 
may,  without  special  authority, 
bind  his  firm  by  an  agreement, 
under  seal,  of  compromise  or  re- 
lease to  a  joint  debtor  of  a  partner- 
ship claim. 

The  rule  that  one  partner  cannot 
bind  his  associate  by  an  instrument 
under  seal  does  not  apply  to  an  in- 
strument which  would  be  equally 
operative  without  a  seal;  as,  for 
example,  a  bill  of  sale  under  seal 
of  partnership  property  in  dis- 
charge of  a  partnership  debt,  there 
being  no  delivery  of  the  property 
at  the  time.  Patten  v.  Kavanaugh, 
11  Daly,  348. 

So  where  a  promissory  note  is 
executed  in  the  firm  name  by  one 
partner  and  a  seal  affixed  thereto, 
whether  the  partner  not  executing 
the  note  is  or  is  not  liable  on  the 
note,  he  will  still  be  liable   for  the 


(h)  See  Hawkshaw  a  Parkins,  2 
Swanst.  539;  and,  as  to  creditors' 
deeds,  Dudgeon  v.  O'Connell,  12 
Ir.  Eq.  566.  See,  in  cases  of  fraud, 
ante,  p.  135,  note  (r),  and  infra, 
Release. 

1  See  Pierson  v.  Hooker,  3  John. 
68;  Bruen  v.  Marquand,  17  Johns. 
58;  Smith  v.  Stone,  4  Gill  &  J.  310; 
Morse  v.  Bellows,  7  N.  H.  549; 
Beach  v.  Ollendorf,  1  Hilt.  41; 
Crutwell  v.  Da  Rossett,  5  Jones,  L. 
263;  McBride  v.  Hogan,  1  Wend. 
826;  Dyer  v.  Sutherland,  75  111. 
584.     See,  also,  post. 

A  partner,  by  an  instrument 
under  seal,  ma}-  authorize  a  third 


person  to  discharge  a  debt  due  to 
the  firm.  Wells  v.  Evans,  20 
Wend.  251 ;  22  id.  324. 

Where  one  of  two  partners,  who 
had  entered  into  a  contract  to  do  a 
job  of  work  according  to  specifi- 
cations, executed  an  instrument 
under  seal  certifying  that  the  con- 
tract was  forfeited  on  their  part, 
and  that  there  had  been  a  settle- 
ment and  payment  to  him  of  a 
certain  sum  as  a"  present,"  held, 
that  such  instrument  amounted  to 
a  release,  and  took  away  the  cause 
of  action  as  to  both  partners.  Gates 
v.  Pollock,  5  Jones,  L.  344. 


334 


CH.  I,  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


■137 


A  deed  executed  by  one  partner  in  the  name  and  in  the  pres- 
ence of  his  copartners  is  deemed  an  execution  by  them;  (?) ' 


partnership  debt  for  which  the  note 
is  given.  Pelzer  v.  Campbell,  15 
S.  C.  581. 

Where  a  partner  possessing 
power  to  borrow  money  for  firm 
purposes  and  to  secure  the  same 
upon  firm  property  mortgages  his 
own  individual  land  upon  which 
are  erected  buildings  and  other  im- 
provements occupied  for  firm  pur- 
poses and  erected  at  the  expense 
of  the  firm,  such  mortgage  will 
bind  the  mortgaged  property  and 
also  the  firm,  whatever  its  rights 
in  the  property  and  improvements 
may  be.  Chittenden  v.  German- 
American  Bank,  27  Minn.  143. 

A  sealed  instrument  executed  by 
one  partner  in  the  name  of  the 
firm  may  be  treated  as  the  deed 
of  all  the  partners,  upon  proof  that 
prior  to  the  execution  the  others 
had  authorized  him  to  execute  the 
instrument,  or  had,  after  execu- 
tion, with  full  knowledge,  acqui- 
esced in  what  he  had  done.  Stro- 
man  v.  Vara,  19  S.  C.  307 ;  Rumery 
v.  McCulloch,  54  Wis.  565 ;  Wilcox 
v.  Dodge,  12  Bradw.  517;  Gibson  v. 
Warden,  14  Wall.  244;  Jeffreys?;. 
Coleman,  20  Fla.  536.  See,  also, 
Grady  v.  Robinson,  28  Ala.  289. 

Prior  assent,  or  subsequent  rati- 
fication, may  be  implied  from  the 
acts  and  declarations  of  the  parties 
whose  liability  is  sought  to  be  es- 
tablished, and   from  other  proper 

(£)  Ball  v.  Dunsterville,  4  T.  R. 
313;  Burn  V.  Burn,  3  Ves.  578. 
See  as  to  ratifying  a  deed  executed 
by  one  person  for  another,  Tupper 
v.  Foulkes,  9  C.  B.  N.  S.  797.  In 
Orr  v.  Chase,  1  Mer.  729,  a  bond 


evidence.  In  the  absence  of  such 
assent  or  ratification  the  party 
who  signed  the  instrument  is  alone 
liable  upon  it.  Wilcox  v.  Dodge, 
12  Bradw.  517. 

One  party  cannot  bind  the  other 
by  executing  an  appeal  bond  for 
both  under  his  general  authority. 
People  v.  Judges  of  Duchess,  5 
Cow.  34;  Charman  v.  McLane,  1 
Oreg.  339. 

Where,  however,  property  of  a 
partnership  was  levied  upon  under 
a  judgment  against  a  part  of  the 
firm  for  trespass  committed  by  the 
active  and  managing  members, 
and  the  latter,  to  save  the  prop- 
erty, procured  the  plaintiff  to 
unite  with  them  in  an  appeal  bond, 
whereby  he  was  compelled  to  pay 
the  judgment,  it  was  held  that 
each  member  of  the  firm  became 
liable  to  him  for  the  amount  so 
paid  to  their  use,  whether  they  all 
united  in  the  appeal  or  not,  and 
that  no  proof  of  a  promise  to  pay 
on  the  part  of  one  of  them  not 
sued,  and  who  did  not  join  in  the 
appeal,  was  necessary,  as  the  law 
implied  a  promise,  and  that  in  such 
case  the  validity  of  the  judgment 
appealed  from  was  wholly  imma- 
terial. Durant  v.  Rogers,  87  111. 
508. 

And  where  on  appeal  from  the 
disallowance  of  a  claim  of  partners 
in  their  firm  name  the  appeal  bond 

executed  by  one  partner  in  the 
name  and  on  behalf  of  the  firm 
was  held  to  be  the  bond  cf  the 
firm.  And  see  Palmer  v.  Justice 
Assurance  Soc.  6  E.  &  B.  1015. 
1  See  note,  supra. 


335 


*137 


RIGHTS    AND   OBLIGATIONS. 


[BOOK    II. 


and  if  one  partner  executes  a  warrant  of  attorney  in  the 
partnership  name,  with  the  consent  of  his  copartner,  the 


is  executed  in  the  firm  name,  the 
presumption,  in  the  absence  of  all 
proof,  is  that  it  was  so  executed  as 
to  bind  both  partners,  and  the 
mode  of  execution  is  approved. 
Kasson  v.  Blocker,  47  Wis.  79.  See, 
contra,  Frees  v.  Baker,  6  So.  West. 
Rep.  5G3. 

A  partner  cannot  bind  his  co- 
partners by  warrant  of  attorney, 
under  his  hand  and  seal  in  the 
name  of  the  firm,  without  previous 
authority  or  subsequent  ratifica- 
tion. Ellis  v.  Ellis,  47  N.  J.  L.  69; 
Heft  v.  Bosford,  43  Leg.  Intel.  414. 

Where  one  partner  signs  the 
partnership  name  to  a  forthcom- 
ing bond,  in  a  case  in  which  the 
partnership  is  defendant,  the  bond 
is  void  as  to  the  partners  not  sign- 
ing it.  Doe  v.  Tupper,  12  Miss. 
261 ;  Turbeville  v.  Ryan,  1  Humph. 
113. 

A  partner  is  not  bound  by  the 
execution  of  a  replevin  bond  by 
his  copartner  as  surety,  in  his  own 
name,  without  affirmative  evi- 
dence of  authority  so  to  bind  him. 
Butterfield  v.  Hemsley,  12  Gray, 
226. 

A  bond  given  for  the  purpose  of 
obtaining  a  dissolution  of  an  at- 
tachment of  partnership  property, 
and  executed  in  the  name  of  the 
firm  by  only  one  of  two  partners 
named  as  principals  therein,  can- 
not be  enforced  against  a  surety 
without  evidence  of  the  assent  of 
the  other  partner  to  its  execution. 
Russell  v.  Annable,  109  Mass.  72. 
See,  however,  Donnelly  v.  Elser, 
6  So.  West.  Rep.  (Tex.)  563.  See 
post. 

The  plea  of  non  est  factum  will 


be  sustained  to  a  bond  executed  by 
one  partner,  in  his  own  name  and 
that  of  his  copartner,  under  an  au- 
thority from  such  copartner,  not 
under  seal,  to  execute  a  note  in  his 
name.  Henry  County  v.  Gates,  26 
Mo.  315. 

A  sealed  note  signed  by  one  of 
two  partners  cannot  be  given  in 
evidence  to  establish  "  an  account 
stated  "in  a  suit  brought  against 
the  partner  who  did  not  sign  it. 
Heath  v.  Gregory,  1  Jones,  L.  417. 

One  partner  has  not  the  power 
to  bind  his  copartner  by  the  execu- 
tion of  a  bond  in  his  own  name, 
although  the  bond  was  a  forthcom- 
ing bond  for  property  in  which  the 
firm  were  interested,  and  the  pro- 
ceeds of  which  it  afterwards  re- 
ceived. Moore  v.  Stevens,  60  Miss. 
809. 

One  partner  has  not  the  power 
to  convey  the  realty  of  the  firm  by 
deed  or  assignment,  nor  to  make 
contracts  about  it  specifically  en- 
forceable against  the  others.  Ruff- 
ner  v.  McConnell,  17  111.  212. 

Where  one  partner  conveys  the 
joint  interest  of  the  firm  in  prop- 
erty, and  the  deed  is  signed  in  the 
name  of  the  firm,  but  acknowl- 
edged by  only  one  partner  as  his 
act  and  deed,  it  is  necessary  for 
the  party  receiving  the  conveyance 
to  show  that  the  partner  had  the 
authority  thus  to  convey,  other- 
wise the  deed  will  only  pass  the 
individual  interest  of  the  signing 
partner.  Walton  v.  Tosten,  49 
Miss.  569. 

A  conveyance  of  lands  executed 
by  one  partner  in  the  partnership 
name  conveys  only  his  undivided 


336 


CH.  I,  SKC.  II.]  LIABILITIES   OF   PARTNERS. 


137 


court  will  not  set  it  aside  on  the  ground  that  the  latter  did 
not  execute  it.  (/„■) 


interest,  and  the  subsequent  verbal 
assent  of  the  other  partners  does 
not  divest  them  of  the  legal  title. 
Brunson  v.  Morgan,  76  Ala.  593. 

See  the  subject  of  partnership 
property  in  real  estate  considered, 
post. 

Where  two  of  three  partners 
were  present,  and  one  wrote  and 
the  other  sealed  a  note  given  in 
the  name  of  the  firm,  it  is  compe- 
tent to  go  to  the  jury  on  the  joint 
execution.  It  is  not  material  to 
the  liability  of  the  two  that  they 
used  the  name  of  the  firm  without 
the  third  partner's  assent.  Potter 
v.  McCoy,  26  Pa.  St.  458. 

Where  a  partner  executes  a  bond 
in  the  name  of  the  firm,  and,  upon 
being  informed  that  it  did  not 
bind  the  partners,  with  the  consent 
of  the  obligee  removes  the  seal  and 
redelivers  it  with  the  intent  to 
bind  the  company,  it  is  effectual 
as  their  promissory  note.  Horton 
v.  Child,  4  Dev.  L.  460. 

A  deed  executed  by  one  partner 
in  the  name  of  the  firm  is,  how- 
ever, binding  upon  the  partner 
who  executed  it,  and  upon  all 
other  members  present  or  consent- 
ing to  its  execution.  Sutlive  v. 
Jones,  61  Ga.  676;  Kasson  v. 
Brocker,  1  N.  W.  Rep.  N.  S.  418 ; 
James  v.  Bostvvick,  Wright,  142; 
Day  v.  Lafferty,  4  Ark.  450;  Lee 
v.  Oristoll,  1  Ark.  206;  Henderson 
v.  Barbee,  6  Blackf.  26;  Price  v. 
Alexander,  2  G.  Greene,  427 ;  Pettes 
v.  Bloomer,  21  How.  Pr.  317.  See, 
also,  cases  at  beginning  of  this 
note. 


However,  in  Fisher  v.  Pender,  7 
Jones,  L.  483,  it  was  held  that 
where  upon  the  face  of  an  instru- 
ment it  appeared  that  one  signed, 
sealed  and  delivered  it  in  order  to 
bind  the  firm  of  which  he  was  a 
member,  and  not  as  his  own  indi- 
vidual deed,  he  was  not  individ- 
ually bound. 

A  sealed  instrument,  executed 
in  the  firm  name  by  an  individual 
partner,  may  become  obligatory  on 
the  other  partners,  upon  the  prin- 
ciples of  estoppel  or  ratification, 
whatever  objection  might  be  taken 
originally,  on  the  ground  that  one 
partner  cannot  bind  his  firm  by  a 
sealed  instrument.  Mann  v.  Etna 
Ins.  Co.  40  Wis.  549;  Baldwin  v. 
Richardson,  33  Tex.  16 ;  Shirley  v. 
Fearne,  33  Miss.  653. 

But  authority  to  execute  the 
deed,  or  a  ratification,  must  be 
proved  before  the  deed  will  be  ad- 
missible as  evidence.  Shirley  v. 
Fearne,  supra. 

The  prior  authority  to  execute 
the  deed,  or  the  subsequent  ratifi- 
cation, may  be  verbal.  Pike  v. 
Bacon,  20  Me.  280 ;  Cady  v.  Shep- 
erd,  11  Pick.  400 ;  Clement  v.  Brush, 
3  Johns.  Cas.  180;  Swan  v.  Sted- 
man,  4  Mete.  548;  Fox  v.  Norton, 
9  Mich.  207 ;  Gwinn  v.  Rooker,  24 
Mo.  290;  Smith  v.  Kerr,  3  N.  Y. 
144;  Gram  v.  Seaton,  1  Hall,  262 
Bond  v.  Aitkin,  6  Watts  &  S.  165 
Johns  v.  Rattin,  30  Pa.  St.  84 
Lowery  v.  Drew,  18  Tex.  786 ;  Wil- 
son v.  Hunter,  14  Wis.  683 ;  Grady 
v.  Robinson,  28  Ala.  289 :  Herbert 
v.    Hanrick,    16   Ala.    581;  Drum- 


(k)  Brutton  v.  Burton,  1  Chitty,  707. 
Vol.  I  — 23  337 


*137 


RIGHTS    AND    OBLIGATIONS. 


BOOK    II. 


wright  v.  Philpot,  16  Ga.  424; 
Haynes  v.  Seachrest,  13  Iowa,  455; 
Ely  v.  Hair,  16  B.  Mon.  230. 

The  assent  of  the  other  partners 
may  be  implied  from  circumstan- 
ces. Person  v.  Carter,  3  Murph. 
321 ;  Lucas  v.  Sandars,  1  McMull. 
311;  Lee  v.  Onstott,  1  Ark.  206. 

And  such  assent  may  be  subse- 
quent to  the  execution  of  the  deed. 
Person  v.  Carter,  3  Murph.  321; 
Doe  v.  Tupper,  12  Miss.  261; 
McCart  v.  Lewis,  2  B.  Mon.  267. 
But  see  Layton  v.  Hastings,  2  Harr. 
147,  and  Turbeville  v.  Ryan,  1 
Humph.  113. 

An  action  brought  by  a  partner- 
ship upon  a  sealed  instrument  ex- 
ecuted by  one  of  the  partners  in 
the  partnership  name  is  an  adop- 
tion of  the  instrument,  and  the 
defendant  cannot  object  that  it  is 
not  the  deed  of  the  partnership. 
Dodge  v.  M'Kay,  4  Ala.  346. 

Where,  in  the  agreement  of 
partnership  under  seal,  each  part- 
ner was  authorized  to  bind  his  co- 
partners by  deed,  and  such  agree- 
ment expired  by  its  own  limitation 
and  was  continued  by  a  written 
agreement  not  under  seal,  held, 
that  the  continuation  did  carry 
with  it  the  power,  and  that  a  mort- 
gage of  real  estate  executed  by  one 
of  the  firm  to  secure  the  partner- 
ship did  not  bind  the  other  mem- 
bers. Napier  v.  Catron,  2  Humph. 
534. 

Though  one  partner  cannot  bind 
another  by  deed  or  bond  by  virtue 
of  the  partnership  relation  merely, 
yet  a  declaration  alleging  that  the 
partners  "  made  their  certain  writ- 
ing obligatory  signed  by  their  firm 
name,"  "  and  sealed  with  their 
seal,"  etc.,  is  good  on  demurrer;  if 
it  was  the  deed  of  but  one  it  must 


be  shown  by  plea  on  the  part  of  the 
partner  who  did  not  execute  the 
bond.  Massey  v.  Pike,  20  Ark.  92. 
A  bond  given  by  one  partner  for 
a  simple  contract  debt  due  from 
the  partners  to  the  creditor,  and 
accepted  by  him,  is,  by  operation 
of  law,  a  release  of  the  other  part- 
ner and  an  extinction  of  the  sim- 
ple contract  debt,  both  at  law  and 
in  equity;  and  ignorance  on  the 
part  of  the  creditor  as  to  the  con- 
sequences of  his  acceptance  is  no 
ground  for  relief,  but  the  bond  is 
obligatory  on  the  obligor.  Will- 
iams v.  Hodgson,  2  Har.  &  J.  474. 
See,  also,  Jacobs  v.  McBee,  2 
McMull.  348;  Baxton  v.  Bell,  19 
Hun,  367. 

Where  a  partner,  without  the 
consent  of  his  copartner,  gave  the 
security  of  the  firm,  under  seal,  for 
a  partnership  debt,  and  the  cred- 
itor afterwards  released  the  copart- 
ner from  all  partnership  debts, 
held,  that,  the  simple  debt  being 
merged  in  the  specialty,  the  copart- 
ner was  released,  but  the  specialty 
still  bound  the  partner  who  had 
signed  the  partnership  name. 
Clement  v.  Brush,  3  John.  Cas.  180. 
It  has  been  held,  however,  in  sev- 
eral cases,  that  a  bond  given  in  the 
partnership  name  by  one  of  the 
partners  for  a  simple  contract  debt 
due  by  the  firm  does  not,  unless 
accepted  as  the  individual  obliga- 
tion of  the  partner  making  it,  ex- 
tinguish the  original  debt  as  to  the 
firm.  Flemming  v.  Lawhorn,  Dud- 
ley, 360;  Dickinson  v.  Legare,  1 
Dessau.  537;  Bond  v.  Aitkin,  6 
Watts  &S.  165;  Haskinson  v.  El- 
liot, 62  Penn.  St.  393. 

So  it  has  been  held  that  the  exe- 
cution of  a  bond  without  author- 
ity, by  one  of  several  partners,  in 


338 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*137 


the  name  of  the  firm,  creates  no 
presumption  that  the  bond  was  re- 
ceived in  satisfaction  of  the  joint 
liability  of  all  the  members  of  the 
firm.  Doniphan  v.  Gill,  1  B.  Mon. 
199;  Brozee  v.  Poyntz,  3  id.  178. 

So  it  has  been  held  that  in  an  ac- 
tion against  partners  upon  a  note 
under  seal  made  in  the  names  of 
the  firm  by  one  of  its  members,  al- 
though such  note  may  not,  because 
of  the  scrawl,  be  operative  as  a 
partnership  obligation,  yet,  it  be- 
ing alleged  and  proved  that  the 
consideration  for  which  the  note 
was  given  went  to  the  use  of  the 
firm,  and  was  received  by  them, 
they  are  liable  upon  the  original 
consideration.  Daniel  v.  Toney,  2 
Mete.  (Ky.)  523. 

A  bond  made  by  one  of  the.  part- 
ners of  a  firm  for  goods  sold  and 
delivered  may  be  evidence  of  the 
time  for  payment  or  of  the  amount 
(as  any  other  statement  of  one  of 
the  partners  would  be),  but  it  cer- 
tainly does  not  amount  to  plenary 
proof  of  the  consideration,  so  as, 
of  itself,  to  entitle  the  plaintiff  to 
recover  of  the  firm  for  goods  gold 
and  delivered.  Fronebarger  v. 
Henry,  6  Jones,  L.  548.  See  post, 
337,  note. 

A  bond  given  by  one  partner  for 
rent  of  real  estate  leased  for  the 
use  of  the  partnership  is  properly 
payable  out  of  the  partnership  ef- 
fects, and,  having  been  so  paid, 
creditors  of  another  partner  cannot 
be  substituted  to  the  rights  of  the 
landlord  on  the  bond.  Christian  v. 
Ellis,  1  Gratt.  396. 

A  bond  by  two  partners  to  one  of 
them  as  obligee  may  be  obligatory 
on  the  other  partner.  O'Bannon  v. 
Simrall,  1  B.  Mon.  287. 

The  rule  that  one  partner  cannot 


bind  his  copartner  by  deed  does  not 
apply  where  one  partner  conveys 
by  deed  property  of  the  firm 
which  he  might  have  conveyed 
without  deed.  Tapley  v.  Butter- 
field,  1  Mete.  515;  Purviance  v. 
Sutherland,  2  Ohio  St.  478. 

A  partnership  contract  which 
would  be  good  without  a  seal  will 
still  be  valid  as  a  simple  contract, 
although  the  partner  who  executed 
the  instrument  had  no  special  au- 
thority to  put  the  partnership  name 
to  such  paper.  Human  v.  Cuniffe, 
32  Mo.  316.  See,  also,  Woodruff 
v.  King,  47  Wis.  261. 

See,  however,  contra,  Schmertz 
v.  Shreeves,  62  Penn.  St.  457,  which 
was  a  sealed  contract  to  deliver 
merchandise  at  a  future  time  for  a 
certain  price. 

Though  one  partner  cannot  bind 
his  copartners  by  deed,  yet  an 
assignment  under  seal,  executed 
by  one  partner,  of  the  effects  of 
the  firm,  which  would  be  valid  and 
binding  on  the  others  if  there  were 
no  seal,  will  be  enforced  in  equity. 
McCollough  v.  Sommerville,  8 
Leigh,  415. 

However,  in  Dillon  v.  Brown,  11 
Gray,  179,  a  sealed  lease  executed 
by  one  partner  only,  in  the  name 
of  the  partnership,  though  for  a 
term  which  required  no  seal,  was 
held  not  to  pass  the  estate  of  the 
other  partners,  without  evidence  of 
previous  authority,  or  subsequent 
ratification  by  them. 

Where  one  partner,  in  the  ab- 
sence of  his  copartner,  executed  a 
bill  of  sale,  under  seal,  of  all  the 
partnership  effects,  the  sale  being 
bona  fide  and  for  the  full  value  of 
the  property,  and  made  to  pay  a 
pressing  debt  of  the  absent  partner, 
held,   that  the  sale    was    binding 


339 


*137  EIGHTS   AND   OBLIGATIONS.  [dOOK    II. 

A  joint  and  several  bond  executed  by  one  partner  in  the 
name  of  himself  and  copartners  binds  him  separately  al- 
though it  is  invalid  against  them;  (I)1  and  it  has  been  held 
that  a  deed  purporting  to  be  made  by  all  the  partners  of  a 
firm,  and  to  assign  all  their  property  to  trustees  for  credit- 
ors, is  operative  against  a  partner  who  executes  it,  although 
his  copartners  ultimately  decline  to  execute  it  also,  (m) 

[12^.  Delivery. —  A  delivery  in  good  faith  to  one  partner 
according  to  the  terms  of  a  contract,  is  a  delivery  to  both, 
each  having  authority  to  receive  it.2] 

13.  Distress. —  If  several  partners  grant  a  lease,  any  one 
of  them  may  distrain,  or  appoint  a  bailiff  to  distrain,  in  the 
name  of  all;  and  a  distress  by  one  partner,  or  by  the  bailiff 
appointed  by  him,  will  be  lawful,  although  the  other  part- 
ners are  no  parties  to  the  distress  and  do  not  assent  there- 
to, (n) 

14.  Extension  of  business. —  It  follows  from  the  princi- 
ples investigated  at  the  commencement  of  the  present  chap- 
ter, that  one  partner  has  no  implied  power  to   bind  the 

upon  the  absent  partner,  and  passed  payment  of  a  note  for  the  purchase 

the  whole  title  of  the  firm  to  the  money  of  a  steamboat,  involving 

property.      Forkner    v.   Stuart,   6  the    question    of     delivery,    held, 

Gratt.  197.  that  a  transfer  by  bill  of  sale  and 

One  partner  may  execute  a  char-  delivery  to  only  one  member  of  a 

ter-party  under  seal,  so  as  to  bind  firm  was  to  the  firm,  and  not  to  the 

the  other  party.  Straffin  v.  Newell,  individual,— the    evidence    show- 

T.  U.  P.  Charlt.  163.  that  it  was  in  accordance  with  and 

(I)  Elliott  v.   Davis,  2  Bos.  &  P.  fulfillment  of  the  original  contract 

338,  of  purchase  made  by  both  mem- 

i  See  note,  supra.  bers  of  the  firm.  Byington  v.  Gaff, 

(??i)  Bowker  v.  Burdekin,  11  M.  &  44  111.  510. 
W.  128 ;  Cumberledge  v.  Lawson,  1        In  a  suit  against  partners  in  a 

C.    B.    N.   S.    709.     And   compare  distillery  and  in  the  purchase   of 

Latch  v.  Wedlake,  11  A.  &  E.  959,  corn,   the    plaintiff    may  give    in 

and  Lascaridi  v.  Gurney,  9   Jur.  evidence  the  receipt  of  one  of  the 

N.  S.  303  C.  P.  defendants,  acknowledging  the  de- 

2Kenney  v.   Atwater,   77  Penn.  livery  of    a  certain    quantity    of 

St.  34;  Henry  v.  Anderson,  77  Ind.  corn  to  him  by  the  plaintiff.     Bisel 

361   (delivery  of    a    deed  to   one  v.  Hobbs,  6  Blackf.  479. 
partner).  («)  See  Robinson  v.  Hofman,  4 

In  an  action  upon  a  guaranty  of  Bing.  562,  and  the  cases  there  cited. 

340 


Cn.  I,  SEC.  II.]  LIABILITIES    OF    PAETXERS. 


•138 


firm  with  respect  to  matters  not  falling  within  the  scope  of 
the  business  which  it  ostensibly  carries  on  or  was  formed  to 
carry  on.  (o) 

[Ua.—  Gifts.1] 

••15.  Guaranties,  etc. —  How  far  one  partner  can  [*138] 
bind  the  firm  by  a  guaranty  obliging  the  firm  to  pay 
if  some  other  person  does  not  has  been  much  disputed. 
The  later  cases,  however,  decide  that  unless  it  can  be  shown 
that  the  giving  of  guaranties  is  necessary  for  carrying  on 
the  business  of  the  firm  in  the  ordinary  way,  one  of  the 
members  will  be  held  to  have  no  implied  authority  to  bind 
the  firm  by  them;  for,  generally  speaking,  it  is  not  usual 
for  persons  in  business  to  make  themselves  answerable  for 
the  conduct  of  other  people.2    The  subject  was  much  con- 


Co)  Ante,  p.  124  et  seq. 

1  Where  a  partner  made  a  gift  of 
two-thirds  of  a  crop  of  corn  to  his 
son,  who  took  it  and  appropriated 
it  to  his  own  use,  held,  in  an  action 
by  the  other  partner  in  the  name 
of  the  firm,  for  his  own  use,  to  re- 
cover his  share  of  the  value  of  the 
corn,  that  a  partner  cannot  make  a 
valid  gift  of  partnership  property, 
to  the  prejudice  of  his  partner,  and 
that  assumpsit  can  be  maintained 
against  the  donee  for  the  value  of 
the  partnership  property  so  given. 
Daniel  v.  Daniel,  9  B.  Mon.  195. 

2  One  partner  cannot,  by  his  in- 
dividual act,  bind  the  firm  as  the 
guarantor  of  the  debt  of  another, 
or  as  a  party  to  a  note  or  bill  made 
for  the  accommodation  or  as  the 
surety  of  another,  without  author- 
ity specially  given  him  for  the  pur- 
pose, or  implied  from  the  common 
course  of  business  of  the  firm,  or 
from  the  previous  course  of  deal- 
ings between  the  parties;  unless 
the  act  of  such  partner  be  after- 
wards ratified  by  the  others.     The 


burden  of  proving  the  authority 
and  consent  of  the  other  partners 
lies  on  the  holder  of  the  note. 
Sweetser  v.  French,  2  Cush.  309; 
Rollins  v.  Stevens,  31  Me.  454; 
Bank  of  Rochester  v.  Bowen,  7 
Wend.  158;  Foot  v.  Tabir,  19  Johns. 
151;  Boyd  v.  Clum,  7  Wend.  309; 
Langan  v.  Hewitt,  21  Miss.  122; 
Andrews  v.  Planters'  Bank,  15  Miss. 
192 ;  Schermerhorn  v.  Schermer- 
horn,  1  Wend.  119:  Eolston  v. 
Click,  1  Stew.  526:  Mayberry  v. 
Barniton,  2  Harr.  24;  Maudlin  v. 
Branch  Bank,  2  Ala.  502;  Selden 
v.  Bank  of  Commerce,  3  Minn.  166; 
Hamill  v.  Purviss,  2  Pa.  177 ;  Sut- 
ton v.  Irwine,  12  Serg.  &  E.  13; 
McQuewans  v.  Hamlin,  35  Pa.  St. 
517  :  Marsh  v.  Thompson  Nat.  Bank, 
2  Brad.  (HI.)  217;  Davis  v.  Black- 
well,  5  id.  32 ;  Avery  v.  Eowell,  59 
Wis.  82;  National  Security  Bank 
v.  McDonald,  127  Mass.  82  (a  note 
executed  as  collateral  security  to 
another  note);  Mutual  Nat.  Bk. 
v.  Eichardson,  33  La.  Ann.  1312; 
S.  C.  29  id.  546 ;  39  Am.  Eep.  293 ; 


341 


'138 


RIGHTS    AND    OBLIGATIONS. 


[book  II. 


sidered  in  Brettel  v.  Williams,  (p)     There  the  defendants, 
who  were  railway  contractors,  made  a  subcontract  for  the 


Osborne  v.  Thompson,  28  N.  W. 
Rep,  260;  S.  O.  35  Minn.  229;  Os- 
borne v.  Stone,  30  Minn.  25;  Davis 
r.  Blackwell,  5  Bradw.  32;  Spurck 
v.  Leonard,  9  Bradw.  174;  Moyna- 
hon  v.  Ilanaford,  42  Mich.  329. 

Each  partner  is,  however,  the 
general  agent  of  the  firm,  and  has 
authority  to  bind  it  by  a  contract  of 
guaranty,  if  such  contract  is  within 
its  scope  of  business ;  and  no  under- 
standing between  the  partners  can 
effect  the  right  of  the  guarantee  to 
recover.  First  Nat.  Bank  v.  Car- 
penter, 41  Iowa,  518. 

A  sale  with  guaranty  of  stock 
cattle  purchased  by  the  firm  for 
the  purpose  of  sale  is  not  in  excess 
of  the  implied  power  of  the  part- 
ner.    Jordan  v.  Miller,  75  Va.  442. 

Where  a  note  is  executed  as  the 
individual  note  of  one  of  the  part- 
ners, and  the  guaranty  of  the  firm 
is  indorsed  thereon,  it  is  prima  fade 
evidence  of  an  individual  debt,  and 
the  burden  of  proof  is  upon  the 
party  seeking  to  enforce  its  pay- 
ment to  show  that  it  was  in  fact  a 
partnership  transaction;  Davis  v. 
Blackwell,  5  Brad.  (111.)  32. 

Since  the  statute  of  1874,  chapter 
404,  if  one  partner  signs,  as  maker, 
a  promissory  note  in  his  individ- 
ual name  payable  to  a  third  person, 
and  in  fraud  of  his  partners  signs 
the  firm  name  on  the  back  of  the 
note  above  the  name  of  the  payee, 


the  person  who  buys  the  note  before 
maturity  has  notice  from  the  form 
of  the  note  of  the  conditional  lia- 
bility of  the  other  partners  and 
cannot  maintain  an  action  against 
them  upon  the  note.  National 
Bank  of  Commonwealth  v.  Law, 
127  Mass.  72. 

Where  a  firm  had  authorized  a 
partner  to  borrow  money  for  it, 
and  allowed  him  frequently  to  lill 
up  notes  over  their  blank  signa- 
tures, and  to  sign  the  names  of  the 
members  of  the  firm  to  obligations, 
and  such  partner  borrowed  money 
for  the  use  of  the  firm,  upon  his 
note,  with  the  names  of  his  copart- 
ners indorsed  thereon  as  guaran- 
tors, held,  that  it  did  not  matter 
even  if  their  names  were  so  signed 
by  such  partner,  as  he  was  held 
out  to  the  world  as  haviug  author- 
ity to  do  what  he  did,  and  that  he 
had  power  to  consent  to  an  altera- 
tion of  the  note,  as  to  the  place  of 
payment,  at  the  time  he  delivered 
the  same  and  obtained  the  money 
thereon,  and  that  the  other  part- 
ners were  liable  on  such  guaranty. 
Pahlman  v.  Taylor,  75  111.  629. 

If  on  the  face  of  the  paper  it 
appears  that  the  firm  purports  to 
execute  it,  not  as  a  principal, 
but  as  a  mere  surety  or  guarantor 
for  some  other  person,  the  party 
taking  the  paper  has  actual  notice 
of  the  fact  that  it  is  not  signed  in 


(p)  4  Ex.623.     See,  also,  Hasle-    of  Lord  Eldon  in  Ex  parte  Gardom, 


ham  v.  Young,  5  Q.  B.  833;  Craw- 
ford v.  Stirling,  4  Esp.  207 ;  Duncan 
V.  Lowndes,  .3  Camp.  478.  The 
dictum  of  Lard  Mansfield  in  Hope 
V.  Cast,  1  East,  53,  and  the  decision 


16  Ves.  286,  are  opposed  to  these 
authorities,  but  cannot  be  relied  on 
after  the  decision  in  Brettel  v.  Will- 
iams. 


342 


CH.  I,  SEC.  II.]  LIABILITIES   OF   PAETNEKS. 


138 


performance  of  part  of  some  work  they  had  undertaken. 
The  subcontractor  required  a  quantity  of  coal,  and  one  of 


the  ordinary  course  of  the  partner- 
ship business,  and  he  must  at  his 
peril  ascertain  that  there  was  a 
special  authority  given  the  partner 
to  use  the  firm  name  as  such  guar- 
antor, or  that  the  paper  was  in  fact 
given  in  the  course  of  the  partner- 
ship business.  Marsh  v.  Thompson 
Nat.  Bank,  2  Brad.  (111.)  217;  Mut- 
ual Nat.  Bk.  v.  Richardson,  33  La. 
Ann.  1312;  S.  C.  29  id.  546;  S9  Am. 
Rep.  293. 

That  one  partner  was  authorized 
to  subscribe  the  firm  name  as  ac- 
commodation sureties  for  a  third 
person  may  be  proved  by  circum- 
stances. Butler  v.  Stocking,  8 
N.  Y.  408. 

The  power  to  sign  the  firm  name, 
by  indorsement,  for  accommoda- 
tion purposes,  would  not  authorize 
the  signature  of  the  firm  name  in 
the  face  of  the  note  as  an  uncondi- 
tional and  distinct  surety.  McGuire 
v.  Blanton,  5  Humph.  361;  Early 
v.  Reed,  6  Hill,  12. 

In  Wilkins  v.  Pearce,  5  Den.  541, 
it  was  held  that  an  agreement, 
made  by  one  partner  of  a  mercan- 
tile firm,  in  the  partnership  name, 
to  indemnify  a  third  person  for  ac- 
cepting, for  the  accommodation  of 
the  firm,  a  draft  drawn  upon  him 
by  such  a  partner,  is  valid,  al- 
though another  of  the  partners  at 
the  time  dissented  from  the  agree- 
ment. 

The  right  of  a  partner  to  sign  the 
firm  name  to  a  contract  of  indem- 
nity in  favor  of  third  persons  must 
be  strictly  proved,  but  not  neces- 
sarily by  a  written  authority  to  him. 
Mcran  v.  Prather,  22  Wall.  492. 


An  attorney  at  law  cannot  bind 
his  partner  by  his  promise  to  in- 
demnify an  officer  for  committing 
a  person  to  jail;  but  the  partner- 
ship is  a  circumstance  from  which, 
with  other  circumstances,  it  may 
be  inferred  he  intended  to  act  for 
both ;  and  where  the  partner,  sub- 
sequently to  the  commitment,  rati- 
fied the  promise,  it  is  binding  on 
such  partner.  Marsh  v.  Gold,  2 
Pick.  285. 

Where  one  partner  signs  the 
firm  name  to  an  undertaking, 
given  for  the  purpose  of  securing 
the  discharge  of  an  attachment  of 
the  goods  of  another  firm,  without 
the  knowledge  or  sanction  of  his 
copartners,  the  latter  will  not  be 
bound  thereby ;  but  where  it  ap- 
pears that  a  partner  knew  of  the 
signature  made  by  his  firm  to  the 
undertaking  at  the  time,  and  even 
directed  the  delivery  of  the  under- 
taking, he  cannot  afterwards  ob- 
ject that  the  partnership  name  was 
improperly  used.  Cockroft  v. 
Claflin,  64  Barb.  464. 

In  the  case  of  Tessier  v.  Crowley, 
1?  Neb.  207,  it  was  held  that  an 
undertaking  in  an  attachment  suit 
signed  by  the  attachment  plaintiff 
as  principal  and  the  firm  as  surety 
is  prima  facie  good. 

One  partner  cannot,  without 
special  authority,  bind  his  copart- 
ners jointly  with  himself  to  pay 
the  debt  of  another.  Shaaber  v. 
Bushong,  105  Pa.  St.  514 ;  S.  G  14 
Weekly  Not.  Cas.  352. 

Where  a  person  lends  his  name 
to  a  firm  as  indorser  to  a  note  to 
raise  money  to  cany  on  the  firm 


343 


*139  EIGHTS    AND    OBLIGATIONS.  [iiOOK    II. 

the  defendants,  in  the  name  of  the  firm,  guarantied  to  the 
plaintiffs,  who  were  coal  merchants,  payment  for  coals  to  be 
supplied  by  them  to  the  subcontractors.  It  was  held  that 
this  guaranty  did  not  bind  the  partners  of  the  contractor 
signing  it. 

In  Sandilands  v.  Marsh,  (q)  a  firm  was  held  bound  by  a 
guaranty  given  by  one  of  the  partners,  but  in  that  case 
there  was  evidence  of  adoption  and  ratification  by  the  firm 
of  the  contract  of  which  the  guaranty  was  part.  In  Ex 
parte  Harding,  (r)  the  guaranty  was  several  as  well  as 
joint,  and  therefore  bound  those  who  signed  it.  These 
cases  cannot  therefore  be  considered  as  opposed  to  those  in 
which  it  has  been  held  that  one  partner  has  no  implied 
power  to  bind  the  firm  by  guaranties  in  its  name. 

Statute  of  frauds. —  With  respect  to  the  statute  of  frauds, 
a  guaranty  signed  by  one  partner  in  the  name  of  the  firm 
is  sufficient  to  bind  all  the  partners  if  authority  from  them 
can  be  proved,  (s) 

But  no  partner  is  liable  for  a  false  and  fraudulent  repre- 
sentation as  to  the  solvency  of  another  person  unless  such 
representation  is  in  writing  and  signed  by  himself,  (t) 
[*139]  ^Promise  to  provide  for  bill. —  If  one  partner,  in 
consideration  that  a  person  will  accept  a  partnership 
bill,  promises  that  the  firm  will  put  him  in  funds  to  meet 
the  bill  when  due,  this  promise  binds  the  firm,  (u)  But 
this  is  not  guarantying  payment  of  the  debt  of  another 
within  the  rule  above  discussed. 

16.  Insurances. —  One  partner  can  bind  the  firm  by  an 

business,  either  partner  authorized  (r)  12  Ch.  D.  557. 

to  raise  money  for    the    purpose  (s)  See   Duncan  v.   Lowndes,    3 

may  make  terms  upon  which  the  Camp.  478. 

accommodation    is    obtained    and  (t)  9  Geo.  4,  ch.  14,  §  6 ;  Swift  V. 

give  such  personal  security  to  the  Jewsbury,  L.  R.  9  Q.   B.    301 ;  re- 

indorser  as  the  firm  may  have  to  versing  Swift  v.  Winterbotham,  L. 

give.     Hopkins  v.  Thomas,  28  N.  E.  8  Q.  B.  244. 

W.  R.  147.  (u)  Johnson  v.  Peck,  3  Stark.  66. 
(g)  2  B.  &  A.  673. 

344 


CH.  I,  SEC.  II.]  LIABILITIES   OF    PARTNERS. 


*139 


insurance  of  the  partnership  goods.  (v)1  And  if  one  in- 
sures for  all  he  may  give  notice  of  an  abandonment  for 
all.  (%) 


(v)  Hooper  v.  Lusby,  4  Camp.  C6. 
See  Arrnitage  v.  Winterbottom,  1 
Man.  &  Gr.  130. 

*Penn.  Ins.  Co.  v.  Murphy,  5 
Minn.  36;  Graves  v.  Boston,  etc. 
Ins.  Co.  2  Cranch,  439 ;  Clement  v. 
British- Am.  Ass.  Co.  141  Mass.  298. 
One  partner  has  authority  to 
settle  a  loss  with  the  insurance 
company.  Brink  v.  Ins.  Co.  5 
Robt.  (N.  Y.)  104;  Brown  v.  Hart- 
ford, etc.  Ins.  Co.  117  Mass.  479. 
He  can  also  bind  his  firm  by  con- 
senting to  the  cancellation  of  a 
policy.  Hillock  v.  Traders'  Ins.  Co. 
54  Mich.  531. 

Where  insurance  is  effected  by 
one  partner  in  the  firm's  name  on 
firm  property  and  the  premium  is 
paid  with  firm  moneys,  though 
charged  by  such  member  to  him- 
self, the  insurance  will  be  for  the 
benefit  of  the  firm  notwithstand- 
ing the  partner  effecting  it  intended 
it  for  his  own  benefit.  Tebbetts  v. 
Dearborn,  74  Me.  392. 

If  a  limited  partnership  contains 
but  one  general  partner,  C,  in 
whose  name  the  business  is  carried 
on,  it  is  no  objection,  in  the  ab- 
sence of  fraud  or  deceit,  to  a  proof 
of  loss  made  to  an  insurer,  that  it 
states  the  property  insured  belongs 
to  C.  and  that  no  other  person  or 
party  has  an  interest  therein;  in 
an  action  upon  such  a  policy  C.  is 
entitled  to  recover  the  full  amount 
of  the  loss  and  not  merely  the 
value  of  his  interest.  Clement  v. 
B.  A.  Insurance  Co.  141  Mass.  298. 
Such  a  change  of  title  of  a  stock 


of  goods  as  is  made  by  the  incom- 
ing of  a  new  partner  will  render 
void  a  policy  of  insurance  contain- 
ing a  provision  that  if  the  property 
is  sold  or  transferred,  or  any  change 
made  in  the  title  of  possession, 
without  the  consent  of  insurers, 
the  policy  should  become  void. 
Malley  v.  Atlantic  Ins.  Co.  51 
Conn.  222.  See,  however,  Cowan 
v.  Iowa  Ins.  Co.  40  Iowa,  551;  20 
Am.  R.  583. 

A  policy  of  insurance  stipu- 
lated that  if  the  interest  of  the 
assured  be  other  than  the  entire 
unconditional  and  sole  ownership 
of  the  property  for  the  use  and 
benefit  of  the  assured,  it  must  be 
so  expressed  in  the  policy,  other- 
wise it  shall  be  void.  A  stock  of 
goods  was  insured  by  the  policy  in 
which  the  estate  of  the  deceased 
partner  of  the  assured  had  an  in- 
terest which  existed  at  the  date  of 
their  destruction  by  fire  and  which 
was  not  referred  to  in  the  policy. 
Held,  that  the  survivor  could  not 
recover  on  the  policy.  Crescent 
Insurance  Co.  v.  Camp,  64  Tex.  521. 

The  dissolution  of  a  partnership 
and  the  transfer  of  one  part- 
ner's interest  in  the  property  to 
another  person  is  not  such  a  trans- 
fer of  interest  as  to  avoid  a  policy 
of  insurance  containing  a  clause 
that  the  policy  should  become  void 
by  the  sale  or  transfer  or  any 
change  in  the  title  or  possession  of 
the  property  insured.  Dresser  v. 
United  Firemen's  Ins.  Co.  45  Hun 
(N.  Y.),  298. 


(x)  Hunt  v.  The  Royal  Exchange  Assurance  Co.  5  M.  &  S.  47. 

345 


*139 


BIGHTS    AND    OBLIGATIONS. 


[HOOK    II. 


17.  Interest.—  An  admission  by  one  partner  that  a  debt 
of  the  firm  bears  interest  at  a  given  rate  is  prima  facie  bind- 
ing- on  the  firm,  (y) 

See  further,  ante,  under  the  head  Debts. 

18.  Judicial  proceedings. —  The  power  of  one  partner  to 
act  for  the  firm  in  legal  proceedings  will  be  noticed  here- 
after, when  treating  of  actions  (Bk.  II,  ch.  3,  §  1),  and  bank- 
ruptcy (Bk.  IV,  ch.  2). 

19.  Leases. —  One  partner,  as  such,  has  no  authority  to 
contract  on  behalf  of  the  firm  for  a  lease  of  a  house  for 
partnership  purposes,  (s) ' 

Where  a  lease  is  made  by  several  partners  jointly,  a  notice 
to  quit,  given  by  one  on  behalf  of  all.  is  sufficient,  (a) 

20.  Mortgages  and  Pledges  —  (a)  By  partners. —  A  legal 
mortgage  cannot  be  made  of  partnership  real  estate  without 
the  concurrence  of  all  the  partners.  (J)2 


Where  a  partnership  to  whom  a 
fire  insurance  policy  was  issued 
was  dissolved  before  the  fire,  and 
the  retiring  partner's  interest  was 
transferred  to  his  copartner  to  con- 
tinue the  business,  and  the  com- 
pany paid  a  dividend  to  him  after 
such  transfer,  held,  that  they  by 
the  payment  waived  any  objection 
they  might  have  had  on  that  score. 
Combs  v.  Mutual  Fire  Insurance 
Co.  34  N.  J.  Eq.  403. 

(y)  See  Fergusson  v.  Fyfe,  8  CI. 
&  Fin.  121. 

(z)  Sharp  v.  Milligan,  22  Beav. 
606,  where,  however,  specific  per- 
formance was  decreed  against  the 
firm,  the  contract  having  been  rati- 
fied by  the  other  partners. 

1 A  partnership  may  be  held 
jointly  liable  for  rent  of  premises 
leased  to  and  in  the  name  of  one 
member  only,  on  proof  that  they 
were  hired  for  and  used  by  the 
firm.  Penn  v.  Kearney,  21  La. 
Ann.  21.     See  ante. 


(a)  Doe  v.  Hulme,  2  Man.  &  Ry. 
433 ;  Doe  v.  Summersett,  1  B.  &  Ad. 
135;  Goodtitle  v.  Woodward,  3  B. 
&  A.  689.  See  Right  v.  Cuthell,  5 
East,  491. 

(b)  See  ante,  heading  Deed.  In 
Juggeewundas  v.  Keeka  Shah  v. 
Ramdas  Brijbooken  Das,  2  Moo. 
In.  Ap.  487,  a  mortgage  by  one 
partner  was  under  peculiar  circum- 
stances held  to  bind  the  firm. 

2  See  post. 

One  partner  may  execute  a  chat- 
tel mortgage  of  the  firm  property 
to  secure  a  partnership  debt  with- 
out the  consent  of  his  copartner; 
and  his  attaching  a  seal  to  the  in- 
strument, being  unnecessary,  will 
not  affect  its  validity.  Gates  v. 
Bennett,  33  Ark.  475 ;  Woodruff  v. 
King,  47  Wis.  261;  Holt  v.  Sim- 
mons, 16  Mo.  App.  97. 

One  partner  has  authority,  with- 
out the  consent  or  knowledge  of 
his  copartner,  to  mortgage  the 
whole  stock  in  trade  of  the  firm  to 


846 


CH.  I.  SEC.  II.]  LIABILITIES    OF   PARTNERS. 


•139 


It  being,  however,  decided  that  a  member  of  an  ordinary 
trading  partnership  has  power  to  borrow  money  on  the 


Bscure  a  particular  creditor  of  the 
firm.  Tapley  v.  Butterfield,  1  Mete. 
515.  See,  also,  Woodruff  v.  King, 
2  N.  W.  Rep.  N.  S.  452 ;  Willett  v. 
Stringer,  17  Abb.  Pr.  152 ;  McClel^ 
land  v.  Remsen,  3  Abb.  App.  Dec. 
74;  Morrison  v.  Mendenball,  18 
Minn.  232 ;  ante,  p.  269,  note. 

In  equity  a  binding  pledge  can 
be  made  of  the  interest  of  the 
pledgor  in  a  partnership  to  be  sub- 
sequently created,  so  as  to  secure 
to  the  partnership  a  priority  of  lien 
against  other  creditors  of  the 
pledgor.  The  existence  of  the  sub- 
ject of  the  pledge  at  the  time  the 
contract  is  made,  or  delivery 
thereof,  is  not  as  necessary;  if  it 
comes  into  existence  afterwards  it 
is  affected  in  equity  at  once  by  the 
lien  stipulated  for.  Collins'  Ap- 
peal, 107  Pa.  St.  590;  S.  C.  15 
Weekly  Not.  Cas.  5;  46  Leg.  Intel. 
55. 

One  partner  may  execute  a  valid 
mortgage  of  a  vessel  owned  by  the 
firm  by  signing  the  individual 
names  of  the  members  of  the  firm. 
Patch  v.  Wheatland,  8  Allen,  102. 
The  execution  of  a  mortgage  of 
personal  property  of  a  partnership 
by  one  partner  in  his  individual 
name  passes  no  title.  Clark  v. 
Houghton,  12  Gray,  38. 

A  mortgage  signed  with  the 
partnership  name,  but  in  the  body 
of  which  it  is  recited  that  it  was 
the  act  of  one  of  the  partners,  and 
given  as  a  security  for  his  indi- 
vidual debt,  is  not,  on  its  face,  a 
partnership  act.  Scott  v.  Dansby, 
12  Ala.  714. 

Under  Wagner's  (Mo.)  Statutes, 
281,  requiring  mortgages    of  per- 


sonal property  to  be  acknowledged 
as  conveyances  of  land  are  by  law 
required  to  be,  a  mortgage  by  a 
partnership  may  be  signed  and  ac- 
knowledged by  anyone  of  the  part- 
ners with  the  firm  name,  although 
his  name  does  not  appear  in  the 
style  of  the  firm.  Keck  v.  Fisher, 
58  Mo.  532. 

A  partner  recognizing  a  chattel 
mortgage  on  the  partnership  prop- 
erty, executed  by  his  partner,  is 
estopped  to  deny  its  validity.  Rich- 
ardson v.  Lester,  83  111.  55.  See, 
also,  Hawkins  v.  Hastings  Bank,  1 
Dill.  462. 

That  individual  property  is  not 
embraced  by  a  mortgage  executed 
by  partners  on  their  property,  un- 
less specifically  set  forth  and  de- 
scribed, see  Reid  v.  Godwin,  48  Ga. 
527. 

Where  chattels  owned  by  one 
partner,  but  used  by  the  firm  with- 
out being  converted  into  firm  as- 
sets, were  mortgaged  by  the  other 
partner  without  the  owner's 
knowledge,  and  sold  by  the  mort- 
gagee under  the  mortgage,  a 
former  mortgagee  from  the  owner 
can  maintain  trover  against  the 
latter  mortgagee  for  their  conver- 
sion. Cutler  v.  Hake,  47  Mich.  80. 
See,  also,  Bates  v.  Bennett,  33  Ark. 
475 ;  Dowell  v.  Mitchell,  105  U.  S. 
430. 

Although  a  mortgage  by  a  part- 
ner of  firm  property,  without  his 
copartner's  consent,  to  secure  his 
individual  debt,  will  not  be  per- 
mitted to  operate  as  a  mortgage, 
yet  if,  on  a  payment  of  the  firm 
debts  and  a  division  of  the  assets 
of  the  firm,  such  mortgaged  prop- 


347 


140 


RIGHTS   AND   OBLIGATIONS. 


[BOOK    II. 


credit  of  the  firm,  it  follows  almost  necessarily  that  be  should 
have  power  to  pledge  partnership  property  as  a 
[*140]  security  for  advances.  *The  writer  is  not  aware  of 
any  decision  in  which  an  equitable  mortgage  made 
by  one  partner  by  a  deposit  of  deeds  relating  to  partnership 
real  estate  has  been  upheld,  or  the  contrary ;  he  can  there- 
fore only  venture  to  submit  that  such  a  mortgage  ought  to 
be  held  valid  in  all  cases  in  which  it  is  made  by  a  partner 
having  an  implied  power  to  borrow  on  the  credit  of  the 
firm,  (c) 

Pledges  of  chattels. —  The  implied  authority  of  a  partner 
who  has  power  to  borrow  to  pledge  the  personal  property 
of  the  firm  for  money  borrowed  is  beyond  dispute;  (d)1 

erty  falls  to  the  mortgagor,  it  be-    ness  cannot  be  lawfully  executed 


comes  operative  and  can  be  en- 
forced. Smith  v.  Andrews,  49  111. 
'28. 

(c)  In  Be  Clough,  31  Ch.  D.  324, 
an  equitable  mortgage  by  a  surviv- 
ing partner  for  a  partnership  debt 
was  held  valid.  See,  further,  Ex 
parte  National  Bank,  14  Eq.  507; 
Patent  File  Co.  6  Ch.  33;  Ex  parte 
Lloyd,  1  Mont.  &  Ayr.  494.  Com- 
pare 7  T.  R.  210,  per  Lord  Kenyon. 

(d)  See  Ex  parte  Bonbonus,  8 
Ves.  540;  Butchart  v.  Dresser,  10 
Ha.  453,  and  4  De  G.  M.  &  G.  542; 
Brownrigg  v.  Rae,  5  Ex.  489 ;  Gor- 
don v.  Ellis,  7  Man.  &  Gr.  607.  See, 
also,  Langmead's  Trusts.  20  Beav. 
20,  and  7  De  G.  Mac.  &  G.  353 ;  and 
as  to  ships,  Ex  parte  Howden,  2 
M.  D.  &  D.  574. 

1  Gregg  v.  Fisher,  3  Brad.  (111.) 
261. 

One  member  of  a  firm  may  exe- 
cute a  deed  of  trust  on  personal 
property  to  secure  the  creditors 
generally  of  the  partnership. 
Scruggs  v.  Burruss,  25  W.  Va.  670. 

A  chattel  mortgage  not  in  fur 
therance  of  the  partnership  busi- 


by  either  partner  without  the  con- 
sent of  the  firm.  Osborne  v.  Barge, 
29  Fed.  Rep.  725. 

M.  gave  money  to  R.  to  invest 
in  leaf  tobacco,  with  a  verbal 
agreement  that  they  should  share 
the  profits  equally,  saying  nothing 
about  losses.  R.  used  the  money 
to  pay  his  own  debts  and  bought 
tobacco  in  the  name  of  M.,  giving 
his  own  acceptances  for  the  pur- 
chase money,  and  pledging  the 
tobacco  for  the  payment  of  the 
acceptances  to  the  defendants,  who 
gave  a  bill  of  sale  receipted  in  the 
name  of  M.  M.  was  unknown  to 
the  defendants,  and  they  were  in- 
formed by  R.  that  the  purchase 
was  for  himself  though  made  in 
M.'s  name.  Held,  that  M.  and  R. 
were  to  be  regarded  as  partners  in 
the  purchase  of  the  tobacco,  and 
that  M.  was  bound  by  the  agree- 
ment of  R.  pledging  the  tobacco 
to  secure  the  payment  of  his  ac- 
ceptances for  the  purchase  money ; 
that  the  defendants  are  not  respon- 
sible to  M.  for  the  misapplication 
by  R.  of  the  money  he  had  received 


348 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


'Ul 


and  the  power  is  not  confined  to  cases  in  which  there  is  a 
general  partnership;  for,  if  several  join  in  a  purchase  of 
goods  to  be  sold  for  their  common  profit,  a  pledge  of  those 
goods  by  one  of  the  persons  interested  is  binding  on  them 
all.  («?)  The  implied  power  to  pledge,  moreover,  extends  to 
pledges  for  antecedent  debts,  (f) 

Redemption. —  Any  partner  may,  on  behalf  of  the  firm, 
redeem  a  pledge  of  the  firm;  but  he  alone  is  not  the  proper 
person  to  bring  an  action  to  recover  the  thing  pledged,  [g) 
Factors'  Acts. —  A  question  of  some  importance  arises  as 
to  the  effect,  if  any,  of  the  Factors'  Acts  (h)  on  the 
power  of  one  partner  to  sell  and  *pledge  the  goods  [*141] 
of  the  firm.  The  writer  is  not  aware  of  any  author- 
ity upon  this  subject,  but  he  conceives  that  those  acts 
neither  extend  nor  abridge  the  power  in  question.  The  Fac- 
tors' Acts  do  not  apparently  render  valid  any  sale  or  pledge 
by  one  partner  of  partnership  goods,  which  is  not  valid, 
independently  of  the  acts,  upon  the  principles  of  the  com- 
mon law. 

that  there  the  goods  pledged  were 
not  partnership  property  when  the 
pledge  was  made.  In  Ex  parte 
Copeland,  2  Mont.  &  Ayr.  177,  it 
was  questioned  whether  a  pledge 
by  one  partner  was  valid  if  the 
pledgee  had  notice  that  the  pledgor 
was  not  the  only  owner ;  but  this  it 
is  conceived  could  only  be  material 
where  the  pledge  is  not  made  for 
ostensible  partnership  purposes. 

(/)  Patent  File  Co.  6  Ch.  83;  Re 
Clough,  31  Ch.  D.  324.  And  see 
Story  on  Partn.  §  101. 

(g)  See  Harper  v.  GoJsell,  L.  R. 
5  Q.  B.  422. 

(7i)  4  Geo.  4,  ch.  83;  6  Geo.  4,  ch. 
94 ;  5  and  6  Vict.  ch.  39 ;  40  and  41 
Vict.  ch.  39.  See,  upon  them,  Navul- 
shaw  v.  Brownrigg,  2  De  G.  M.  & 
G.  441;  Kaltenbach  v.  Lewis,  10 
App.  Ca.  617. 


from  M. ;  that  the  receipted  bill 
given  by  the  defendants  in  the 
name  of  M.,  on  the  receiving  the 
acceptances  of  R.  was  open  to  ex- 
planation, and  did  not  estop  the 
defendants  from  holding  the  to- 
bacco to  secure  the  payment  of 
the  acceptances  according  to  their 
agreement  with  R.  Miller  v.  Sul- 
livan, 1  Cincinnati,  271. 

One  partner  has  no  authority  to 
agree  that  private  property  of  the 
other  partner,  pledged  by  him  for 
a  firm  debt,  shall  also  stand  as 
security  for  further  advances. 
Beardsley  v.  Tuttle,  11  "Wis.  74. 

See  post. 

(e)  Reid  v.  Hollinshead,  4  B.  & 
C.  867;  Re  Gellar,  1  Rose,  297; 
Raba  v.  Ryland,  Gow,  N.  P.  133; 
Tupper  v.  Haythorne,  id.  135.  But 
see  Barton  v.  Williams,  5  B.  &  A. 
395,  p.  405,  per  Best,  J.,  and  note 


349 


*l-il  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

(b)  To  partners. —  One  partner  has  implied  authority  to 
accept,  in  the  ordinary  course  of  business,  security  for  a 
debt  due  to  his  firm;  and  where  one  member  of  a  firm  of 
bankers  accepted  as  security  for  money  due  to  the  bank 
shares  in  a  company,  and  caused  them  to  be  registered  in 
the  name  of  the  bank,  it  was  held  that  he  had  implied  au- 
thority so  to  do,  although  the  consequence  was  that  he 
thereby  rendered  himself  and  his  copartners  liable  as  con- 
tnbutories  of  the  company,  (i) 

21.  Notice. —  Questions  frequently  arise  as  to  whether 
notice  to  one  partner  is  notice  to  all. 

General  rule. —  As  a  general  rule,  notice  to  a  principal  is 
notice  to  all  his  agents;  (k)  and  notice  to  an  agent  of  mat- 
ters connected  with  his  agency  is  notice  to  his  principal.  (I)1 
Consequently,  as  a  general  rule,  notice  to  one  partner  of 
an}'  matter  relating  to  the  business  of  the  firm  is  notice  to 
all  the  other  members;  (ra)  and  if  two  firms  have  a  common 
partner,  notice  which  is  imputable  to  one  of  the  firms  is 
imputable  to  the  other  also,  if  it  relates  to  the  business  of 
that  other,  (n) 2 

(i)  Weikersheiin's    Case,    8    Ch.  ser  v.  Norwood  is  a  strong  author- 

831.  ity  that  in  commercial  transactions 

(Jc)  See  Mayhew  v.  Eames,  1  Car.  he  is. 

&  P.  550,  and  3  B.  &  C.  601 ;  Willis  »  See  Ewell's  Evans  on  Agency, 

v.  The  Bank  of  England,  4  A.  &  E.  159  et  seq. 

21.  (m)  Alderson  v.  Pope,    1   Camp. 

(T)  Dresser  v.  Norwood,  17  C.  B.  404 ;    Porthouse  v.  Parker,  id.  82 ; 

N.  S.  466,  reversing  the  decision  Bignold  v.  Waterhouse,  1  M.  &  S. 

below,   14  C.   B.   N.    S.  574.     Per  259.     And  see  Salomons  v.  Nissen, 

Ashhurst,       J.,      Fitzherbert      v.  2  T.  R.  647. 

Mather,  1  T.  R.  16;  Le  Neve  V.  Le  (n)  See  Steele  v.  Stuart,  2Eq.  84; 

Neve,    1  Ves.  Sr.  64;   Collinson  v.  Porthouse  v.  Parker,  1  Camp.  82; 

Lister.  7  De  G.  M.  &  G.  634,  and  20  Worcester  Corn  Exch.  Co.  3  De  G. 

Beav.  356.     See,  generally,  on  this  M.  &  G.  180;  Jacaud  v.  French,  12 

maxim,  Blackburn,  Low  &  Co.  v  East,  317 ;  Powles  v.  Page,  3  C.  B. 

Vigors,  17  Q.  B.   D.  553  (reversed  16. 

by  the  house  of  lords  in  12  App.  2  Howland  v.  Davis,  40  Mich.  546; 
Ca.  531).  Whether  a  principal  is  Fitch  v.  Stamps,  7  Miss.  487;  San- 
affected  by  notice  acquired  by  the  ders  v.  Ruddle,  2  T.  B.  Mon.  139 ; 
agent,  but  not  in  that  character,  is  Barney  v.  Currier,  1  D.  Chip.  315; 
perhaps  scarcely  yet  settled.  Dres-  Smith  v.  Hall,  5  Bosw.  319;  Her- 

850 


CH.  I,  SEC.  II.]  LIABILITIES   OF    PARTNEES. 


*141 


bert  V.  Odlin,  40  N.  H.  267 ;  Bank 
of  America  v.  Shaw,  2  N.  Eng.  R. 
572 ;  U.  S.  Nat'l  Bank  v.  Burton,  id. 
206;  Marietta,  etc.  R.  R.  Co.  v. 
Mowry,  28  Hun,  79;  Bigelow  v. 
Henniger,  33  Kan.  362;  Tucker  v. 
Cole,  54  Wis.  539;  Patterson  v. 
Seaton,  70  la.  689;  King  v.  Rem- 
ington, 36  Minn.  15;  Fourth  Nal'l 
Bank  v.  Altheimer.  91  Mo.  190. 
See,  also,  Manwaring  v.  Griffin,  5 
Day,  561. 

Thus  where  a  transfer  of  a  note 
is  made  to  a  firm,  one  of  whose 
members  is  a  trustee  of  the  com- 
pany owning  the  note,  the  firm  has 
constructive  notice  of  want  of 
authority  in  the  company  to  make 
the  transfer.  Smith  v.  Hall,  supra. 
Where  a  partnership  seeks  to  re- 
cover as  a  bona  fide  purchaser  of  a 
promissory  note  alleged  to  have 
been  fraudulently  procured,  the 
burden  is  upon  it  to  show  that  all 
the  members  of  the  firm  were  ig- 
norant of  the  fraud  at  the  time  of 
the  purchase.  Frank  v.  Blake,  58 
la.  650. 

Purchase  of  lands  in  the  name  of 
one  partner,  made  simultaneously 
with  the  forming  of  the  firm,  held 
to  be  a  partnership  transaction,  so 
that  notice  of  the  rights  of  others 
in  the  land  had  by  one  partner  was 
notice  to  the  other.  King  v.  Rem- 
ington, 29  N.  W.  R.  352. 

One  partner  agreed,  on  behalf  of 
the  firm,'  to  accept  a  mortgagee's 
interest  in  certain  lands  in  satis- 
faction of  a  debt  due  to  the  firm, 
with  full  knowledge  of  the  mort- 
g  Igor's  title,  took  an  absolute  deed 
to  the  firm,  and,  after  receiving 
from  the  mortgagor  the  sum  due 
on  the  mortgage,  conveyed  his 
share  to  a  copartner.  Held,  that 
notice  to  him  was   notice  to  the 


firm,  and  that  a  reconveyance  to 
the  mortgagor  might  be  decreed. 
Barney  v.  Currier,  1  D.  Chip.  (Vt.) 
315. 

Where  property  is  purchased  by 
a  partnership,  notice  to  one  is  no- 
tice to  all  the  partners ;  yet,  if  one 
of  two  persons  about  entering  into 
partnership  purchase  of  the  other 
an  undivided  interest  in  property 
owned  by  him,  to  be  held  by  the 
two  for  the  use  of  the  firm,  this 
principle  as  to  notice  does  not  ap- 
ply.    Herbert  v.  Odlin,  supra. 

Each  member  of  a  firm  is  charge- 
able with  notice  of  the  transaction 
of  the  others  within  scope  of  the 
partnership  business,  but  not  with 
notice  of  the  sale  by  a  partner  of 
his  individual  interest  in  partner- 
ship property  or  of  his  representa- 
tions in  making  ?  uch  sale.  Liddell 
v.  Grain,  53  Tex.  549. 

The  fact  that  one  member  of  the 
firm  had  formerly  been  the  agent 
of  appellants,  and  had  knowledge 
of  an  agreement  between  the  mem- 
bers that  the  new  firm  should  not 
deal  in  goods  sold  by  appellants, 
does  not  constitute  knowledge  on 
the  part  of  appellant  of  such  agree- 
ment. His  knowledge  of  such 
agreement  was  acquired  as  a  mem- 
ber of  the  new  firm  and  not  as 
agent  of  appellant.  Aultman  & 
Taylor  Co.  v.  Webber,  4  Brad.  (111.) 
427. 

If  A.  and  B.  are  partners,  and  A. 
is  employed  as  the  agent  of  C, 
who  claims  an  interest  in  certain 
lands,  to  look  after  such  interest, 
and  B.,  the  other  partner,  pur- 
chases an  outstanding  title  to  the 
land  for  the  benefit  of  the  partner- 
ship, inasmuch >as  the  title  to  the 
land  does  not  vest  in  the  partner- 
ship, but  in  the  individual  partners, 


351 


*142 


EIGHTS   AND   OBLIGATIONS. 


[LOOK    II. 


[*142]      *Firm  affected  by  its  agent's  knowledge.— In 

conformity  with  these  principles,  if  a  firm  claims  the 
benefit  of  a  transaction  entered  into  by  one  of  its  mem- 
bers, it  cannot  effectually  set  up  its  own  ignorance  of  what 
that  member  knew,  so  as  to  be  in  a  better  position  than  he 
himself  would  have  been  in  had  he  been  dealing  on  his  own 
account  as  a  principal,  (o)  Thus  in  Gollinson  v.  Lister,  (p) 
it  was  held  that  a  banking  company  was  not  entitled  to  the 
benefit  of  a  mortgage  given  to  it  by  its  own  manager  in 
his  character  of  an  executor.  For  the  mortgage  was  given 
as  a  security  for  money  borrowed  by  the  manager  as  exec- 
utor, and  advanced  by  himself  as  manager  for  improper 
purposes,  and  in  breach  of  the  trusts  which,  as  executor,  he 
had  to  perform;  and  the  company,  in  taking  the  mortgage, 
knew  that  their  manager  was  giving  a  security  on  his  tes- 
tator's estate  for  money  previously  taken  by  him  from  the 
funds  of  the  company,  and  which  moneys  he  had  been  re- 


C.  will  be  entitled  to  treat  A.  as 
his  trustee  as  to  his  half  of  such 
title,  and  as  holding  it  for  his  use. 
But  he  cannot  hold  B.  liable  in  the 
same  way,  as  B.  is  not  chargeable 
with  notice  of  A.'s  agency  merely 
from  his  relation  to  him  as  partner. 
Hardenburgh  v.  Bacon,  33  Cal.  356. 

Notice  to  a  firm  cannot  affect  a 
member  thereof  in  his  individual 
rigbts  or  interests  disconnected 
with  those  of  the  firm.  Boling  v. 
Anderson,  60  Tenn.  551. 

Upon  trial  of  a  case  involving 
the  extent  of  a  water  privilege 
claimed  by  copartners  under  an 
alleged  appropriation,  their  notice 
of  location,  shown  to  have  been 
prepared  with  the  knowledge  of 
some  of  them,  and  seen  by  them 
as  a  posted  notice,  and  to  have 
been  so  posted  that  it  "  must  have 
been  seen"  by  the  others,  was  held 
admissible  in  evidence  as  part  of 


the  res  gestce.  McKinney  v.  Smith, 
21  Cal.  374. 

The  fact  that  one  partner  was  in- 
formed at  the  time  that  a  note  was 
transferred  to  the  firm  by  another 
partner,  and  that  the  note  was 
given  without  consideration,  being 
merely  lent  to  the  latter,  is  wholly 
immaterial.  Ross  v.  Whitefield,  1 
Sweeny,  318. 

As  to  notice  where  a  person  is 
a  member  of  plaintiff's  and  of  an- 
other firm,  see  Glass  v.  McDonald, 
4  Can.  L.  T.  139. 

Where  a  bill  is  drawn  by  one 
and  accepted  by  the  other  of  two 
firms  having  one  common  partner, 
formal  notice  of  protest  to  the  ac- 
ceptors is  not  necessary.  Wood- 
bury v.  Sackrider,  2  Abb.  Pr.  402. 

(o)  See  ante,  p.  116,  and  the  cases 
below. 

(p)  7  De  G.  M.  &  G.  634,  and  20 
Beav.  356. 


352 


CH.  I,  SEC.  II.]  LIABILITIES   OF   PARTNERS.  *  143 

quested  to  replace  or  give  security  for.  Under  these  cir- 
cumstances it  was  treated  as  clear  that  the  bank  could  stand 
in  no  better  position  than  the  manager  would  have  done  had 
he  advanced  the  money  himself  and  taken  a  mortgage  for 
it  from  himself. 

Meaning  of  phrase  notice  to  one  is  notice  to  all. —  When 
it  is  said  that  notice  to  one  partner  is  notice  to  all,  what  is 
meant  is  (1)  that  a  firm  cannot,  in  its  character  of  principal, 
set  up  the  ignorance  of  some  of  jts  members  against  the 
knowledge  of  others  of  whose  acts  it  claims  the  benefit,  or  by 
whose  acts  it  is  bound ;  and  (2)  that  when  it  is  necessary  to 
prove  that  a  firm  had  notice,  all  that  need  be  done  is  to 
show  that  notice  was  given  to  one  of  its  members  as  the 
agent  and  on  behalf  of  the  firm.  The  expression  means  no 
more  than  this;  and  although  every  person  has  notice  of 
what  he  himself  does,  it  would  be  absurd  to  hold  that  a 
firm  has  notice  of  everything  done  by  each  of  its  members. 
Where  one  member  is  acting  beyond  his  powers,  or  is  com- 
mitting a  fraud  on  his  copartners,  or  is  the  person  whose 
duty  it  is  to  give  his  firm  notice  of  what  he  himself  has 
done,  in  all  such  cases  notice  on  his  part  is  not  equivalent 
to  notice  by  them,  (q) 

*In  Blgnold  v.  Waterhouse,  (r)  one  of  a  firm  of  [*143] 
carriers  entered  into  an  agreement  to  carry  valuable 
parcels  free  of  charge,  but  under  such  circumstances  as  to 
render  the  agreement  not  binding  on  the  other  partners.  A 
parcel  known  to  the  partner  who  made  the  agreement  to  be 
of  value  was  sent,  but  was  not  entered  or  paid  for  as  a  valu- 
able parcel.  The  other  partners  were  held  to  be  unaffected 
with  the  notice  which  their  copartner  had  of  the  nature  of 
the  parcel,  and  were  held  not  to  be  liable  for  its  loss. 

Breaches  of  trust. —  So,  if  one  partner  is  a  trustee,  and 
he  improperly  employs  the  trust  funds  in  the  partnership 
business,  his  knowledge  that  he  is  so  doing  is  not  inimitable 

(q)  See  the  judgment  of  Jessel,        (r)  1  M.  &  S.  255. 
M.  R.,  in  Williamson  v.  Barbour,  9 
Ch.  D.  535  et  seq. 

Vol.  1  —  23  353 


*143 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


to  the  firm ;  and  therefore,  to  affect  the  other  partners  with 
a  breach  of  trust,  further  evidence  must  be  adduced,  (s) 

Notice  to  clerks. —  Moreover,  in  cases  of  this  kind,  no- 
tice on  the  part  of  the  clerks  of  the  firm  of  what  the  fraud- 
ulent partner  is  doing  is  no  more  than  notice  to  him.  It  is 
not  sufficient  to  affect  his  copartners,  (t) 

Ratification.1  —  These  cases  show,  what  indeed  is  obvious 

of  itself,  viz.,  that  if  a  partner  exceeds  his  authority,  and 

(s)  See  Ex  parte  Heaton,  Buck. 


(t)  See  Lacey  V.  Hill,  4  Ch.  D. 
537  (affirmed  by  the  House  of  Lords 
under  the  name  of  Read  v.  Bailey, 
3  App.  Cas.  94),  and  Williamson  v. 
Barbour,  9  Ch.  D.  536. 

1  See  the  general  doctrine  of  rati- 
fication considered  at  length  in 
Ewell's  Evans  on  Agency,  chapter 
7.     A  few  cases  touching  upon  the 


edge  of  his  copartner,  converts  to 
the  use  of  the  firm  money  re- 
ceived by  him  as  a  United  States 
deputy  collector  of  internal  rev- 
enue, held,  that  a  bond  of  the 
firm,  given  to  indemnify  the  sure- 
ties of  the  collector,  was  valid  as 
a  partnership  obligation.  Whar- 
ton v.  Clements,  3  Del.  Ch.  209. 

Payment  of  money,  by  one  part- 
ner, toward  the  expenses  of  an  at- 


subject  of  ratification  by  partner-    torney  employed  by  another  part 


ships  will,  for  want  of  a  more  con- 
venient place,  be  referred  to  in 
this  connection. 

A  contract  executed  by  one  mem- 
ber of  a  firm  without  the  scope  of 
the  partnership  business  may  be- 
come binding  upon  the  firm  by 
ratification  of  the  other  members. 
Clark  v.  Hymen,  55  la.  14. 

Ratification  by  a  firm  is  equiva- 
lent to  antecedent  authority  in  the 
partner  acting  for  the  firm.  Cer- 
tain transactions  held  to  constitute 
a  ratification  of  the  act  of  one 
partner.  Lynch  v.  Flint,  56  Vt. 
46.  See,  also,  Rust  v.  Hanselt,  46 
N.  Y.  Super.  Ct.  22. 

While  a  partner  is  not  at  liberty 
to  use  a  fund  belonging  to  his  co- 
partner individually  in  payment  of 
a  partnership  claim  to  his  injury, 
yet  a  subsequent  ratification  by  the 
latter  will  make  the  act  valid. 
Evans  v.  Howell,  84  N.  C.  460. 
Where  a  partner,  with  the  knowl- 


ner,  in  a  matter  not  strictly  part- 
nership business,  but  in  the  interest 
of  the  firm,  will  amount  to  a  rati- 
fication of  the  act  of  such  other 
partner  in  employing  such  at- 
torney. Holmes  v.  Kortlander,  31 
N.  W.  R.  532;  S.  C.  7  West.  R.  842. 

Non-repudiation,  when  called  on 
to  pay  the  same,  of  a  note  signed 
by  defendant  and  another,  between 
whom  a  partnership  is  alleged  to 
have  existed,  and  a  promise  to  pay 
the  same,  is  sufficient  evidence  to 
make  the  defendant  liable  on  the 
note.  Murphy  v.  Whitlow,  1  Ariz. 
340. 

If  a  firm,  in  the  absence  of  fraud 
or  concealment,  maintains  silence 
when  it  should  repudiate  the  un- 
authorized act  of  a  partner,  it  will 
be  estopped  from  repudiating  such 
act.  Campbell  v.  District  of  Co- 
lumbia, 19  Ct.  of  CI.  160. 

Where  S.,  a  partner,  had  con- 
tracted in  writing  in  the  firm  name 


354 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


>U3 


it  is  contended  that  the  firm  is  bound  by  what  he  has  done, 
on  the  ground  that  it  has  ratified  his  acts,  evidence  must  be 


to  sell  certain  timber  limits  belong- 
ing to  the  firm,  but  standing  in  his 
name  only,  and  M.,  his  copartner, 
when  informed  thereof,  did  not 
dissent,  but  shortly  afterwards  fur- 
nished information  to  the  purchaser 
which  he  was  only  entitled  to  ask 
for  as  such  purchaser,  held,  that 
the  firm  was  bound  by  the  con- 
tract. Reid  v.  Smith,  2  Ont.  69; 
S.  C.  2  Can.  L.  T.  305 ;  18  Can.  L. 
J.  (N.  S.)  205. 

The  mere  knowledge,  on  the  part 
of  a  firm,  that  one  of  its  members 
had  given  a  firm  note,  will  not  be 
construed  to  imply  a  knowledge  on 
their  part  that  the  note  was  a 
fraud  upon  them,  and  until  such 
knowledge  of  the  fraud  has  been 
brought  home  to  them  the  firm 
cannot  be  held  to  have  ratified  the 
transaction.  Hayes  v.  Baxter,  65 
Barb.  181. 

As  to  the  effect  of  the  receipt 
of  profits  arising  from  speculations 
beyond  the  scope  of  the  firm  busi- 
ness, see  Biggs  v.  Hubert,  14  S.  C. 
620. 

The  mere  fact  that  a  partner, 
upon  being  informed  that  his  co- 
partner has  given  a  firm  note  for 
his  individual  debt,  does  not  deny 
his  liability  thereon,  does  not,  per 
se,  amount  in  point  of  law  to  a 
ratification  or  adoption  of  the  note, 
though  it  may  be  a  circumstance 
tending  to  show  assent.  Reubin  v. 
Cohen,  48  Cal.  545. 

Where  a  member  of  a  firm  drew 
a  check  in  the  firm  name  in  favor 
of  a  bank  to  which  he  was  individ- 
ually indebted,  and  the  other  mem- 
bers within  a  month  had  knowl- 
edge of  the  misapplication  of  the 


check  to  his  private  account,  but 
omitted  to  repudiate  the  act  till 
four  years  afterward,  when  the 
firm  brought  suit  for  the  money, 
such  omission  was  held  to  be  tan- 
tamount to  a  ratification  and  to  bar 
recovery.  Marine  Co.  v.  Carver,  42 
111.  66. 

One  partner  of  a  firm,  without 
the  knowledge  or  assent  of  the 
other,  subscribed  for  certain  stock 
in  the  firm  name.  Held,  that  the 
omission  of  the  other  partner  to 
express  his  dissent  to  such  sub- 
scription, when  demand  of  pay- 
ment for  the  stock  was  made  of  the 
firm,  did  not  make  him  a  stock- 
holder or  render  him  liable  to  pay 
for  stock  so  subscribed  for.  Bar- 
nard v.  Lapeer,  6  Mich.  274. 

Subsequent  ratification  of  a  part- 
ner's authority  to  bind  the  firm  as 
sureties  upon  a  note  may  be  proved 
by  circumstantial  evidence.  First 
Nat.  Bank  v.  Breese,  39  Iowa, 
640. 

Where  one,  without  authority, 
purchases  goods  for  persons  about 
to  enter  into  partnership,  and  in 
their  name  and  on  their  credit  as 
partners,  and  they  receive  the  goods 
and  dispose  of  them  for  their  own 
purposes,  after  being  informed  that 
the  goods  were  so  purchased, 
whether  they  are  partners  in  fact 
or  not,  they  are  liable  as  partners 
to  the  seller  for  the  value  of  the 
goods.  Pike  v.  Douglas,  28  Ark.  59. 

Where  one  of  two  partners,  with- 
out the  knowledge  or  consent  of 
the  other,  made  an  amicable  set- 
tlement of  and  terminated  a  busi- 
ness transaction  with  another,  re- 
ceiving a  sum  in  cash  and  a  promis- 


355 


*143 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    II. 


given  to  prove  that  at  the  time  of  the  alleged  ratification 
his  copartners  knew  of  those  acts.     It  would  be  absurd  if 


sory  note  for  the  amount  due  the 
firm,  the  use  of  the  cash  by  the 
firm  and  the  acceptance  of  the 
amount  of  the  note  by  the  other 
partner,  after  knowledge  of  the 
settlement,  constitutes  a  ratifica- 
tion by  him  of  such  settlement. 
Levick's  Appeal,  2  Atl.  R.  532. 

The  fact  that  the  other  member 
of  the  firm,  when  a  note  —  signed 
by  one  partner  as  an  individual, 
and  guarantied  by  him  in  the  firm 
name  —  was  presented  for  pay- 
ment, indoi'sed  thereon  a  waiver  of 
notice,  protest,  etc.,  for  the  pur- 
pose of  saving  expense,  cannot  be 
considered  a  ratification  or  adop- 
tion by  the  firm  of  the  unauthor- 
ized act  of  the  partner  in  making 
such  guaranty;  nor  is  the  failure 
to  make  prompt  denial  of  firm  lia- 
bility, on  such  note  being  presented 
for  payment,  sufficient  to  establish 
a  ratification  or  an  admission  of 
liability.  Marsh  v.  Thompson  Nat. 
Bank,  2  Brad.  217. 

J.  T.,  a  member  of  the  firm  of  T. 
&  F.,  whose  business  was  the  lay- 
ing of  wooden  pavement,  accepted 
a  draft  drawn  in  favor  of  the 
plaintiffs,  signing  his  name  "  J.  T., 
for  T.  &  F."  There  was  evidence 
that  F.,  the  other  partner,  had  been 
shown  the  draft,  and  made  offers 
as  to  its  payment.  Held,  that  this 
was  sufficient  evidence  of  a  ratifi- 
cation by  F.  to  send  the  case  to  the 
jury.  Held,  further,  that  evidence 
tending  inferentially  to  disprove 
the  alleged  admission  of  liability 
by  F.  (e.  g.,  that  the  firm  received 
no  consideration)  was  inadmissible. 
Filbert  v.  Bickel,  7  Weekly  Notes 
of  Cases,  217. 


A  partner  assented  to  the  signing 
of  the  firm  name  to  a  proposition 
for  the  sale  of  land,  and  verbally 
agreed  to  be  bound  by  the  acts  of 
his  partners  in  carrying  it  out ;  they 
made  a  contract  and  signed  the 
firm  name  in  his  absence ;  he  signed 
a  deed  in  pursuance  of  that  con- 
tract. Held,  that  if  he  had  not 
authorized  he  had  ratified  the 
making  of  the  contract,  and  was 
therefore  bound  by  it.  Waterman 
v.  Dutton,  6  Wis.  265. 

A  partner  said  he  would  settle  a 
note  which  was  signed  in  the  firm 
name,  but  which  was  not  given  for 
partnership  purposes,  "  if  he  could 
get  the  books,  notes  and  accounts 
from "  the  partner  who  signed  the 
note.  Held,  that  he  did  not  become 
liable  on  the  note,  especially  as  the 
condition  of  this  promise  never 
happened.  Burleigh  v.  Parton,  21 
Tex.  585. 

Where  a  member  of  a  partnership 
had  indorsed  his  own  note  with  the 
name  of  the  firm,  for  his  own  ex- 
clusive benefit,  without  authority 
from  the  other  copartner,  and  the 
indorsee  took  the  note  with  full 
knowledge  of  the  facts,  held,  that 
no  independent  consideration  was 
required  to  support  a  subsequent 
ratification  and  promise,  by  the 
second  copartner,  to  pay  the  note. 
Commercial  Bank  v.  Warren,  15 
N.  Y.  577. 

A  promissory  note  executed  by 
one  partner  after  the  dissolution  of 
the  partnership  may  be  ratified  by 
the  other  partners,  and  will  then 
be  binding  upon  the  firm.  Carter 
v.  Pomeroy,  30  Ind.  438. 

To    constitute  a  ratification  by 


356 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


■144 


in  such  a  case  knowledge  by  him  was  equivalent  to  knowl- 
edge by  them,  (u) 

A  retired  partner  is  not  affected  with  notice  on  the  part 
of  the  continuing  partners  of  what  has  occurred  since  the 
partnership  if  the  agency  subsisting  between  them  has  been 
dissolved,  {x)  Nor  is  an  incoming  partner  affected  with  no- 
tice of  what  occurred  before  he  joined  the  firm,  (y) 

22.  Payments. —  See  ante,  under  the  head  Debts. 

23.  Penalties. —  One  partner  may  bind  the  firm 
under  a  '-penalty  to  observe  a  contract  which  he  is  [*144] 
authorized  to  enter  into  on  its  behalf,  (z) 

24.  Purchases. —  It  has  been  long  decided  that  every 
member  of  an  ordinary  trading  partnership  has  implied 
power  to  purchase  on  the  credit  of  the  firm  such  goods  as 
are  or  may  be  necessary  for  carrying  on  its  business  in  the 
usual  way.  (a)1     This  cannot  be  more  strongly  exemplified 


one  partner  of  the  use  by  another 
partner,  after  dissolution,  of  the 
firm  name,  in  the  renewal  of  a  part- 
nership note,  there  must  be  some 
act  on  the  part  of  the  former  fairly 
implying  a  willingness  to  affirm 
what  had  been  done.  Hatton  v. 
Stewart,  2  Lea  (Tenn.),  233. 

(«)  See  ace.  the  last  note. 

(x)  Adams  v.  Bingley,  1  M.  &  W. 
192. 

(y)  See  per  Jessel,  M.  R.,  in  "Will- 
iamson v.  Barbour,  9  Ch.  D.  536. 

(z)  Beckham  v.  Drake,  9  M.  &  W. 
79. 

(a)  Hyatt  v.  Hare,  Comb.  383. 

1  Where  one  member  of  a  firm 
makes  a  purchase  within  the  scope 
of  the  firm  business  the  firm  will 
be  liable.  Alabama  Fertilizer  Co. 
v.  Reynolds,  79  Ala.  497;  Clark  v. 
Johnson,  90  Pa.  St.  442. 

So  notwithstanding  the  goods 
are  diverted  by  such  purchasing 
partner  to  other  uses,  and  never 
came  into  possession  of  the  firm. 


Clark  v.  Johnson,  90  Pa.  St.  442; 
Dickson  v.  Alexander,  7  Ired.  L.  4; 
Venable  v.  Levick,  2  Head,  351. 

The  purchase  of  a  stone  store- 
house and  a  lot  of  stationery  by  a 
trading  firm  held  to  be  within  the 
scope  of  the  firm  business.  Davis 
v.  Cook,  14  Nev.  265. 

So  as  to  the  purchase,  by  a  mem- 
ber of  a  brewing  company,  of  the 
lease  of  a  brewery.  Stillman  v. 
Harvey,  47  Conn.  26. 

Dealing  in  futures  is  not  pre- 
sumed to  be  incident  to  the  busi- 
ness of  cotton  buyers  and  commis- 
sion merchants.  Gruner  v.  Stucken, 
3  So.  Rep.  (La.)  338. 

Where  several  persons  put  up  a 
building  as  partners,  and  one  of 
them  buys  brick  for  the  purpose, 
without  an  express  understanding 
with  the  vendor  that  it  was  an  in- 
dividual purchase,  and  the  brick 
was  used  in  the  building,  partners 
are  liable  therefor.  Stecker  v. 
Smith,  46  Mich.  14. 


357 


*144 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


than  by  the  case  of  Bond  v.  Gibson,  (b)    There  two  persons 
carried  on  business  as  harness-makers ;  one  of  them  bought 


Where  a  partner  has  contributed 
to  the  capital  of  a  firm  goods 
which  have  been  conditionally  sold 
to  him  by  a  stranger,  the  other 
partner,  if  without  knowledge  of 
the  adverse  claims,  will  not  be  lia- 
ble for  them  to  the  real  owner. 
Boynton  v.  Isaac,  37  Leg.  Intel. 
232. 

As  to  the  authority  of  one  part- 
ner in  a  firm  of  bankers  and  bro- 
kers to  bind  the  firm  by  contract  for 
the  purchase  of  bonds,  see  Johnson 
v.  Trask,  40  Hun  (N.  Y.),  415. 

One  partner  in  a  firm  of  commis- 
sion merchants  cannot  bind  the 
other  by  purchase  on  his  own  ac- 
count on  credit  in  the  partnership 
name.  Alabama  Fertilizer  Co.  v. 
Reynolds,  79  Ala.  497. 

The  purchase  of  the  entire  stock 
of  a  competing  road  is  not  within 
the  scope  of  the  authority  of  a 
partner  of  an  association  organized 
to  build,  equip  and  operate  a  cer- 
tain railroad.  Roberts'  Appeal,  92 
Pa.  St.  407;  S.  C.  9  Weekly  Not. 
Cas.  118. 

A  partner  in  the  firm  of  iron  mas- 
ters and  coal  miners  owning  prop- 
erty of  these  descriptions  has  no 
implied  authority  to  purchase  a 
rolling-mill  in  the  name  of  the  firm ; 
and  his  partner,  who  is  absent  and 
has  not  authorized  the  transaction, 
is  not  liable  on  notes  given  for  the 
purchase  money.  Clay  v.  Carter, 
16  Weekly  Not.  Cas.  385. 

The  plaintiff  bought  of  one  part- 
ner stock  in  a  corporation,  and  took 
from  the  firm  a  power  of  attorney 
authorizing  him  to  procure  a  trans- 


fer on  the  books  of  the  corporation. 
The  firm  then  had  a  large  number 
of  shares  to  its  credit  on  the  books 
of  the  corporation.  The  plaintiff 
delayed  presenting  his  power  of  at- 
torney for  some  months,  till  after 
the  firm  had  sold  all  its  shares  -to 
other  persons,  who  obtained  certifi- 
cates from  the  corporation.  Held, 
that  the  plaintiff  was  not  entitled, 
in  equity,  as  against  a  partner  who 
had  no  knowledge  of  the  transac- 
tion, to  a  decree  for  the  delivery 
to  him  of  a  certificate  of  the  shares 
in  the  stock,  which  had  risen  in 
value,  but  was  entitled  to  a  decree 
for  the  money  paid,  with  interest. 
Wonson  v.  Fenno,  129  Mass.  405. 

If  there  be  an  agreement  of 
partnership,  common  or  special, 
for  the  purpose  of  purchasing  prop- 
erty at  certain  sales,  all  the  pur- 
chases made  at  such  sales  by  either 
of  the  partners  will  be  considered 
as  made  on  the  partnership  ac- 
count, although  the  advances  by 
one  exceed  those  of  the  other. 
Taylor  v.  Taylor,  2  Murph.  70. 

Wherever  the  original  credit 
was  given  to  the  partnership,  that 
will  constitute  a  debt  against  the 
partnership,  notwithstanding  the 
partner  contracting  the  debt  may 
have  given  his  own  separate  secu- 
rity, or  made  himself  personally 
liable  therefor.  Barcroft  v.  Snod- 
grass,  1  Coldw.  430. 

A  sale  of  goods  on  credit  to  one 
partner  in  the  course  of  the  busi- 
ness of  the  partnership  is  a  sale  to 
the  firm,  unless  it  be  made  con- 
trary to  an  express  notice  by  the 


(b)  1  Camp.  185. 


358 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNEKS. 


*1U 


on  the  credit  of  the  firm  a  number  of  bits  to  be  made  up 
into  bridles;  but  instead  of  using  the  bits  for  the  partner- 


other  partner  not  to  trust  the  firm 
on  his  account,  in  which  case  he 
alone  will  be  liable  who  made  the 
purchase,  and  an  action  to  recover 
the  price  cannot  be  maintained 
against  the  firm.  Feigley  v.  Spone- 
berger,  5  Watts  &  S.  567. 

A  copartnership  is  not  chargeable 
for  goods  sold  to  one  of  his  partners 
for  his  separate  use,  although  he 
ordered  them  to  be  charged  to  the 
firm,  if  the  vendor  knew,  at  the 
time,  that  they  wei'e  for  the  sole 
use  of  that  partner.  Gullat  v. 
Tucker,  2  Cranch,  C.  Ct.  33;  Bird 
v.  Lanius,  7  Ind.  615. 

K.  and  M.  were  partners  in  the 
hotel  business;  K.  and  P.  were 
partners  in  the  grocery  business; 
it  was  doubtful  whether  either  had 
a  well-settled  firm  name,  and  there 
was  evidence  that  each  sometimes 
used  and  recognized  the  name  of 
K.  &  Co.  Held,  that  one  selling 
goods  to  K.  and  taking  reasonable 
care  to  ascertain  for  which  firm  K. 
was  dealing,  and  believing  that 
firm  to  be  K.  and  M.,  and  the  goods 
being  adapted  to  the  business  of 
that  firm,  could  hold  that  firm  for 
the  price  of  the  goods.  Baker  v. 
Nappier,  19  Ga.  520. 

When  a  partnership  has  entered 
a  credit  for  an  article  bought  by 
one  partner  in  his  private  capacity 
the  vendor  has  a  right  to  look  to 
the  partnership  for  payment. 
Dishon  v.  Schorr,  19  111.  59. 

To  bind  a  partnership  to  the  pay- 
ment for  goods  delivered  to  third 
persons  it  is  not  enough  to  show 
that  one  of  the  partners  requested 
the  furnishing  of  the  goods  to  such 


third  persons.    Pinckney  v.  Keyler, 
4  E.  D.  Smith,  469. 

Where  one  who  boarded  hands 
in  the  employ  of  a  partnership  was 
authorized  by  a  partner  to  take  up 
goods  on  account  of  the  firm  for 
his  family  use  in  that  business/ 
and,  on  his  representation  to  that 
effect,  goods  were  furnished  him 
on  the  credit  of  the  firm,  though, 
for  convenience,  merely  charged  in 
the  first  instance  to  him,  and  after- 
wards transferred  to  the  account 
of  the  firm,  held,  that  the  firm 
was  liable  therefor,  and  that  he 
was  a,  competent  witness  for  the 
plaintiffs  to  show  the  liability;  a 
fortiori  if  he  were  a  partner  as 
well  as  an  agent.  Scott  v.  Shep- 
herd, 3  Vt.  104. 

In  assumpsit  against  partners, 
under  the  common  counts,  proof 
of  a  promise  by  one  in  the  name  of 
the  firm  is  not  sufficient;  there 
must  be  proof  of  a  joint  promise 
or  of  the  existence  of  the  partner- 
ship. Findlay  v.  Stevenson,  3 
Stew.  48. 

Although  a  purchase  of  goods  by 
one  partner  is  made  in  violation  of 
the  articles,  yet,  if  the  goods  come 
to  and  are  used  by  the  partnership, 
the  firm  is  liable.  Johnson  v.  Bern- 
heim,  76  N.  C.  139. 

Judicial  notice  is  taken  Of  the 
mercantile  custom  of  mutual  cred- 
its, under  which  business  establish- 
ments furnish  each  other's  clerks  i 
or  customers  with  goods,  and  t 
charge  them  to  each  other.  It  is 
within  the  authority  of  the  man- 
aging partner  to  authorize  such 
dealings,  and  when  so  authorized 


359 


*144 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


ship  business  he  pawned  them  for  his  own  use.1  The  seller 
of  the  bits  was  nevertheless  held  entitled  to  recover  their 
price  in  an  action  against  both  partners. 

Goods   supplied   to  one   partner. —  The   firm   is  liable 
although  the  goods  may  have  been  supplied  to  one  only  of 


they  are  binding  until  notice  to  the 
contrary.  Cameron  v.  Blackman, 
39  Miss.  108. 

A  firm  is  not  exonerated  from 
liability  to  pay  for  articles  pur- 
chased by  one  member  for  its  legit- 
imate use  and  business  —  planta- 
tion supplies  in  this  case  —  merely 
because  another  member  has  noti- 
fied the  sellers  not  to  extend  credit 
to  the  former  on  account  of  the 
partnership.  Campbell  v.  Bowen, 
49  Ga.  417. 

If  articles  of  partnership  between 
three  persons  expressly  deny  to  one 
partner  power  to  purchase  without 
the  written  consent  of  the  other 
two,  sales  made  to  the  one,  for  use 
of  the  partnership,  without  such 
consent,  by  persons  having  full  no- 
tice of  the  stipulation,  will  be  held 
to  be  made  on  the  individual  credit 
of  the  partner,  and  not  on  the 
credit  of  the  firm.  Radcliffe  v. 
Varner,  55  Ga.  427. 

Where  defendant  was  at  the 
same  time  a  partner  of  the  plaint- 
iff's and  of  another  firm,  and  pur- 
chased from  the  latter  firm  on 
behalf  of  the  plaintiff's  firm  a 
quantity  of  lumber  which  was  not 
needed  and  was  never  used,  held, 
that  the  burden  was  on  the  defend- 
ant to  show  that  the  lumber  was 
required  for  the  plaintiff's  firm, 
and  not  having  done  so  its  price 
was  properly  disallowed  to  him  in 
taking  firm  account.  Same  ruling 
also  made  as  to  an  expensive  ma- 


chine bought  by  defendant  in  his 
own  name  for  firm  purposes,  with- 
out consulting  the  plaintiff,  but 
never  actually  placed  on  partner- 
ship premises.  Glass  v.  McDonald, 
4  Can.  L.  T.  139. 

Where  a  trading  firm  consists  of 
a  husband,  his  wife,  and  his  wife's 
father,  the  wife  having  separate 
estate,  and  her  father  living  with 
the  husband  and  wife  without  any 
account  being  kept  between  them, 
these  facts  are  evidence  to  show 
that  an  indebtedness  which  in- 
cluded store  and  family  expenses 
was  a  firm  indebtedness.  Haben 
v.  Harshaw,  49  Wis.  379. 

Though  a  purchase  made  by  a 
member  of  a  commercial  firm  is 
one  outside  of  its  ordinary  opera- 
tions, yet  if  made  for  the  benefit 
of  the  firm  and  brought  to  the 
knowledge  of  the  other  partner, 
who  does  not  repudiate  it,  but 
promises  to  pay  the  note  given  in 
the  firm  name  for  the  price,  he  will 
be  bound ;  and  without  the  written 
memorandum  required  of  a  prom- 
ise to  pay  the  debt  of  a  third  per- 
son. Succession  of  Arick,  22  La. 
Ann.  501. 

1  If  a  partner  purchase  goods  in 
the  name  of  the  firm,  although  he 
applies  them  to  his  individual  use, 
the  partnership  is  liable  for  the 
j)rice  to  the  vendor.  Clark  v.  John- 
son, 90  Pa.  St.  442;  Dickson  v. 
Alexander,  7  Ired.  L.  4;  Venable 
v.  Levick,  2  Head,  351. 


360 


CH.  I,  SEC.  If.]  LIABILITIES    OF    PARTNERS. 


<U4: 


the  partners,  and  no  other  person  may  have  been  known  to 
the  supplier  as  belonging  to  the  firm,  (c) 1  But,  as  will  be 
seen  hereafter,  the  firm  is  not  liable  for  goods  ordered  by 
and  supplied  to  one  partner,  and  which  it  was  his  duty  to 
contribute  to  the  joint  stock  of  the  firm,  id) 2 

Non-trading  partnerships. —  The  power  of  one  partner 
to  bind  the  firm  by  a  purchase  of  goods  on  its  credit  is  not 
confined  to  trading  partnerships.  Thus  where  some  print- 
ers and  publishers  agreed  to  share  the  profits  of  a  work,  and 
the  publishers  ordered  paper  for  that  particular  work  and 
became  bankrupt,  the  printers  were  held  liable  for  its  price 
to  the  stationers  who  supplied  it.  (e)  It  is  of  no  conse- 
quence what  the  partnership  business  may  be,  if  the  goods 


(c)  Ruppell  v.  Roberts,  4  Nev.  & 
Man.  31 ;  City  of  London  Gas  Co. 
v.  Nicholls,  2  Car.  &  P.  365 ;  Gar- 
diner v.  Childs,  8  id.  345. 

1  Where  goods  purchased  by  one 
partner  go  into-  the  partnership 
fund  his  copartners  are  liable  for 
the  price,  although  the  partnership 
was  not  known  to  the  seller  at  the 
time  of  the  sale.  Bracken  v.  March, 
4  Mo.  74. 

A  partnership  is  liable  for  lumber 
purchased  by  and  charged  to  one 
of  the  partners,  where  it  was  pur- 
chased for  partnership  purposes. 
Bruches  v.  Anderson,  14  Mo.  441. 

The  declaration  of  a  partner, 
after  he  had  purchased  a  chattel, 
that  he  had  bought  it  for  the  firm, 
is  not  sufficient  nor  competent  evi- 
dence to  render  a  copartner  liable. 
White  v.  Gibson,  11  Ired.  L.  283. 
See  ante. 

Where  A. ,  in  the  storage  business 
and  a  grain  dealer,  made  an  ar- 
rangement with  an  owner  of  corn 
to  store  the  same,  with  the  privi- 
lege of  buying  the  same,  and  then 


formed  a  partnership  with  B.  be- 
fore the  corn  was  delivered,  and 
after  selling  and  shipping  the  grain 
A.  gave  a  note  in  the  firm  name 
for  the  price,  held,  that  the  prior 
arrangement  did  not  limit  his 
power  as  a  partner  after  the  part- 
nership was  formed  to  purchase 
the  grain,  and  that  the  giving  of 
the  firm  note  for  the  price  amounted 
to  a  purchase  for  the  firm,  and 
made  B.  liable  on  the  note.  John- 
son v.  Barry,  95  111.  483. 

(d)  See  book  ii,  ch.  2,  §  3.  Green- 
slade  v.  Dower,  7  B.  &  C.  635,  and 
cases  of  that  class. 

2  The  mere  fact  that  the  buyer  of 
goods  has  put  them  in  a  firm  as 
part  of  his  capital,  does  not  render 
the  firm  liable  to  pay  the  seller  for 
them.  The  burden  is  on  the  cred- 
itor to  show  an  agreement  by  the 
firm  to  assume  such  liability.  Mor- 
litzer  v.  Bernard,  10  Heisk.  361. 

(e)  Gardiner  v.  Childs,  8  Car.  & 
P.  345.  Compare  Wilson  v.  White- 
head, 10  M.  &  W.  503. 


361 


144 


EIGHTS    AND    OBLIGATIONS. 


[liC/OK    II. 


supplied  are  necessary  for  its  transaction  in  the  ordinary 
way.1 


1  See  ante. 

A  large  number  of  persons  asso- 
ciated together  by  agreement  in 
writing,  for  the  purpose  of  trade, 
to  be  conducted  by  the  direction  of 
a  board  of  managers,  a  part  of 
whose  duty  was  "to  provide  a 
store  for  the  company."  Held,  that 
the  managers  had  power  to  pur- 
chase a  store,  and  land  whereon  to 
place  it,  and  to  give  the  notes  of 
the  company  to  secure  the  payment 
of  the  consideration.  Beaman  v. 
Whitney,  20  Me.  413. 

Where  two  parties  undertake  a 
joint  adventure  to  make  a  crop, 
the  one  to  furnish  the  land  and 
supplies  and  the  other  to  furnish 
and  pay  the  labor,  and  the  profits, 
if  any,  to  be  equally  divided,  but 
do  not  hold  themselves  out  as  part- 
ners, or  give  notice  of  the  natiu-e 
of  their  association,  farther  than 
being  seen  co-operating  on  the 
same  plantation, — a  merchant 
dealing  with  the  party  who  merely 
furnished  the  labor,  and  expecting 
to  bind  the  crop,  under  the  Missis- 
sippi agricultural  act  of  1867,  is 
bound,  at  his  peril,  to  acquaint 
himself  with  the  nature  of  the 
association.  Cooper  v.  Frierson,  48 
Miss.  300. 

In  an  agreement  for  a  partner- 
ship for  farming,  an  express  stipu- 
lation that  one  partner  shall  furnish 
the  mules  necessary  for  the  busi- 
ness, and  that  neither  shall  bind 
the  other  by  contracts,  excludes 
the  inference  of  authority  in  the 
other  to  bind  the  partnership  by 
the  purchase  of  mules;  and  such 
power  cannot  be  implied,  as  a  mat- 


ter of  law,  from  the  nature  and 
purposes  of  the  partnership.  Mc- 
Crary  v.  Slaughter,  58  Ala.  230. 

Four  individuals  became  jointly 
interested,  by  an  agreement  in 
writing,  in  a  business  speculation 
involving  the  purchase  of  land  and 
the  cutting  and  sale  of  the  timber 
thereon  on  joint  account.  H.,  one 
of  the  paitie-s,  was,  by  the  terms 
of  the  agreement,  to  be  the  acting 
agent  in  purchasing  the  land  and 
carrying  on  the  business.  Held, 
that  H. ,  in  contracting  for  the  pur- 
chase of  a  tract  of  land,  taking 
possession  of  the  same,  and  cutting 
timber  thei-eon,  was  performing 
the  duty  assigned  to  him  by  his 
associates,  and  that  these  were 
jointly  responsible  for  all  his  con- 
tracts with  the  men  hired  to  labor 
on  such  tract,  and  for  supplies  fur- 
nished to  enable  him  to  prosecute 
the  business.  Mead  v.  Shepard,  54 
Barb.  474.  Compare  Haskinson  v. 
Eliot,  62  Pa.  St.  393. 

When  one  partner  makes  pur- 
chase of  goods  not  connected  with 
the  known  business  of  the  firm, 
although  in  the  name  of  the  firm, 
such  purchase  will  not  bind  the 
firm,  unless  an  express  or  implied 
authority  is  shown,  or  a  subsequent 
ratification  is  proved.  Bankhead 
v.  Alloway,  6  Coldw.  56. 

One  of  two  partners  purchased 
land  and  gave  a  note  for  the  con- 
sideration in  the  partnership  name, 
taking  a  deed  running  to  both,  but 
without  the  knowledge  or  assent 
of  the  other  partner.  The  trans- 
action was  wholly  out  of  the 
line  of  the  business  of  the  partner- 


362 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


:145 


Return  of  goods. —  If  goods  are  sold  to  a  firm  on  credit 
and  are  delivered  to  the  firm,  and  then  one  partner  returns 
them,  the  firm  not  being  able  to  pay  for  them,  the 
property  will  be  vested  in  the  vendor;  *subject,  in  [*145] 
the  event  of  bankruptcy,  to  the  question  of  fraudu- 
lent preference.  (/) 

25.  Receipts. — ■  See  ante,  under  the  head  Debts. 

26.  .Releases,  etc. —  A  covenant  by  one  partner  not  to  sue 
for  a  partnership  debt  does  not  amount  to  a  release  of  that 
debt  by  the  firm,  (</)  although  a  covenant  by  all  the  part- 
ners not  to  sue  would  be  equivalent  to  a  release,  (h)  and  a 
release  by  one  partner  operates  as  a  release  by  the  firm,  (i) l 


ship  and  known  to  be  so  by  the 
payees.  Afterwards  both  partners 
joined  in  a  bond  to  convey  the 
same  land,  the  partner  not  assent- 
ing to  the  said  conveyance  dis- 
claiming in  the  bond  any  interest 
in  the  land,  and  declaring  the  exe- 
cution of  the  bond  to  be  for  the 
benefit  of  his  copartner,  and  that 
he  would  receive  none  of  the  profits 
arising  from  the  transaction.  Held, 
that  he  had  so  confirmed  the 
doings  of  his  partner  as  to  be 
holden  on  the  note.  Dudley  v.  Lit- 
tlefield,  21  Me.  418. 

(/)  De  Tastet  v.  Carroll,  1  Stark. 
88. 

(g)  Walmsley  v.  Cooper,  11  A.  & 
E.  216. 

(h)  Deux  v.  Jefferies,  Cro.  El. 
352. 

(i)2  Ro.  Ab.  Release,  410,  D. ; 
Hawkshaw  v.  Parkins,  2  Swanst. 
539. 

1  A  release  of  errors  by  one  part- 
ner will  bind  his  copartner.  Wood 
v.  Goss,  21  111.  604. 

An  agreement  between  partners 
on  dissolution  that  one  shall  have 
the  settlement  of  their  affairs,  he 
assuming  all  the  debts  of  the  firm, 


and  agreeing  to  pay  to  the  outgo- 
ing partner  all  the  money  contrib- 
uted by  him,  except  what  he  had 
before  drawn  out,  operates  as  an 
assignment  of  the  debts  due  the 
firm  to  the  remaining  partner ;  and 
a  subsequent  release  of  a  debt  due 
the  firm  by  the  outgoing  partner 
to  a  creditor  having  notice  of  the 
agreement  is  void.  Cram  v.  Cad- 
well,  5  Cow.  489.  See,  also,  Lunt 
v.  Stevens,  24  Me.  534;  also,  ante. 

A  release  of  liability  upon  a 
contract  of  warranty,  executed  by 
one  partner  in  the  name  of  the 
firm  after  he  had  sold  his  interest 
in  the  machine  warranted,  is  not 
admissible  to  bind  the  other  part- 
ner. Brayley  v.  Goff,  40  Iowa, 
76. 

A  release  of  the  cause  of  action 
by  one  of  two  plaintiffs,  copart- 
ners, made  by  a  fraudulent  conni- 
vance with  the  defendant,  is  void. 
Beatson  v.  Harris,  60  N.  H.  83. 

An  action  at  law  cannot  be 
maintained  by  copartners  to  re- 
cover a  debt  which  has  been  dis- 
charged by  one  of  them  and  paid 
by  a  set-off  of  his  separate  debt, 
with  his  assent,  when  the  defend- 


*146  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

Setting  aside  bona  fide  releases  by  one  partner.— This 

last  proposition,  viz.,  that  a  release  by  one  partner  is  in 
point  of  law  a  release  by  all,  is  strongly  illustrated  by  those 
cases  in  which  attempts  have  been  unsuccessfully  made  by 
one  partner  to  set  aside  a  release  given  by  a  copartner 
•without  his  consent. 

In  Farnival  v.  Weston,  (k)  the  members  of  a  firm  sued 
the  defendant  for  a  libel  on  the  firm  published  by  him. 
One  of  the  partners,  without  the  consent  of  the  others,  re- 
leased the  defendant,  and  there  being  no  fraud  in  the  case 
the  court  refused  to  set  the  release  aside.  In  Arton  v. 
Booth,  (I)  the  two  plaintiffs,  Arton  and  Dawson,  had  been 
partners,  but  they  had  dissolved  partnership;  and  it  was 
agreed  between  them  that  Arton  should  get  in  the  debts  of 
the  firm,  and  that  Dawson  should  not  interfere  with  him. 
The  defendant  was  sued  for  a  debt  owing  to  the  plaintiffs, 
and  after  action  brought  Dawson  released  him  on  receiving 
payment.  Although  the  release  deprived  the  plaintiffs  of 
their  costs,  the  court  would  not  interfere,  as  no  case  of  fraud 
was  made  out.  So  in  Phillies  v.  Clagett,  (m)  where  part- 
ners brought  an  action  against  the  defendant  for  illegally 
pledging  their  property,  the  court  gave  him  leave  to  plead 
a  release  previously  given  by  one  of  the  partners. 

Setting  aside  fraudulent  releases. —  However,  if  it  can 
be  shown  that  one  partner  has,  in  fraud  of  his  copartners 
and  in  collusion  with  the  defendant,  executed  a  release  for 
the  purpose  of  preventing  them  from  enforcing  a  just  de- 
mand, the  defendant  will  not  be  allowed  to  plead  this  re- 
lease as  a  defense  to  an  action  against  him.  Thus, 
[*146]  in  Barker  *v.  Richardson,  (n)  the  plaintiffs,  Barker 
and  OwTen,  had  been  partners,  but  they  had  dissolved 

ant  acted  in  good  faith.     Chase  v.        (m)  11  M.  &  W.  84. 

Bean,  58  N.  H.  183.  (u)  1  Y.  &  J.  362.     See,  too,  As- 

(fc)  7  Moore,  356.  pinall  v.  The  London  and  N.  W. 

(0  4  Moore,  191.     See,  too,  Jones    Rail.  Co.  11    Ha.  325;    Phillips  v. 
v.  Herbert,  7  Taunt.  421,  and  com-    Clagett,  11  M.  &  W.  84. 
pare  Barker  v.  Richardson,  1  Y.  & 
J.  362,  stated  lower  down. 

364 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*146 


partnership;  and  it  was  agreed  that  Barker  should  get  in 
the  debts  owing  to  the  firm,  and  if  necessary  sue  for  the 
same.  The  defendant  was  indebted  to  the  firm  and  had 
notice  of  the  above  agreement.  He  was  also  a  creditor  of 
Owen  on  a  private  account,  and  Owen,  against  Barker's 
consent,  gave  a  receipt  for  the  partnership  debt,  and,  after 
the  commencement  of  the  action  by  Barker  for  the  recov- 
ery of  that  debt,  gave  the  defendant  a  formal  release. 
The  evidence  showed  that  the  release  was  given  to  defeat 
the  action,  to  prevent  Barker  from  recovering  the  debt  due 
the  firm,  and  as  part  of  a  scheme  for  discharging  Owen's 
private  debt  to  the  defendant.  Under  these  circumstances 
the  release  was  not  allowed  to  be  pleaded.1 

27.  Representations. —  The  firm  is  bound  by  all  represen- 
tations made  by  a  partner  whilst  acting  within  the  scope 
of  his  real  or  implied  authority,  and  having  reference  to 
the  business  of  the  firm ;  (o) 2  but  not  by  statements  made 


1 A  canal  company  owed  G.  &  K. 
for  work  and  materials  on  an  aque- 
duct $76,589.89,  and  $16,250.50  for 
preliminary  work  on  the  same. 
The  company  secretly  obtained 
from  K.  a  release  of  all  G.  &  K.'s 
claims  against  it  for  $3,000  cash, 
and  $3,000  more  in  the  company's 
stock  at  par.  Held,  that  this  re- 
lease was  void,  it  being  a  gross 
fraud  on  its  face.  South  Fork 
Canal  Co.  v.  Gordon,  6  Wall.  561. 
See  ante,  note. 

(o)  Rapp  v.  Latham,  2  B.  &  A. 
795;  Blair  v.  Bromley,  2  Ph.  354; 
Wickham  v.  Wickham,  2  K.  &  J. 
478. 

2 See  Stockwell  v.  Dillingham,  50 
Me.  443,  McKee  v.  Hamilton,  33 
Ohio  St.  7;  and  the  cases  cited 
below;  also,  Admissions  and  Dec- 
larations, ante,  note. 

The  general  rule  that  where  one 
makes  a  statement  as  received  from 
another,  and  refers  directly  to  that 


other,  the  former  is  not  bound  for 
the  truth  of  the  facts  thus  stated, 
is  not  applicable  to  the  case  of  part- 
ners, wTho  are  responsible  for  each 
other's  statements  in  regard  to  their 
joint  transactions.  Cook  v.  Cast- 
ner,  9  Cush.  266. 

A  partner  sold  certain  promissory 
notes  belonging  to  the  firm  for  the 
benefit  of  the  firm,  stating  to  the 
purchaser  that  they  were  good 
notes  and  would  be  paid,  that  the 
indorser  was  worth  a  certain  sum, 
and  the  maker  another  certain 
sum,  which  representations  were 
false.  Held,  that  the  firm  were 
bound  by  the  representations  of 
the  partner,  and  an  action  on  the 
warranty  might  be  maintained 
against  all  the  members.  Sweet  v. 
Bradley,  24  Barb.  549. 

Representations  by  a  member  of 
a  firm  to  the  payees  and  indorsees 
of  notes  of  the  firm,  without  knowl- 
edge that  the  notes  were  tainted 


365 


>U6 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


by  him  as  to  bis  authority  to  do  that  which  the  nature  of 
the  business  of  the  firm  does  not  impliedly  warrant,  (p) 

The  liability  of  partnerships  for  false  and  fraudulent  rep- 
resentations will  be  discussed  in  the  next  section  of  this 
chapter. 

See  further  on  this  subject  ante,  under  the  head  Admis- 
sions. 

[Retainer}] 

28.  Sales. —  Any  person  can  dispose  of  any  of  the  part- 
nership goods ;  (q) 2  and  in  one  case  it  was  even  held  that 
he  could  make  a  valid  sale  of  the  partnership  books.  (/•) 


with  usury,  that  the  debt  repre- 
sented by  the  notes  was  all  right, 
and  would  be  promptly  paid,  are 
binding  on  the  firm,  and  estop 
them  from  setting  up  usury  in  de- 
fense to  a  suit  on  the  notes.  French 
v.  Rowe,  15  Iowa,  563. 

One  of  a  firm  of  warehousemen 
falsely  represented  to  a  person  who 
advanced  money  on  the  faith  of 
such  representation  that  the  one 
to  whom  the  money  was  advanced, 
and  to  whom  he  had  given  receipts 
in  the  firm  name,  had  on  storage 
with  the  firm  a  certain  quantity  of 
grain.  The  innocent  partners  were 
held  bound  by  the  representation, 
and  responsible  for  the  money  ad- 
vanced. Griswold  v.  Haven,  25 
N.  Y.  595. 

Where  one  of  a  firm  makes  rep- 
resentations that  certain  flour  was 
bought  on  account  of  a  third  per- 
son, and  that  the  firm's  interest  is 
limited  by  the  amount  advanced  by 
them  in  making  the  purchase,  the 
firm  cannot  assert  their  ownership 
as  against  one  who  has  purchased 
of  said  third  person.  Bemis  v. 
Becker,  1  Kan.  226. 

"Where    one    of     two     partners 


makes  fraudulent  representations, 
whereby  goods  are  obtained  and 
consigned  to  his  partner,  replevin 
in  the  cepit  lies  against  both. 
Olmsted  v.  Hotailing,  1  Hill,  317. 
(p)  Ex  parte  Agace,  2  Cox,  312. 

1  Where  a  partnership  exists  be- 
tween two  attorneys,  and  one  of 
them  receives  a  retainer's  fee,  con- 
ducts the  trial  of  the  cause,  and 
charges  the  fee  therefor  upon  the 
firm  books,  the  presumption  is  that 
of  a  retainer  of  the  firm,  and  that  the 
fee  accrued  to  the  firm ;  but  such 
presumption  is  liable  to  be  rebut- 
ted. Harris  v.  Pearce,  5  Bradw. 
622. 

(q)  Lambert's  Case,  Godb.  244. 

2  One  partner  may  sell  the  whole 
of  the  partnership  property  if  the 
sale  be  free  from  fraud  on  the  part 
of  the  purchaser;  and  such  sale 
dissolves  the  partnership,  although 
the  term  for  which  it  was  formed 
has  not  expired.  Whitton  v.  Smith, 
1  Freem.  Ch.  231 ;  Deckard's  Case, 

5  Watts,  22;  Arnold  v.  Brown,  24 
Pick.  89;  Williams  v.  Barnett,  10 
Kan.  455;  Hyrschfelder  v.  Keyser, 
59  Ala.  338;  Williams  v.  Roberts, 

6  Coldw.  493 ;  Schneider  v.  Sansom, 


(r)  Dore  v.  Wilkinson,  2  Stark.  287. 

366 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


■146 


62  Tex.  201;  Avery  v.  Fisher,  28 
Hun,  508 ;  Ellis  v.  Allen,  80  Ala. 
515;  Christ  v.  Firestone,  10  Cent. 
Rep.  (Pa.)  67;  S.  C.  11  Atl.  Rep. 
395  (assignment  of  a  patent-right). 

See,  however,  to  a  greater  or  less 
extent  contra,  Kimball  v.  Hamil- 
ton, etc.  Ins.  Co.  8  Bosw.  495; 
Reid  v.  Smith,  2  Ont.  69 ;  S.  C.  2 
Can.  L.  T.  305;  18  Can.  L.  J. 
(N.  S.)  205;  Drake  v.  Thyng,  37 
Ark.  228;  Hunter  v.  Waynick,  67 
la.  555;  Blaker  v.  Sands,  29  Kan. 
551 ;  Liberty  Sav.  Bk.  v.  Campbell, 
75  Va.  534;  Harkey  v.  Tillman,  40 
Ark.  551;  Myers  v.  Moulton,  71 
Cal.  498. 

If  such  sale  is  consummated 
without  notice  to  the  other  partner 
and  works  wrong  or  injury  to  him 
his  relief  is  in  equity ;  but  if  he  ac- 
quiesces in  it  or  declines  to  dissent, 
a  partnership  creditor  cannot  as- 
sail it  except  on  grounds  which 
would  avoid  a  sale  by  the  firm. 
Ellis  v.  Allen,  80  Ala.  515. 

Even  if  such  sale  is  held  not  valid 
against  a  copartner  not  consenting 
thereto,  it  is  binding  upon  the  part- 
ner making  the  sale,  who  thereby 
disposes  of  all  his  interest  in  the 
joint  property  of  the  partnership. 
Blaker  v.  Sands,  29  Kan.  551. 

Where  a  partner,  in  the  absence 
of  his  copartner,  who  has  fur- 
nished the  capital,  sells  the  partner- 
ship effects  and  business  at  a  sacri- 
fice to  parties  having  a  knowledge 
of  the  interest  of  the  copartner,  and 
where  there  is  no  necessity  for  the 
sale,  a  trust  will  attach  to  the  prop- 
erty in  the  hands  of  the  purchasers, 
and  they  and  the  vendor  will  be 
held  to  a  rigid  accountability  to 
the  copartner.  Drake  v.  Thyng,  37 
Ark.  228. 

Under  section  2430,   subdivision 


3,  Civil  Code,  California,  providing 
that  a  partner  as  such  has  no  au- 
thority to  dispose  of  the  whole  of 
the  partnership  property  at  once, 
unless  it  consists  entirely  of  mer- 
chandise, a  stallion  kept  for  breed- 
ing purposes  is  not  merchandise. 
Myers  v.  Moulton,  12  Pac.  R.  505. 

A  sale  of  the  whole  property  of 
the  firm  in  fraud  of  the  rights  of 
his  copartner  to  a  purchaser  in  good 
faith  transfers  the  title  to  the 
whole  property.  Crites  v.  Wilkin- 
son, 65  Cal.  559. 

In  the  absence  of  fraud,  one 
member  of  a  firm  may,  notwith- 
standing the  protest  of  his  partner, 
transfer  all  the  property  of  the 
partnership,  in  consideration  of  the 
promise  of  the  purchaser  to  pay  its 
debts,  though  not  yet  due.  Graser 
v.  Stellwagen,  25  N.  Y.  315.  See, 
also,  Chadwick  v.  Burrows,  42  Hun, 
39. 

But  a  sale  of  all  the  partnership 
property  by  one  of  the  partners 
against  the  prohibition  of  the  other 
partner  is  suspicious ;  and  the  pur- 
chasers at  such  a  sale,  with  knowl- 
edge of  the  circumstances,  purchase 
it  at  their  peril.  Williams  v.  Rob- 
erts, 6  Cold.  493. 

The  mere  fact  that  one  member 
of  an  ordinary  planting  partner- 
ship is  intrusted  with  the  manage- 
ment of  the  plantation  in  Louisi- 
ana will  not  authorize  him  to  make 
a  dation  en  paiement  of  certain 
property  of  the  partnership  to  one 
of  the  partnership  creditors,  and 
thus  place  the  interest  of  his  co- 
partner in  said  property  beyond  the 
reach  of  the  other  creditors  of  the 
partnership.  Bass  v.  Messick,  30 
La.  Ann.  373. 

The  active  partner  of  a  mercan- 
tile partnership  may  transfer  its 


367 


:146 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II 


funds.  Piatt  v.  Oliver,  3  McLean, 
27. 

The  appropriation  of  the  partner- 
ship funds  by  the  active  partner 
to  the  rebuilding  of  a  house  for 
purposes  of  speculation  transcends 
the  range  of  partnership  transac- 
tions, and  unless  sanctioned  by  the 
copartner  the  funds  so  expended 
would  be  properly  charged  to  the 
active  partner  as  so  much  appro- 
priated to  his  private  use,  and  the 
rents  of  the  house  would  belong  to 
him ;  otherwise  the  rents  would  be 
accounted  for  as  partnership  as- 
sets. Roberts  v.  Totten,  13  Ark.  (509. 

Upon  a  bill  to  reach  property  of 
a  debtor,  the  fact  that  certain  stock 
which  he  had  in  a  canal  company 
was  partnership  property,  in  which 
another  person  was  interested,  and 
that  the  stockholders  were  person- 
ally liable  for  the  debts  of  the  com- 
pany, was  held  to  be  no  objection 
to  granting  an  injunction  to  re- 
strain him  from  parting  with  it. 
Eager  v.  Price,  2  Paige,  333. 

If  A.  be  a  silent  partner  with  B. 
he  is  the  only  person  who  can  ob- 
ject to  the  validity  of  a  sale  by  B. 
alone  of  goods  owned  in  common 
by  them  as  partners.  Derby  v. 
Gallup,  5  Minn.  119. 

One  partner  cannot  maintain  an 
action  of  any  kind  against  a  person 
who  purchases  from  a  copartner 
the  partnership  effects,  though 
such  sale  was  made  by  the  copart- 
ner in  fraud  of  the  partnership 
rights,  and  to  satisfy  his  own  indi- 
vidual debt.  Wells  v.  Mitchell,  1 
Ired.  L.  484. 

One  partner  cannot  sell  or  mort- 
gage his  undivided  interest  in  a 
specific  part  of  the  property  be- 
longing to  the  partnership.  Love- 
joy  v.  Bowers,  11  N.  H.  404. 


A  member  of  a  copartnership 
Bold  and  assigned  to  another  "all 
his  interest  in  and  to  the  property, 
goods,  wares  and  merchandise,  and 
debts  belonging  to  the  firm."  Held, 
that  a  debt  owing  by  himself  to 
the  firm  did  not  pass  by  the  assign- 
ment, the  interest  of  the  assignor 
being  only  what  remained  over 
and  above  the  amount  of  his  indebt- 
edness to  the  firm.  Van  Scoter  v. 
Lefferts,  11  Barb.  140. 

The  mere  fact  that  persons  are- 
mercantile  partners  does  not  em- 
power one  of  them  to  execute  an 
agreement  for  the  sale  of  real  es- 
tate in  the  name  of  both.  Mc- 
Whorter  v.  McMahan,  1  Clark,  400. 

Where  the  object  of  a  partner- 
ship is  to  purchase,  improve  and 
own  a  certain  tract  of  land,  and 
there  is  no  express  agreement  that 
either  party  shall  have  the  power 
to  alienate  any  part  of  the  land  ac- 
quired, no  such  power  can  be  im- 
plied from  the  nature  of  the  scope 
of  the  partnership  business.  Berry 
v.  Folkes,  60  Miss.  576. 

While  it  is  competent  for  one 
partner  to  bind  the  other  by  a  sale 
of  the  good-will  of  the  business,  it 
is  out  of  his  power  to  bind  his  part- 
ner by  a  contract  not  to  go  into 
the  same  business.  Morean  v.  Ed- 
wards, 2  Tenn.  Ch.  347. 

Although  one  partner  can  trans- 
fer the  property  of  the  firm  to  its 
creditors  in  discharge  of  its  indebt- 
edness he  cannot  apply  the  part- 
nership property,  funds  or  securi- 
ties, either  by  way  of  sale,  pledge 
or  mortgage,  to  the  discharge  or 
security  of  his  own  private  debt, 
without  the  consent  of  the  other 
partners,  either  express  or  implied. 
Caldwell  v.  Scott,  54  N.  H.  414; 
Hyrschfelder    v.  Keyser,    59  Ala. 


368 


CH.  I,  SEC.  II.]  LIABILITIES   OF    PARTNERS. 


*146 


338;  Stegall  v.  Co  ley,  49  Miss.  761 ; 
Geery  v.  Goi  kro  t,  33  N.  Y.  Supe- 
rior Ct.  147;  Williams  v.  Barnett, 
10  Kan.  455;  Post  v.  Kimberly,  9 
John.  470;  Cochran  v.  Nat.  Bk.  83 
Ky.  36 ;  Liberty  Sav.  Bk.  v.  Camp- 
bell, 75  Va.  534;  Stebbins  v.  Will- 
iard,  53  Vt.  665.  See,  also,  ante, 
note. 

Where  a  partner,  with  the  assent 
of  his  copartner,  appropriates  firm 
property  to  the  payment  of  his  in- 
dividual debts,  he  will,  notwith- 
standing such  assent,  be  held  to 
account  to  his  copartner  for  the 
property  so  appropriated.  Currier 
v.  Bates,  62  la.  527. 

The  rule  that  a  partner  cannot, 
without  his  copartner's  consent, 
appropriate  the  firm  property  to 
the  payment  of  his  individual 
debts,  is  not  affected  by  the  fact 
either  of  the  creditor's  knowledge 
or  ignorance  of  the  partnership 
ownership.  Geery  v.  Cockroft, 
supra;  Rogers  v.  Batchelor,  12 
Pet.  221 ;  Ackles  v.  Stockle,  56  Mo. 
558.  See,  however.  Flannagan  v. 
Alexander,  50  Mo.  50. 

If,  however,  one  partner  pur- 
chases property  with  the  partner- 
ship effects,  and  sells  such  property 
to  a  bona  fide  purchaser  without 
notice,  the  other  partners,  it  is  held, 
cannot  follow  the  property  in  the 
hands  of  such  purchaser.  Chipley 
v.  Keaton,  65  N.  C.  534. 

One  who,  in  ignorance  of  a  co- 
partnership, takes  in  payment  of 
the  individual  note  of  a  member, 
given  for  his  private  debt,  notes  of 
third  parties  running  to  such  mem- 
ber, but  in  fact  the  property  of  the 
copartnership,  will  be  protected 
as  a  bona  fide  holder  for  value. 
Kellogg  v.   Fancher,   23  Wis.    21. 


See,  also,  Nichols  v.  Sober,  38  Mich . 
678;  ante,  266,  note. 

Where  a  partner  who  is  author- 
ized to  close  up  the  affairs  of  the 
firm,  and  who  has  advanced  his 
private  funds  in  payment  of  its 
debts,  in  good  faith  disposes  of 
property  of  the  firm  to  an  amount 
less  than  the  sum  so  due  him,  and 
in  satisfaction  of  a  debt  due  from 
him  to  a  third  person  acting  in 
like  good  faith,  and  believing  the 
sale  authorized  by  the  firm,  such 
disposition  of  the  property  cannot 
be  avoided  by  another  member  of 
the  firm  so  long  as  all  the  other 
debts  of  the  firm  are  paid  or  se- 
cured. Corwin  v.  Suydani,  24  Ohio 
St.  209. 

One  partner,  acting  in  good  faith, 
sold  the  partnership  property  to 
satisfy  his  individual  indebtedness, 
and  an  action  of  replevin  was 
brought  by  the  purchaser  against 
a  creditor  of  the  firm  who  had  at- 
tached the  property,  after  the  sale 
and  delivery,  as  the  firm  property, 
and  for  the  firm  debt.  Held,  that 
the  right  of  the  purchaser  was  su- 
perior. Stokes  v.  Stevens,  40  Cal. 
391. 

A  sale  by  a  partner,  in  payment 
of  his  own  debt,  of  goods  which 
are  in  fact  goods  of  the  partner- 
ship, but  which  the  partnership 
has  so  intrusted  to  hirn  as  to  en- 
able him  to  deal  with  as  his  own, 
and  to  induce  the  public  to  believe 
to  be  his,  and  which  the  creditor 
receives  in  good  faith  and  without 
notice  that  they  are  the  goods  of 
the  partnership,  is  valid  against 
the  partnership  and  its  creditors. 
Locke  v.  Lewis,  124  Mass.  1. 

A  partner  cannot  appropriate 
the  partnership  effects  to  the  pay' 


Vol.  1  —  24 


369 


*146 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


ment  of  his  individual  debts ;  but 
he  may  say  to  a  hotel-keeper,  "  buy 
your  groceries  of  us,  and  we  will 
take  it  out  in  whole  or  in  part,  in 
the  board  either  of  ourselves  or  of 
our  clerks ; "  and  this  contract  will 
hind  the  firm.  Perry  v.  Butt,  14 
Ga.  699. 

On  the  failure  of  a  partnership 
an  appropriation  of  the  joint  prop- 
erty by  one  partner  to  pay  his  in- 
dividual debt  is  fraudulent  and 
void  as  against  the  pai'tnership 
creditors.  Second  Nat.  Bank  v. 
Fair,  9  East.  Rep.  821 ;  S.  C.  6  Cent. 
Rep.  321;  7  Atl.  Rep.  892;  Yale  v. 
Yale,  13  Conn.  185;  French  v. 
Lovejoy,  12  N.  H.  458;  Hartley  v. 
White,  94  Pa.  St.  31 ;  S.  C.  9  Weekly 
Not.  Cas.  286. 

A  partner  cannot  appropriate 
partnership  assets  on  the  ground  of 
indebtedness  of  the  partnership  to 
himself  without  assent  of  the  co- 
partners. Saylor  v.  Mockbie,  9 
Iowa,  209. 

A  bona  fide  sale  of  partnership 
property  for  the  benefit  of  the 
partnership  is  good  as  against  a 
mortgage  of  the  same  property  by 
one  of  the  partners  to  secure  an 
individual  debt.  Shaw  v.  McDon- 
ald, 21  Ga.  395. 

If  a  partner  buys  a  chattel  for 
his  private  use,  and  agrees  to  pay 
for  it  in  goods  to  be  delivered  by 
his  firm  on  the  order  of  the  seller, 
and  the  firm  is  changed  by  the  ad- 
dition of  a  new  member,  but  con- 
tinues the  business  of  the  old  firm 
in  the  old  place,  and  subsequently 
the  goods  are  delivered  according 
to  the  agreement,  the  firm  cannot 
maintain  an  action  for  the  price  of 
the  goods,  though  the  other  mem- 
bers of  the  firm  were  ignorant  of 


the  agreement.     Tay  v.  Ladd,  15 
Gray,  296. 

Where  one  member  of  a  firm 
received  stolen  property,  knowing 
that  such  property  had  been  stolen, 
and,  in  order  to  prevent  a  prosecu- 
tion for  the  felony,  he  paid  the 
value  of  the  stolen  goods  out  of 
the  partnership  funds  unknown  to 
his  copartner,  held,  that  the  in- 
nocent copartner  could  not  main- 
tain an  action  against  the  person  re- 
ceiving the  money  to  recover  such 
money  back.  He  was  affected  by 
the  act  of  his  co-plaintiff  in  the  suit. 
Johnson  v.  Byerly,  3  Head,  194. 

If  a  partner  sells  goods  it  raises 
an  implied  promise  on  the  part  of 
the  vendee  to  pay  the  partnership 
for  them,  subject,  however,  to  be 
controlled  by  any  express  contract 
which  may  have  been  made  be- 
tween the  vendee  and  all  the  part- 
ners that  the  former  was  not  to 
pay  the  partnership,  but  to  credit 
the  amount  of  the  goods  on  an  in- 
dividual claim  against  the  partner 
who  sold  the  goods  in  favor  of  the 
vendee.  Broaddus  v.  Evans,  63  N. 
C.  633;  Ramey  v.  McBride,  4 
Strobh.  12. 

As  to  the  proper  remedy,  where 
one  has  applied  partnership  funds 
and  effects  to  the  payment  of  his 
individual  debt  without  his  part- 
ner's consent,  see  Viles  v.  Bangs, 
36  Wis.  131 ;  Estabrook  v.  Messer- 
smith,  18  id.  545. 

A  forced  sale  by  one  partner  of 
the  property  of  the  firm,  not  in  the 
course  of  its  business,  confers  no 
title  on  the  purchaser  who  buys 
with  notice  of  the  nature  of  the 
transaction.  Wallace  v.  Yeager, 
4  Phil.  251. 

A  stipulation  in  partnership  arti- 
370 


CH.  I,  SEC.  II.]  LIABILITIES    OF    PARTNERS. 


*146 


cles  that  the  farm  produce  of  the 
partnership  business  is  all  to  be 
sent  to  certain  factors,  and  held 
till  sold  by  consent  of  all  the  part- 
ners, will  affect  whoever  has  notice 
of  the  same ;  and  a  sale  by  one  part- 
ner, in  violation  of  the  stipulation, 
will  pass  to  a  purchaser  having 
such  notice  no  title  as  against  the 
partnership.  And  proceeds  of 
partnership  property  realized  by 
the  plaintiffs  by  a  wrongful  sale  by 
them  of  such  property  are  not  the 
subject  of  set-off  in  favor  of  some 
of  the  partners  in  a  suit  at  law 
against  them  only,  without  bring- 
ing in  the  other  partner  as  a  party, 
and  alleging  all  the  equitable  facts 
requisite  to  entitle  the  defendants 
to  the  relief  they  claim.  Radcliffe 
v.  Varner,  55  Ga.  427. 

Where  a  member  of  a  firm  of 
dealers  in  dry  goods  sold  a  judg- 
ment in  favor  of  the  firm  for  corn, 
held,  that  this  was  a  misappli- 
cation of  the  effects  of  the  partner- 
ship; that  the  purchaser  was 
chargeable  with  a  knowledge  of 
the  fact ;  and  that,  by  his  contract, 
he  took  no  right  to  receive  the  pro- 
ceeds of  the  judgment.  Vance  v. 
Campbell,  8  Humph.  524. 

L.,  W.  &  B.  were  partners  deal- 
ing in  cattle.  L.,  on  behalf  of  the 
firm,  sold  some  eighty  head  to  F., 
who  knew  of  the  partnership,  and 
had  had  dealings  with  it.  B. 
claimed  to  have  purchased  the 
cattle  from  his  firm  some  months 
prior  to  the  sale  to  F.  Held,  that 
if  there  was  no  change  in  the  pos- 
session or  control  of  the  cattle  at 
the  time  of  B.'s  purchase,  and  if 
F.,  without  any  knowledge  of  such 
prior  purchase,  or  of  any  facts  cal- 
culated to  arouse  suspicion  and 
put  him  on  inquiry,  and  finding 


the  cattle  in  the  possession  of  the 
firm,  bought  in  good  faith  for  a 
valuable  consideration  and  in  the 
ordinary  course  of  business,  his 
title  would  be  good  against  B.,  and 
that  notwithstanding  the  latter's 
purchase  was  also  in  good  faith  and 
for  a  valuable  consideration.  Such 
case  is  determined  by  the  laws  of 
partnership  rather  than  by  the  pro- 
vision of  the  statute  of  frauds. 
Birks  v.  French,  21  Kans.  238. 

Subsequently  to  the  time  of  B.'s 
purchase,  but  prior  to  that  of  F., 
L.,  on  behalf  of  the  firm,  turned 
the  cattle  over  to  F. ,  under  a  feed- 
ing contract,  by  the  terms  of 
which  the  latter  was  to  take  the 
cattle  to  a  certain  place  and  there 
feed  them  until  the  succeeding 
July;  then  the  cattle  were  to  be 
sold,  a  certain  sum  to  be  paid  to  the 
firm,  and  the  balance,  if  any,  di- 
vided between  the  firm  and  F.,  and 
T.  was  not  to  remove  or  dispose  of 
the  cattle  without  the  consent  of 
the  firm.  This  contract  was  as- 
signed by  L.  for  the  firm  to  F.  at 
the  time  of  his  purchase.  Subse- 
quently, but  before  July,  B.  took 
the  cattle  from  T.  under  a  writ  of 
replevin.  Thereafter  he  settled 
with  T.  paying  him  his  charges  for 
feeding,  and  the  latter  sold  his  in- 
terest in  the  cattle.  After  this  F. 
brought  this  action  against  B.  to 
recover  the  possession  of  the  cat- 
tle. Held,  that  F.  could  main- 
tain the  action  and  was  entitled  to 
the  possession,  and  that  any  ad- 
verse rights  of  possession  created 
by  the  feeding  contract  were  de- 
stroyed by  the  transactions  be- 
tween B.  and  T.  Birks  v.  French, 
supra. 

Want  of  authority  in  a  firm  of 
lawyers  to  sell  claims  held  for  col- 


371 


147 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


If  by  any  event  the  partners  become  mere  tenants  in 
common  of  the  partnership  goods,  and  one  assumes  to  sell 
them,  the  purchaser,  although  he  may  only  become  tenant 
in  common  with  the  other  partners,  will,  nevertheless,  if  he 
gets  possession  of  the  goods,  be  able  to  retain  them  as 
against  his  co-tenants;  for  no  action  lies  by  one  tenant  in 
common  against  another  for  the   recovery  of  the   goods 

belonging  to  both,  (s) 
[*147]       *The  question  whether  a  partner's  power  to  sell  is 
in  any  way  affected  by  the  Factors'  Acts  has  already 
been  noticed,  (t) 

29.  Servants. —  One  partner  has  implied  authority  to  hire 
servants  to  perform  the  business  of  the  partnership,  (u) l  and 
the  writer  presumes  that  one  partner  has  also  implied  au- 
thority to  discharge  them,  although  he  cannot  do  so  against 
the  will  of  his  copartners.  (%) 2 


lection  is  no  defense  to  a  suit 
against  one  partner  to  recover 
money  paid  the  other  by  a  pur- 
chaser for  claims  which  he  has  not 
received.  Pierce  v.  Jarnagin,  57 
Miss.  107. 

(s)Litt.  g  323;  Fox  v.  Hanbury, 
Cowp.  445.  And  see  Buckley  v. 
Barber,  G  Ex.  182;  ante,  p.  61. 

(*)  Ante,  p.  140. 

(«)  Beckham  v.  Drake,  9  M.  & 
W.  79.  A  servant  of  the  firm  is  a 
servant  of  each  of  the  partners, 
and  may  be  described  accordingly 
in  an  indictment  for  stealing  the 
separate  property  of  one  of  the 
partners.     R.  v.  Leech,  3  Stark.  70. 

1  Where  two  persons  as  partners 
in  the  erection  of  buildings  have 
dealt  largely  with  persons  engaged 
in  the  roofing  of  buildings,  and  one 
of  the  partnership  employ  such 
person  in  and  about  a  building  of 
his  own,  and  the  person  doing  such 
work  has  no  notice  of  the  fact  that 
the  work  is  for  the  individual  part- 


ner, but  doec  the  work  on  the  firm 
credit  as  in  prior  dealings,  a  recov- 
ery by  him  for  his  services  against 
the  firm  will  not  be  disturbed. 
Bartlett  v.  Powell,  90  111.  .331. 

A  contract  by  one  partner  to  pay 
stipulated  wages  to  an  employee 
binds  the  partners  to  pay  for  such 
services  as  may  thereafter  be  ren- 
dered under  such  contract,  though 
some  of  such  services  were  rendered 
after  a  third  person  had  become  a 
copartner  in  the  firm  business. 
Froun  v.  Davis,  97  Ind.  401. 

(x)  Donaldson  v.  Williams,  1  Cr. 
&  M.  345.  But  see  Dixon  on  Part. 
139,  contra. 

2  Where  an  agreement  was  made 
in  writing  by  one  partner,  signing 
the  name  of  the  firm,  in  which  it 
was  agreed  that  the  firm  should 
pay  to  the  brother  of  the  partner 
making  the  agreement  a  salary  for 
services  to  be  rendered  by  him; 
and  the  evidence  showed  that  the 
party  thus  employed  was  unfit  to 


37i 


CH.  I,  SEC.  III.]  LIABILITIES    OF   PARTNERS. 


*147 


30.  S/u'ps. —  Where  necessary,  one  partner  may  bind  the 
firm  by  chartering  a  ship  on  its  behalf,  and  one  partner  mav 
mortgage  a  ship  belouging  to  the  firm.  (?/) 

[31.  Storage  of  firm  property}} 


Section  III. —  Liability  of  Partners  in  Respect  of  Torts 
and  Frauds. 

Liability  of  principals  for  the  torts  and  frauds  of  their 
agents. —  If  it  were  necessar}^,  in  order  that  one  person 
should  be  liable  for  the  tort  or  fraud  of  another,  that  the 
former  should  have  authorized  the  commission  of  such  tort 
or  fraud,  it  would  be  a  comparatively  easy  matter  to  deter- 
mine in  any  particular  case  whether  a  tort  or  fraud  coin- 


discharge  the  duties  imposed  on 
him  by  the  agreement,  and  that 
the  agreement  was  kept  from  the 
knowledge  of  the  other  partners, 
held,  that  under  such  circum- 
fctances  no  effect  should  be  given 
to  the  agreement  as  an  evidence  of 
indebtedness  against  the  creditors 
of  the  partnership.  Beste  v.  Cred- 
itors, 15  La.  Ann.  55. 

Three  partners  took  a  nephew  ten 
years  old ;  he  lived  with  them  sev- 
enteen years  and  worked  for  them ; 
they  agreed  to  pay  him  wages  all 
the  time  he  stayed  with  them. 
After  the  death  of  one  partner  the 
survivors  settled  with  the  nephew 
and  paid  him  what  they  thought 
due.  Held,  that  the  facts  consti- 
tuted a  valid  contract,  and  that  the 
estate  of  the  deceased  partner  was 
liable  for  a,  third  of  the  amount. 
Moister's  Appeal,  74  Pa.  St.  166. 

If  agents  of  an  unincorporated 
joint  stock  company,  acting  within 
the  scope  of  their  employment,  hire 
a  mechanic  to  do  work  for  the  com- 
pany, its  members,  as  partners,  are 
liable  to  him  for  his  work,  although 


they  did  not  know  by  whom  the 
work  was  done,  nor  exactly  what 
was  to  be  done,  and  as  between 
themselves  their  articles  of  associ- 
ation had  not  been  complied  with, 
and  those  articles  gave  no  author- 
ity in  terms  to  anybod}'  to  incur  a 
debt  for  the  company.  Bodwell  v. 
Eastman,  106  Mass.  525. 

(//)  See,  as  to  chartering,  Thomas 
v.  Clarke,  2  Stark.  451 ;  and  as  to 
mortgaging,  Ex  parte  Hovvden,  2 
M.  D.  &  D.  574.  The  circumstance 
that  a  person  is  registered  as  a 
part  owner  does  not,  per  se,  ren- 
der him  liable  for  the  acts  of  the 
other  owners.  Myers  i\  Willis,  17 
C.  B.  77,  and  18  id.  886 ;  Brodie  v. 
Howard,  17  C.  B.  109. 

1  The  storage  in  a  warehouse  by 
one  partner,  without  the  consent 
of  the  others,  of  partnership  goods, 
as  his  own  individual  property, 
will  not  change  the  right  of  posses- 
sion or  title  of  the  partnership,  the 
possession  of  one  being  the  posses- 
sion of  all,  and  either  may  receive 
the  goods  and  discharge  the  bailee. 
Crosswell  v.  Lehmann,  54  Ala.  363. 
73 


*148 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


mitted  by  an  agent  could  or  could  not  be  imputed  to  his 
principal.  But  as  a  principal  is  bound  not  only  by  the 
authorized  acts  of  his  agent,  but  also  by  such  unauthorized 
acts  as  fall  within  the  scope  of  the  authority  apparently 
conferred  upon  him,  the  question  whether  a  tort  or  fraud 
committed  by  an  agent  is  or  is  not  imputable  to  his  princi- 
pal becomes  one  of  considerable  difficulty;  for  it  is  obvious 
that  it  does  not  follow  from  the  circumstance  that  such  tort 
or  fraud  was  not  authorized,  that  therefore  the  principal  is 

not  legally  responsible  for  it.  (s) 
[*148]      ^General  principles.—  In  order  that  responsibility 

may  attach  to  the  principal  in  respect  of  a  tort  or 
fraud,  it  is  necessary  : 

1.  That  he  shall  have  authorized  it  in  the  first  instance ; l  or, 

2.  That  it  shall  have  been  done  on  his  behalf  and  he  shall 
have  ratified  it;  (a)2  or 

3.  That  it  shall  have  been  committed  for  his  benefit  by 
the  agent  in  the  course  and  as  part  of  his  employment,  (b) 3 


(z)  Pollock  on  Torts,  63  et  seq. ; 
Story  on  Agency,  §  452 ;  Paley  on 
Agency,  294  et  seq. 

1  See  post. 
(a)  Ratification  can  only  be  of  an 

act  done  for  the  person  ratifying. 
Wilson  v.  Tuniman,  6  Man.  &  Gr. 
236. 

2  The  assent  of  one  of  two  part- 
ners to  what  is  being  done  by  a 
person  acting  as  a  deputized  con- 
stable in  the  service  of  an  execu- 
tion in  favor  of  the  firm  is  suffi- 
cient to  bind  them  both.  Harvey 
v.  McAdams,  32  Mich.  472. 

"Where  one  partner  of  a  firm 
acting  as  agents  for  the  owner  of 
demised  property  committed  a 
trespass  in  expelling  the  tenant 
and  removing  his  goods  from  the 
premises,  held,  that  the  other  part- 
ner, who  took  no  part  in  the  act 
and  knew  nothing  of  it  at  the 
time,  and  neither  advised  nor  di- 

374 


rected  it,  could  not  be  rendered 
liable  on  the  mere  ground  of  his 
subsequent  approval  and  sanction- 
ing of  the  act  after  its  commission. 
Grand  v.  Van  Vleck,  69  111.  478. 

Where  one  partner  has  an  attach- 
ment made  on  account  of  a  firm 
debt,  and  the  goods  are  afterwards 
sold  under  an  execution  in  the 
same  suit,  and  the  proceeds  are 
applied  to  meet  the  debt,  this  is 
proof  of  a  ratification  of  the  at- 
tachment by  all  the  partners ;  and 
if  it  be  wrongful  they  will  all  be 
liable  in  an  action  of  tort.  Gurler 
v.  Wood,  16  N.  H.  539. 

See  post. 

(?))  As  to  the  meaning  of  this  ex- 
pression, see  Burns  v.  Poulson,  L. 
R.  8  C.  P.  563;  Pollock  on  Torts, 
72  et  seq. 

3  See,  generally,  Ewell's  Evans 
on  Agency,  *465  et  seq. 


Cil.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *149 

That  this  last  is  sufficient  is  obvious  from  those  cases  in 
which  masters  have  been  held  liable  for  the  negligence  of 
their  servants;  (c)  litigants  for  irregularities  committed  by 
their  solicitors  in  the  course  of  the  litigation  to  conduct 
which  they  are  retained;  (<2)  merchants  for  frauds  com- 
mitted by  their  factors  and  brokers  whilst  acting  on  their 
behalf ;  (e)  and  shop-keepers  for  the  illegal  acts  o*f  their' 
shopmen  whilst  in  the  sfcop  and  attending  to  its  business.  (/) 

Exceptions  to  the  rule  respondeat  superior.—  On  the 
other  hand,  a  principal  is  not  liable  for  the  torts  or  frauds 
of  his  agent,  except  upon  one  or  other  of  the  three  above- 
mentioned  grounds.  Thus,  a  principal  is  not  liable  for  the 
wilful  acts  of  his  agent,  if  not  done  in  the  course  of  his  em- 
ployment and  as  part  of  his  business;  (g) l  and  this  is  true 
not  only  of  assaults,  batteries,  libels,  and  the  like,  but  also 
of  frauds.  The  maxim  respondeat  superior  does  not  render 
a  principal  liable  for  the  frauds  of  his  agent,  if  the  agent 
has  been  dealt  with  as  a  principal,  (h)  nor  unless  the  frauds 
have  been  committed  by  the  agent  for  the  benefit  of  his 
principal,  and  in  the  course  and  as  part  of  his  own  employ- 
ment, {i) 

Further,  a  principal  is  not  bound  by  a  contract 
which  is  a  *fraud  on  him,  and  is  known  to  be  so  by  [*149] 
the  person  entering  into  the  contract,  (k) 

Having  made  these  preliminary  observations,  it  is  pro- 
posed, in  the  present  section,  to  examine  the  liability  of 
partners  for  torts  and  frauds,  as  distinguished  from  contracts. 

(c)  See  the  last  case,  and  Patten  J  See  Cooley  on  Torts,  535,  536 ; 
v.  Rea,  2  C.  B.  N.  S.  606.  Ewell's  Evans    on  Agency,   *480, 

(d)  Collett  v.  Foster,  2  H.  &  N.     and  note. 

356.  (h)  Ex  parte  Eyre,  1  Ph.  227. 

(e)  Hern  v.  Nichols,  1  Salk.  289.  (i)  Grant  v.  Norway,  10  C.  B.  665; 
(/)  Grammar  v.   Nixon,    1    Str.     Coleman  v.  Riches,  16  id.  104. 

653 ;  Amory  v.  Delaniirie,  id.  505.  (k)  British  and  American  Tel.  Co. 

(g)  McManus  v.  Crickett,  1  East,  v.  Albion  Bank,  L.  R.  7  Ex.  119; 

106 ;  Croft  v.  Alison,  4  B.  &  A.  590 ;  Phosphate  of  Lime  Co.  v.  Green,  L. 

A.-G.  v.   Siddon,  1   Cr.   &  J.  220.  R.  7  C.  P.  43.   And  see,  as  to  the  ef- 

Compare  Limpus  v.  Lon.  Gen.  Om.  feet  of  having  benefited  by  such  a 

Co.  1H.&C.  526.  contract,  id.  p.  55. 

375 


■149 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


First,  as  regards  torts. 

Torts  of  partners. —  It  follows  from  the  principles  of 
agency,  coupled  with  the  doctrine  that  each  partner  is  the 
ag^nt  of  the  firm  for  the  purpose  of  carrying  on  its  busi- 
ness in  the  usual  way,  that  an  ordinary  partnership  is  liable 
in  damages  for  the  negligence  of  any  one  of  its  members  in 
conducting  the  business  of  the  partnership.1     It  has  accord- 


i  The  members  of  a  firm  are  in- 
dividually liable  in  actions  of  tort 
for  the  acts  of  the  firm,  their 
agents  and  servants,  within  the 
scope  of  the  partnership,  and  for 
such  acts  may  be  sued  individually. 
Stockton  v.  Frey,  4  Gill,  406 ;  Hall 
v.  Younts,  87  N.  C.  285 ;  Wiley  v. 
Stewart,  11  West.  Rep.  (111.)  91 ;  S. 
C.  14  N.  East.  Rep.  835.  See,  also, 
Cunningham  v.  Wood  bridge,  76 
Ga.  302. 

The  other  partners  are  liable  for 
the  tortious  acts  of  one  partner  in 
the  course  of  the  firm  business, 
even  if  they  did  not  assent  to  the 
same.  Mode  v.  Penland,  93  N.  C. 
292. 

Thus  a  person  may  be  liable  for 
a  trespass  upon  land  committed 
by  his  partner  for  the  benefit  of 
the  firm,  and  of  which  he  had  the 
benefit,  although  he  himself  never 
went  upon  the  land.  Gerhardt  v. 
Swaty,  57  Wis.  24. 

The  penalty  of  twelve  and  one- 
half  per  cent,  damages,  and  that 
the  attorneys'  names  should  be 
stricken  from  the  rolls  upon  return 
of  execution  indorsed  nulla  bona, 
for  failure  to  pay  over  money  col- 
lected, does  not  apply  to  a  member 
of  a  firm  who  did  not  participate 
in  the  receipt  or  wrongful  appro- 
priation of  the  money.  Such  pen- 
alty can  only  be  inflicted  upon  a 
party  derelict  in  duty  and  person- 


ally guilty  of  wrong.  Porter  v. 
Vance,  14  Lea  (Tenn.),  629.  See, 
also,  Ex  parte  Flood,  23  New  Br.  86. 
An  action  for  slanderous  words 
spoken  of  the  plaintiff  by  a  mut- 
ual aid  association,  of  which  he 
was  then  a  member,  will  not  lie 
against  the  association  as  a  part- 
nership, but  against  the  individual 
wrong-doers.  Gilbert  v.  Crystal 
F.  Lodge,  S.  C.  Ga.,  Nov.  1,  1887; 
4  S.  E.  Rep.  905. 

If  a  limited  partnership,  organ- 
ized under  the  act  of  June  2,  1874, 
by  its  manager  or  authorized  agent, 
knowingly  trespasses  upon  the 
land  of  another  and  mines  coal 
therefrom,  trespass  may  be  main- 
tained against  the  association  to 
recover  double  or  treble  the  value 
of  the  coal  mined  or  converted, 
under  the  provisions  of  the  act  of 
May  8,  1876,  authorizing  such  ac- 
tion against  any  person  or  corpora- 
tion. Oak  Ridge  Coal  Co.  v. 
Rogers,  108  Pa.  St.  147;  S.  C.  16 
Weekly  Not.  Cas.  855;  42  Leg. 
Intel.  336. 

All  torts  are  joint  and  several. 
Where  one  partner  commits  a  tort 
in  the  prosecution  of  firm  business 
the  injured  party  may,  at  his  elec- 
tion, sue  all  the  partners  or  any  one 
or  more  of  them.  Mode  v.  Pen- 
land,  93  N.  C.  292;  Roberts  v. 
Johnson,  58  N.  Y.  613. 

A  tort  committed  by  one  partner 


376 


CH.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS. 


449 


ingly  been  held  that  a  firm  of  coach  proprietors  is  answer- 
able for  the  negligent  driving  of  a  partnership  coach  by  one 


will  not  bind  the  partnership  or 
the  other  copartner,  unless  it  be 
either  authorized  or  adopted  by  the 
firm,  or  be  within  the  proper  scope 
and  business  of  the  partnership. 
Graham  v.  Meger,  4  Blatchf.  129; 
Heirn  v.  McCaughan,  32  Miss.  17 ; 
Taylor  v.  Jones,  42  N.  H.  25 ;  Einst- 
man  v.  Black,  14  Brad.  381. 

Defendants  were  partners  en- 
gaged in  the  business  of  apotheca- 
ries; the  plaintiff  came  to  their 
store  and  called  for  extract  of 
dandelion.  One  of  the  partners 
undertook  to  put  up  for  him  a 
quantity  of  the  drug,  and  in  doing 
so  by  mistake  put  up  extract  of 
belladonna  and  delivered  same  to 
plaintiff,  none  of  which,  however, 
was  taken  by  the  plaintiff.  The 
plaintiff,  at  the  time,  helped  him- 
self to  a  dose  of  the  medicine  from 
the  jar  standing  on  defendants' 
counter  and  was  thereby  injured. 
Held,  that  if  it  be  admitted  that 
one  of  the  defendants  was  negli- 
gent in  permitting  plaintiff  to  help 
himself,  without  paying  for  it,  to  a 
dose  of  medicine  which  was  proved 
not  to  be  the  medicine  intended, 
but  a  poison,  yet,  as  giving  away 
medicine  was  not  a  part  of  the  firm 
business,  the  other  partner  would 
not  be  liable  for  such  negligence. 
Gwynn  v.  Duffield,  66  la.  708;  S. 
C.  61  la.  64. 

One  partner  in  a  firm  engaged  in 
dealing  in  furniture  and  draperies 
is  not,  merely  because  of  being  a 
partner,  liable  for  a  libel  published 
by  another  partner  or  a  servant  of 
the  firm  by  placing  a  placard  on  a 
piece  of  furniture,  the  property  of 
the  firm,  and  offering  it  for  sale. 


Woodling  v.  Knickerbocker,  31 
Minn.  268. 

Partners  are  liable  in  solido  for 
the  torts  of  one  of  their  number 
if  committed  by  him  in  the  course 
of  the  business  of  the  partnership : 
but  if  a  partner  commit  a  tort, 
not  as  a  partner,  but  as  an  individ- 
ual, in  respect  to  a  matter  entirely 
foreign  to  the  business  of  the  part- 
nership, the  other  partners  are  not 
liable.  Schwabacker  v.  Riddle,  84 
111.  517. 

Where,  therefore,  one  partner 
induces  a  stranger  to  purchase  the 
interest  of  the  other  partners  in  the 
firm  business,  by  fraudulent  rep- 
resentations, the  parties  selling  are 
not  liable  for  such  false  represen- 
tations, unless  they  instigate  or 
approve  them,  or  the  partner  mak- 
ing them  is  acting  as  their  agent 
in  making  them.  The  mere  fact 
of  their  relation  as  partners  will 
not  make  them  liable.  Schwa- 
backer v.  Riddle,  supra. 

All  the  members  of  a  partner- 
ship are  liable  for  an  injury  oc- 
casioned by  the  negligence  of  one 
of  them,  or  of  servants  employed 
by  the  partnership  while  transact- 
ing business  of  the  firm.  Linton 
v.  Hurley,  14  Gray,  191 ;  Haley  v. 
Case,  7  N.  E  Rep.  877;  McCar- 
ragher  v.  Gaskell,  42  Hun,  451. 

Thus  partners  in  the  practice  of 
medicine  are  all  liable  for  an  injury 
to  a  patient  resulting  from  the 
negligence,  either  of  omission  or 
commission,  of  any  one  of  the 
partners  within  the  scope  of  the 
firm  business ;  but  from  an  injury 
resulting  from  the  act  of  one  part- 
ner outside  of  the  common  busi- 


377 


*149 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


of  the  firm,  the  coach  being  driven  for  the  firm  in  the  or- 
dinary course  of  business ;  (0  and  that  two  partners  are  lia- 


ness,  offending  partner  alone  is  re- 
sponsible. Hyrne  v.  Erwin,  23  S. 
C.  226. 

So  the  owner  of  a  horse  bor- 
rowed by  a  partner  to  be  used  in 
the  firm  business,  and  lost  through 
his  neglect  or  other  wrong  doing, 
rnay  recover  therefor  against  the 
partnership.  Witcher  v.  Brewer, 
49  Ala.  119. 

An  action  was  brought  against 
B.  as  surviving  partner  of  the  firm 
of  B.  &  C,  and  it  was  shown  that 
each  of  the  partners  was  engaged 
in  separate  business  on  his  own  ac- 
count besides  the  business  of  the 
firms.  C.  being  about  to  go  to 
San  Francisco  to  purchase  goods 
for  the  firm,  R.  delivered  to  him  a 
package  of  United  States  treasury 
notes  and  securities.  On  the  way 
to  that  city  C.  lost  his  life.  After- 
ward R.  tried  to  collect  his  claim 
from  C.'s  estate.  It  did  not  ap- 
pear what  had  become  of  the  notes 
and  securities  after  their  delivery 
to  C.  Held,  that  the  es'idence  was 
too  meager  to  justify  the  conclu- 
sion that  B.  was  chargeable  as  a 
copartner  of  C.  Roney  v.  Buck- 
land,  5  Nev.  219. 

The  direction  to  levy  execution 
upon  a  particular  subject,  being  an 
incident  to  the  obtaining  payment 
of  the  legal  process,  when  a  part- 
ner gives  such  direction  while  act- 
ing in  the  collection  of  a  debt  due 
the  partnership,  the  presumption 
is  that  he  had  the  countenance  and 
assent  of  the  other  partner;  and 
both  are  presumptively  liable  for 


the  trespass  if  the  levy  is  wrong- 
ful. Chambers  v.  Clearwater,  1 
Abb.  App.  Dec.  341. 

It  is  not  necessary  there  should 
be  a  joint  conversion  in  fact  in 
order  to  implicate  all  the  partners, 
as  such  a  conversion  may  arise  by 
construction  of  law.  An  assent  by 
some  of  the  partners  to  a  conver- 
sion by  the  others  will  make  them 
wrong-doers  equally  with  the  rest, 
provided  the  conversion  was  for 
their  use  and  benefit,  and  that  they 
were  in  a  situation  to  have  origi- 
nally commanded  the  conversions. 
Loomis  v.  Barker,  69  111.  360. 

Where  property  is  sold  upon  ex- 
ecution under  a  void  judgment  in 
favor  of  a  firm,  trover  will  lie  not 
only  against  the  constable  who 
seized  the  property,  but  against  the 
judgment  creditors  if  they  took 
part  in  the  proceedings  after  judg- 
ment. So  held  where  one  partner 
received  the  property  and  refused 
to  give  it  up,  while  the  other  de- 
clined to  do  anything  about  it,  but 
referred  the  owner  to  his  partner. 
Whatever  one  partner  does  in  the 
collection  of  a  firm  debt  is  presum- 
ably done  with  the  other's  consent. 
Rolfe  v.  Dudley,  58  Mich.  208. 

If  one  partner,  without  express 
authority  from  his  copartners,  be- 
gins a  suit  by  attachment  for  the 
recovery  of  a  partnership  debt,  and 
goods  of  a  stranger  are  wrongfully 
seized,  all  the  copartners  will  be 
liable.     Kuhn  v.  Weil,  73  Mo.  213. 

Where  one  partner  placed  a 
claim  in  the  hands  of  a  constable 


{I)  Moreton  v.  Hardern,  4  B.  &  C. 
Lester,  3  C.  P.  D.  121. 


223.     And  see,  as  to  ships,  Steele  v. 


378 


CH.  I,  SEC.  III.]  LIABILITIES    OF   PARTNERS. 


*H9 


ble  for  not  keeping  the  shaft  of  a  mine  in  proper  order, 
although  one  of  them  only  actually  superintended  it.  (m) 


for  collection,  and  under  which 
property  of  a  stranger  to  the  pro- 
cess was  seized  and  sold  under  at- 
tachment or  execution,  and  the 
other  partner  was  present  at  the 
sale  and  bid  on  the  property,  and 
treated  and  spoke  of  the  property 
as  having  been  taken  and  sold  on 
the  process  issued  upon  a  claim 
due  the  firm,  and  he  received  the 
proceeds  of  the  sale  as  a  payment 
on  such  claim,  held,  in  an  actipn 
of  trover  by  the  owner  against  the 
partners,  that  they  were  both  liable 
for  the  conversion.  Loomis  v. 
Barker,  69  111.  360. 

If  a  member  of  a  firm  in  the  due 
course  and  within  the  scope  of  the 
business  of  the  partnership  com- 
mits a  tort  by  seizing  and  taking 
the  property  of  another,  and  the 
same  is  appropriated  to  the  use  and 
benefit  of  the  firm,  thereby  in- 
creasing its  assets,  the  other  part- 
ners will  be  liable  for  the  same. 
Durant  v.  Eogers,  87  111.  508;  Re 
Ketchum,  1  Fed.  Rep.  815;  Rubin- 
son  v.  Goings,  63  Miss.  500. 

So  even  though  the  proceeds  of 
the  property  be  converted  to  the 
use  of  the  individual  partner. 
Todd  v.  Jackson,  75  Ind.  272.  See, 
also,  Gilchrist  v.  Brande,  58  Wis. 
184. 

If  a  firm,  acting  through  an  agent 
or  one  of  the  partners,  while  en- 
gaged in  the  regular  course  of  the 
business  of  the  firm,  innocently  or 
wrongfully   appropriates  chattels, 


other  than  money,  or  what  has  the 
quality  of  money,  and  sells  them 
and  receives  and  uses  in  its  busi- 
ness the  proceeds,  or,  without  a  sale, 
uses  them  in  the  firm's  business, 
the  firm  is  liable  for  conversion ; 
and  it  is  wholly  immaterial  that  all 
or  any  of  the  members  of  the  firm 
were  ignorant  of  the  wrong  com- 
mitted, or  innocent  of  any  wrong- 
ful intent.  In  re  Ketchum,  1  Fed. 
Rep.  815. 

The  firm  is  liable  for  the  misap- 
propriation of  money  under  such 
circumstances,  where  the  innocent 
partner  on  the  facts  proved  appears 
to  have  no  equity  to  avail  himself 
of  the  payment  of  the  money  to 
the  firm,  as  a  payment  between 
himself  and  his  copartner  of  money 
in  settlement  or  adjustment  of  any 
balance  due  to  him  on  account  of 
the  partnership  business,  or  as  a 
payment  of  money  to  him  upon 
any  consideration  whatever,  in  re- 
ceiving which  he  relied  upon  his 
copartner's  possession  as  proof  of 
ownership,  where,  by  reasonable 
inquiry,  such  innocent  partner 
could  have  discovered  the  source 
from  which  the  misappropriated 
money  came.  In  re  Ketchum,  1 
Fed.  Rep.  815. 

A  partner,  innocent  in  fact,  may 
be  charged  for  conversion  by  his 
copartners,  in  the  regular  line  of 
firm  business,  the  profits  and  com- 
missions thereon  having  gone  to 
the  firm  account.     Castle  v.    Bul- 


(m)  Mellors  v.  Shaw,  1  B.  &  Sm. 
437 ;  Ashworth  v.  Stanwix,  7  Jur. 
N.  S.  467,  and  3  E.  &  E.  701.  See, 
as  to  irregular  executions  of  writs 


by  one  of  two  partners,  Duke  of 
Brunswick  v.  Slowman,  8  C.  B. 
317. 


379 


*149 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


So  a  partnership  is  liable  for  the  negligence  of  its  servants 
acting  in  the  course  of  their  employment  by  the  firm,  (n)  x 
Breach  of  revenue  laws.— If  one  partner,  in  conducting 
the  business  of  the  firm,  is  guilty  of  a  breach  of  the  revenue 
laws,  all  the  partners  are  jointly  and  severally  answerable 
for  the  consequent  penalties,  although  they  may  not  them- 
selves have  authorized  or  been  parties  to  the  illegal  conduct 
of  their  copartner,  (o)2 


lard,    23    How.     172.      See,    also, 
Fletcher  v.  Ingram,  46  Wis.  193. 

A  conversion  by  one  of  a  firm  to 
which  goods  have  been  sent  to  be 
made  up  does  not  excuse  the 
owner  from  paying  the  other  part- 
ners, and  therefore  he  may  bring 
trover  against  the  guilty  partner 
alone.  Stevens  v.  Faucet,  24  111. 
483. 

(m)  Stables  v.  Eley,  1  Car.  &  P. 
614. 

1  If  a  firm  of  attorneys  prac- 
ticing only  in  Baltimore  receive  a 
note  for  collection  in  Carroll  county 
with  the  privity  of  both  partners, 
and  they  employ  an  attorney  in 
Carroll  count}-,  they  are  responsi- 
ble for  his  default.  Brent  v.  Davis, 
9  Md.  217. 

An  action  for  injuries  sustained 
through  the  negligence  of  an  em- 
ployee of  a  firm  may  be  brought 
against  any  one  or  more,  or  all,  of 
its  members.  Roberts  v.  Johnson, 
58  N.  Y.  613. 

(o)R.  v.  Stranyforth,  Bunb.  97; 
A.-G.  v.  Burges,  id.  223;  A.-G.  v. 
Weeks,  id.  ;  R.  v.  Manning,  Comyn, 
616.  See,  also,  Mullins  v.  Collins, 
L.  R.  9  Q.  B.  292 ;  A.-G.  v.  Siddon, 
1  Cr.  &  J.  220.  Compare  Newman 
V.  Jones,  17  Q.  B.  D.  132. 

2  Every  partner  is  civilly  liable 
for  violations  of  the  revenue  law 
by  his  copartners,  whether  he  knew 


of,  or  consented  to,  such  violations 
or  not.  United  States  v.  Thomas- 
son,  4  Biss.  99. 

Tort  committed  by  a  fraudulent 
undervaluation  of  goods  at  the 
custom-house  is  joint  and  several, 
and  on  proof  of  the  debt  in  bank- 
ruptcy the  United  Slates  is  entitled 
to  priority  out  of  any  of  the  pro- 
ceeds of  either  of  the  joint  or  sev- 
eral estates,  without  reference  to 
what  may  be  the  particular  claim 
of  priority  in  its  proof  of  debt. 
In  re  Vetterlein,  20  Fed.  Rep.  109. 

Partners  are  jointly  and  sever- 
ally liable  for  the  circulation  of 
change  bills  by  their  clerk,  in  vio- 
lation of  the  Alabama  Revised 
Code,  section  3G43.  although  they 
did  not  jointly  assent  thereto,  and 
did  know  when  the  bills  were 
emitted.  Barnett  v.  State,  54  Ala. 
579. 

Where  two  persons  composing  a 
partnership  make  and  sign,  in  their 
partnership  name,  a  false  return  to 
the  assessor  of  internal  revenue, 
they  may  be  jointly  indicted  there- 
for. United  States  v.  McGinnis.  1 
Abb.  U.  S.  120. 

Fraudulent  misconduct  of  a  part- 
ner, from  which  the  constructive 
liability  to  pay  money  may  arise 
as  against  the  firm,  is  not  suffi- 
cient to  justify  an  order  to  strike  a 
solicitor  from   the  rolls  in  whom 


380 


CH.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *150 

Wilful  torts.—  As  a  rule,  however,  the  wilful  tort  of  one 
partner  is  not  imputable  to  the  firm.1  For  example,  if  one 
partner  maliciously  prosecutes  a  person  for  stealing 
partnership  property,  the  firm  *is  not  answerable  ["150] 
unless  all  the  members  are,  in  fact,  privy  to  the  ma- 
licious prosecution,  (p)  But  a  wilful  tort  committed  by  a 
partner  in  the  course,  and  for  the  purpose,  of  transacting 
the  business  of  the  firm,  may  make  the  firm  responsible.  (?) 


there  has  been  no  personal  mis- 
conduct. In  re  McCaughey,  3 
Ont.  425. 

Fraudulent  conduct  of  one  part- 
ner will  not  warrant  an  order  of 
arrest  against  his  copartner,  on  the 
ground  of  intent  to  dispose  of  their 
property  with  intent  to  defraud 
their  creditors,  where  no  such  con- 
duct is  proved  as  against  the  per- 
son to  be  arrested.  Scott  v.  Reed, 
8  N.  Y.  Civ.  Proc.  269. 

As  to  the  criminal  liability  of 
one  member  of  a  firm  for  wrongful 
conversion  of  public  funds  by  the 
firm  of  which  he  is  a  member, 
though  he  was  absent  from  the 
state  when  the  money  was  re- 
ceived, see  People  v.  Lyon,  33 
Hun  (N.  Y.),  623. 

A  conviction  of  A.  and  B.,  who 
were  in  partnership,  for  an  offense 
several  in  its  nature,  namely,  keep- 
ing intoxicating  liquor  for  sale, 
adjudging  that  they  for  said  offense 
should  forfeit  and  pay  $50,  and,  in 
default  of  payment,  be  imprisoned 
for  forty  days,  is  bad ;  a  penalty 
ought  to  be  imposed  upon  the 
parties  severally.  Ex  parte  How- 
ard, 25  N.  Brum  191. 

A   dry -goods  firm  held  not  re- 


sponsible for  the  penal  acts  of  their 
agent,  done  without  their  knowl- 
edge, in  pirating  a  copyrighted 
photograph  and  attaching  the 
copies  to  goods  as  labels.  Schreiber 
v.  Sharpless,  6  Fed.  Rep.  175. 

A  partner  in  a  dram-shop  is 
criminally  liable  for  the  illegal 
sale  of  liquor  by  his  partnership  to 
a  minor,  although  he  was  absent  at 
the  time  of  the  sale  and  had  no 
knowledge  of  it.  Robison  v.  The 
State,  38  Ark.  641. 

i  See  Ewell's  Evans  on  Agency, 
*480,  and  note;  Rosenkrans  v. 
Earlier,  115  111.  331. 

Where,  therefore,  one  partner, 
without  the  knowledge  of  the 
other,  maliciously  procures  the 
arrest  of  the  debtor  of  the  firm, 
and  such  act  fails  to  be  of  any 
benefit  to  the  firm,  the  partner  not 
participating  in  the  unlawful  act 
will  not  be  liable  for  the  arrest 
and  imprisonment.  Rosenkrans  v. 
Barker,  115  III.  331. 

(p)  Ar buckle  v.  Taylor,  3  Dow. 
160. 

(g)  See  Limpus  v.  Lon.  Gen.  Om. 
Co.  1  H.  &  C.  526;  PoUock  on 
Torts,  80  et  seq. 


381 


*150 


RIGHTS    AND    OB  LIGATIONS. 


[hook    ii. 


Secondly,  as  regards  frauds. 

Frauds  of  partners.— An  ordinary  firm  is  liable  for 
frauds  committed  by  one  of  its  members  whilst  acting  for 
the  firm  and  in  transacting  its  business;  and  the  innocent 
partners  cannot  divest  themselves  of  responsibility  on  the 
ground  that  they  never  authorized  the  commission  of  the 
fraud.1    On  the  other  hand,  the  firm  is  not  liable  for  the  other 


1  A  fraudulent  act  or  representa- 
tion by  one  partner,  or  deceit  prac- 
ticed by  him,  within  the  scope  of 
the  general  partnership  authority, 
will  make  the  other  partners  liable, 
although  ignorant  thereof.  Durant 
V.  Rogers,  87  111.  508;  Wolf  V. 
Mills,  56  111.  360;  Chester  v.  Dick- 
erson,  54  N.  Y.  1 ;  Rogers  v.  Ayde- 
lotte,  1  Cincinnati,  81 ;  Locke  v. 
Stearns,  1  Met.  560;  Manufactur- 
ers', etc.  Bank  ?>.  Gore,  15  Mass. 
75,  81 ;  Boardman  v.  Gore,  id.  331 ; 
1  [awkins  v.  Appleby,  2  Sandf.  421 ; 
Reynolds  v.  Waller,  1  Wash.  164; 
Doremus  v.  McCormick,  7  Gill,  49; 
Tenney  v.  Foote,  95  111.  101; 
Bradner  v.  Strong,  89  N.  Y.  299; 
S.  C.  23  Hun,  445;  Scott  v.  Haynes, 
12  Mo.  App.  597;  Peck  ham  Iron 
Co.  v.  Harper,  41  Ohio  St.  100 
Coleman  v.  Pearce,  26  Minn.  123 
Strang  v.  Bradner,  114  U.  S.  555 
Thvving  v.  Clifford,  136  Mass.  482 
Wilson-O'Bear  Grocery  Co.  v. 
Cole,  26  Mo.  App.  5. 

But  the  firm  is  not  chargeable 
for  the  fraud  of  one  partner  com- 
mitted outside  the  scope  of  the  firm 
business.  Pierce  v.  Jackson,  6 
Mass.  242;  Sherwood  v.  Marwick, 
5  Me.  295. 

Where  A.,  on  entering  into  part- 
nership with  B.,  purchases  an  in- 
terest in  a  stock  of  goods  held  by 
B.,  and  the  goods  are  afterwards 
seized  on  attachment  as  the  prop- 


erty of  a  third  person,  and,  in  an 
action  by  A.  and  B.  against  the  at 
taching  officer,  it  appears  thai  the 
goods  wen-  Bold  to  B,  by  the  at- 
tachment  debtor,  and  that  snob 
sale  wbb  fraudulent  and  void  as  to 
the  attaching  creditor,  A.  and  B. 
cannot  recover  any  part  of  the 
goods  on  the  ground  that  A.  pur- 
chased  his  interest  without  knowl- 
edge of  the  fraud.  Eatabrook  v. 
Messersmith,  18  Wis.  54fi. 

A  firm  is  bound  by  the  frauds  or 
illegal  acta  Of  a  partner  done  in  tho 
course  of  the  firm  bu  Iness.  So, 
where  a  firm  was  Conned  by  A.  and 
B.  for  engaging  in  the  commission 
business,  A.  to  furnish  the  capital, 
and  B.  generally  did  all  the  trading 
of  the  firm,  and  B.  made  a  con- 
tract with  another  in  the  course  of 
the  firm  business,  and  in  its  name, 
for  trading  for  a  commission  on 
the  board  of  trade,  which  was  il- 
legal, as  relating  to  option  or  gam- 
ing contracts,  all  the  dealings  pred- 
icated upon  such  contract  will  be 
under  legal  condemnation,  and  a 
note  given  in  consideration  of  a 
balance  due  under  such  contract 
to  the  firm  will  be  void  as  against 
the  firm,  or  an  assignee  with  notice, 
although  A.,  the  other  partner,  had 
no  knowledge  of  the  illegality  of 
the  contract.  Tenney  v.  Foote,  95 
HI.  101. 

Where  the  fraud  alleged  is  the 


382 


Cn.  I,  SEC.  HI.]  LIABILITIES    OF    PARTNERS.  *150 

frauds  of  its  members,  unless  it  has,  in  fact,  sanctioned  such 
frauds  or  the  transactions  of  which  they  form  part.  It  will 
be  convenient  to  examine  this  subject  first  with  reference  to 
misapplications  of  money,  and  secondly  with  reference  to 
false  representations  by  partners. 

Liability  of  partnerships  for  misapplication  of  money  by  their  members. 

In  order  that  a  firm  may  be  liable  for  the  misapplication 
of  money  by  one  of  its  members  some  obligation  on  the 
part  of  the  firm  to  take  care  of  the  money  must  be  shown. 
A  receipt  of  the  money  by  the  firm  prima  facie  imposes 
this  obligation;  but  where  there  is  no  receipt  by  the  firm 
there  is  prima  facie  no  obligation  on  its  part  with  respect 
to  the  money  in  question.  It  becomes  important,  therefore, 
to  determine  accurately  when  money  is  to  be  considered  as 
received  by  the  firm.  Upon  this  point  the  following  obser- 
vations suggest  themselves: 

1.  The  firm  must  be  treated  as  receiving  wThat  any  part- 
ner receives  as  its  real  or  ostensible  agent,  i.  e.,  in  the  course 
of  transacting  the  business  of  the  firm. 

2.  In  a  case  of  this  sort  it  is  immaterial  whether  the  other 
partners  know  anything  about  the  money  or  not,  for,  ex 
hypothesis  it  is  in  the  custody  of  one  who  must  be  regarded 
as  their  agent.  (/•) 

3.  The   firm   cannot  be  treated  as  receiving  what  one 

purchase  of  goods  when  the  firm  had  any  sum  so  invested,  is  not 

is  hopelessly  insolvent,  the  conceal-  within  the  statute  of  frauds  (sec. 

ment  of  such  fact,  and  the  intent  4909,  R.  S.  1881).    St.  John  v.  Hen- 

not  to  pay  for  the  same,  each  part-  drickson,  81  Ind.  350. 

ner  will  be    presumed  to  be  ac-  In     an     action    upon    contract 

quainted   with  the  accounts    and  against  partners  to  justify  an  arrest 

affairs  of  the  firm.     Bacon  v.  Ken-  of  any  defendant  it  is  necessary  to 

dall,  49  N.  Y.  Super.  Ct.  123.  prove  tbat  he  actually  and   indi- 

An  oral  representation  by  per-  vidually  participated  in  the  fraud 

sons     in    partnership,    falsely    or  which  is  alleged  to  be  connected 

fraudulently  made,    that  each  of  with  the  contracting  of  the  liabil- 

them  had    $800  invested    in    the  ity.     Bacon  v.  Kendall,  49  N.  Y. 

business,  whereby  another  was  in-  Super.  Ct.  123 ;  Re  Benson,  10  Daly, 

duced  to  invest  that  sum  and  be-  166. 

come  a  partner,  when  none  of  them  (r)  See  infra,  rules  1,  2,  3. 

383 


151 


EIGH  l-    AM)    OBLIGATIONS. 


[book  ir. 


partner  receives  otherwise  than  as  its  real  or  ost.n- 

[*151]  sibleagent,  unless  •■the  money  actually  comes  into 

the  possession   or    under  the   control   of  the  other 

partners,  (s) 

4.  Agency  being  excluded  in  such  a  case  as  the  last,  the 
money  cannot  be  considered  as  in  the  possession  or  under 
the  control  of  the  innocent  partners,  unless  they  know  that 
it  is  so,  or  unless  they  are  culpably  ignorant  of  the  fact,  (t) 

These  principles  will  be  found  to  reconcile  most,  if  not 
all,  of  the  numerous  decisions  upon  the  important  subject 
now  under  consideration,  and  to  warrant  the  following  rules 
deduced  from  them. 

1.  Liability  of  firm  for  money  received  by  one  partner 
in  the  course  of  business. —  When  oru  partner,  acting 
within  the  scope  of  his  authority,  as  <  videnc  d  by  tht  business 
of  the  frm,  obtains  money  and  misapplies  it.  the  firm  is  an- 
swerable for  it.1 


(s)  See  rules  3  and  4. 

(t)  Compare  rule  2  with  rules  3, 
4  and  5,  and  see  infra,  p.  101 ;  and 
as  to  culpable  ignorance,  compare 
Marsh  v.  Keating,  2  CI.  &  Fin.  289; 
Sims  v.  Brutton,  5  Ex.  802:  Ex 
parte  Geaves,  8  De  G.  M.  &  G. 
291 ;  Cleather  v.  Twisden,  28  Ch.  D. 
340. 

1  Brown  v.  Watson,  4  Leg.  News. 
404.     See  ante. 

A  firm  of  lawyers,  V.  and  A., 
received  a  note  for  collection.  A. 
was  administrator  of  an  estate 
which  was  indebted  to  one  of  the 
makers  of  the  note  in  an  amount 
larger  than  the  note.  Upon  a  set- 
tlement A.  retained  the  amount  of 
the  note  and  executed  a  receipt  in 
the  name  of  the  firm  for  the  note 
and  interest.  Upon  failure  to  pay, 
upon  motion,  it  was  held  that  V. 
was  liable  for  the  amount  although 
he  knew  nothing  of  the  receipt  of 
the  note  for  collection  or  the  set- 


tlement.  Porter  v.  Vance,  14  Lea 
(Tenn.),  ('.29. 

Where  an  attorney,  while  in 
partnership  with  another  attorney, 
brought  suit  for  a  client,  and  after 
the  dissolution  of  the  firm  collected 
a  large  sum  and  retained  the  whole, 
and  more  than  five  years  after  the 
dissolution  the  client  applied  for  an 
order  to  compel  the  attorney  to  pay 
over  the  amount  collected,  held, 
that  the  fact  that  there  was  an  un- 
settled account  between  the  said 
partners,  involving  a  comparatively 
small  sum,  was  not  a  sufficient 
ground  for  refusing  the  order 
against  the  attorney  who  naJp.the 
collection  alone.  Jeffries  v.  Laurie, 
23  Fed.  Rep.  786. 

Where  an  executor  of  an  estate 
loaned  certain  securities  to  the 
firm,  and  they  were  converted  to 
the  firm's  use,  a  special  partner 
who  was  as  to  the  public,  by  non- 
compliance with  the  statute,  a  gen- 


384 


CH.  I,  SEC.  III.]  LIABILITIES    OF   PARTNERS. 


f151 


In  Willett  v.  Chambers,  (u)  two  persons  carried  on  busi- 
ness as  solicitors  and  conveyancers  in  partnership.  One  of 
.  them  received  money  from  a  client  to  invest  on  mortgage, 
and  misapplied  it.  The  other  partner  was  held  liable  to 
repay  it  to  the  client.  Lord  Mansfield  relied  upon  the  fact 
that  the  bill  for  the  fictitious  mortgage  was  made  out  in  the 
name  of  the  firm,  and  was  paid  to  the  innocent  partner. 


eral  partner,  and  knew  of  at  least 
one  such  loan,  is  liable  as  a  general 
partner  of  the  estate,  although  he 
neither  participated  in  nor  knew 
of  the  fraudulent  conversion.  Such 
knowledge  as  to  one  irregular  loan 
is  sufficient  to  put  him  upon  in- 
quiry as  to  the  manner  in  which 
the  business  of  the  firm  was  being 
conducted.  Guillon  v.  Peterson, 
89  Pa.  St.  163. 

An  innocent  partner  is  liable  for 
the  fraudulent  application  by  his 
copartner  of  bonds  as  security  for 
a  partnership  loan,  which  bonds 
are  subsequently  sold  by  the 
pledgee  and  the  proceeds  credited 
upon  indebtedness  of  the  firm. 
Fripp  v.  Williams,  14  S.  C.  502. 

Where  a  claim  was  placed  in  the 
hands  of  two  attorneys,  who  were 
partners  in  the  practice  of  law,  for 
collection,  and  judgment  was  ob- 
tained, land  of  the  debtor  sold 
under  execution,  and  redemption 
from  the  sale  made  by  paying  the 
money  to  the  sheriff,  who  paid  it 
over  to  one  of  the  attorneys,  but 
prior  to  the  redemption  the  copart- 
nership between  the  attorneys  was 
dissolved,  held,  that  both  of  the 
partners  were  liable  to  the  client 
for  the  money  thus  received  by 
one  of  them  after  the  dissolution. 
Smyth  v.  Harvie,  31  111.  62;  S.  P. 
Poole  v.  Gist,  4  McCord,  259. 

Where  money  was  fraudulently 


obtained  by  a  partner  in  the  name 
of  the  firm,  and  in  business  trans- 
actions such  as  the  firm  was  en- 
gaged in,  held,  that  the  firm  might 
be  liable  therefor,  although  the 
transactions  were  unknown  to  the 
other  partner ;  but  that,  if  the  per- 
son dealing  with  such  partner 
knew  that  the  latter  was  acting  in 
violation  of  his  duty  to  the  firm, 
the  latter  would  not  be  liable. 
Alexander  v.  State,  56  Ga.  478. 

(u)  Cowp.  814.  See,  also,  Atkin- 
son v.  Mackreth,  2  Eq.  570;  St. 
Aubyn  v.  Smart,  5  Eq.  183,  and  3 
Ch.  646 ;  Dundonald  v.  Masterman, 
7  Eq.  515.  Compare  Cleather  v. 
Twisden,  28  Ch.  D.  340;  Viney  v. 
Chaplin,  2  De  G.  &  J.  483,  and 
Bourdillon  v.  Roche,  27  L.  J.  Ch. 
681,  and  Harman  v.  Johnson,  2  E. 
&  B.  61 ;  Plumer  v.  Gregory,  18  Eq. 
621,  noticed  infra.  These  cases 
show  that  whilst  it  is  the  ordinary 
business  of  a  solicitor  to  receive 
money  from  a  client  for  investment 
on  a  specific  security,  it  is  not  part 
of  his  ordinary  business  to  receive 
money  for  investment  generally, 
nor  to  keep  negotiable  securities 
for  his  clients,  nor,  without  express 
authority  from  them,  to  receive 
money  for  them  on  the  payment  off 
of  a  mortgage,  or  on  a  sale.  See, 
also,  Be  Bellamy  &  Met.  Bd.  of 
Works,  24  Ch.  D.  387. 


Vol.  I  —  25 


385 


*152  BIGHTS   AND   OBLIGATIONS.  [BOO!    IT 

The  transaction  therefore  was  clearly  a  partnership  trans- 
action, and  the  defendant,  although  perfectly  innocent  of 
the  fraud  himself,  was  liable  for  the  consequences. 

In  Brydges  v.  Branfill,  (x)  one  of  several  solicitors  con- 
nived at  a  fraud  committed  by  a  client  of  the  firm 
[*152]  in  obtaining  money  *out  of  the  court  of  chancery. 
The  money  was  received  by  the  one  partner  under  a 
power  of  attorney,  and  was  handed  over  to  the  client.  The 
other  partners  were  entirely  innocent,  and  were,  in  fact, 
ignorant  of  the  transaction.  It  was  nevertheless  held  that 
they  were  jointly  and  severally  liable  to  make  good  the 
money  to  those  to  whom  it  really  belonged,  (y) 

In  these  cases  the  receipt  of  the  money  by  one  of  the 
partners  was  the  receipt  by  the  firm;  and  the  firm  was 
liable,  although  in  fact  the  other  partners  never  received 
the  money  or  knew  of  its  receipt.  (2) 

2.  Liability  of  firm  for  money  in  its  custody  in  the 
course  of  business. —  Where  a  firm  in  the  course  of  its  busi- 
ness {a)  receives  money  belonging  to  other  people,  and  one  of 
the  partners  misapplies  that  money  whilst  it  is  in  the  custody 
of  the  firm,  t/ie  firm  must  make  it  good} 

In  Devaynes  v.  Noble,  Clayton's  Case,  (b)  some  exchequer 

(x)  12  Sim.  369.     See,  too,  Todd  (a)  See  infra,  prop.  3  and  5,  as  to 

v.  Studholrne,  3  K.  &  J.  324.  the  importance  of  this   qualifiea- 

(y)  Although   solicitors  who  are  tion. 

partners  are  responsible  for  the  acts  l  The  Boston  fire-relief  committee 

of  each   other,  the  court  will  not  gave  a  firm  a  sum  of  money  to  be 

exercise  its  summary  jurisdiction  used  "  in  re-establishing  their  busi- 

against  a  solicitor  to  whom  person-  ness,"  taking  a  note  therefor,  which 

ally  no  blame  is  attributable.     See  was  not  to  be  paid  if  the  money 

Re  Lawrence,  2  Sm.  &  G.  367 ;  Ex  should  be  devoted  to  such  purpose* 

parte  Gould,  2  Mon.  &  A.  48 ;  Dixon  One  member  applied  the  money  to 

v.  Wilkinson,  4  Drew.   614,  and  4  pay  a  pre-existing  debt  of  the  firm 

De  G.  &  J.  503;  and  Re  Ford,  8  to  his  father.     Held,  that  a  decree 

Dowl.  684.     But  where  a  firm  of  was    properly    granted    that    the 

solicitors  are  the  solicitors  on  the  money  should  be  refunded  to  the 

record,  see  Norton  v.  Cooper,  3  Sm.  remaining     partner.     Stanley    v. 

&  G.  375.  Stark,  115  Mass.  259. 

(z)  See  St.  Aubyn  v.  Smart,  ubi  (b)  1  Mer.  575. 
supra. 


CH.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *153 

bills,  deposited  by  their  owner  with,  a  firm  of  bankers,  were 
sold  by  one  of  the  partners  without  the  owner's  knowledge; 
the  money  produced  by  the  sale  was  applied  by  the  firm  to 
its  own  use;  and  it  was  held  to  be  clear  that  the  money 
having  been  received  by  the  partnership,  the  amount  became 
a  partnership  debt  whether  all  the  individual  partners  were 
or  were  not  privy  to  the  sale. 

In  Devaynes  v.  Noble,  Baring's  Case,  (e)  the  firm  was  held 
liable  for  stock  of  its  customers  standing  in  the  name  of  one 
of  the  partners  "of  the  firm,  and  wrongfully  sold  out  by  him. 
For  the  stock  was  standing  in  his  name  alone,  in  accordance 
with  the  ordinary  practice  of  the  firm;  the  produce  of  the 
sale  of  the  stock  had  been  received  by  the  firm,  and  had 
thus  become  a  partnership  debt;  and  the  firm,  in 
the  accounts  rendered  by  *it  to  its  customer,  had  [*153] 
falsel\T  represented  the  stock  as  still  standing  in  the 
name  of  the  partner  who  had  sold  it,  and  had  given  credit 
for  the  dividends  as  if  the  stock  had  still  been  there. 

In  Ex  parte  Biddulph,  (d)  trust  money  in  the  hands  of  a 
firm  of  bankers  was  drawn  out  and  misapplied  by  one  of 
the  firm,  and  it  was  held  that  all  the  partners  were  liable 
to  make  it  good. 

In  Sadler  v.  Zee,  (e)  the  members  of  a  banking  firm  were 
authorized  jointly  and  severally  to  sell  out  stock  standing 
in  the  name  of  a  customer,  and  one  of  the  partners  exer- 
cised the  power  and  sold  out  the  stock  and  the  firm  was 
credited  with  the  proceeds  of  the  sale.  These  were  after- 
wards misapplied  by  one  of  the  partners,  and  it  was  held 
that  the  firm  was  answerable  for  the  money. 

Another  well-known  case  illustrating  the  same  principle 
is  Blair  v.  Bromley,  (f)  There  two  persons  were  in  part- 
nership as  solicitors.  A  client  intrusted  one  of  them  with 
money  to  invest  on  mortgage,  and  was  told  by  him  that  it 

(c)  1  Mer.  611.     See,  too,  Warde's        (e)  6  Beav.  324. 

Case,    id.    624,   and    Vulliamy   v.        (/)  5  Ha.   542,  and  2  Ph.   354. 
Noble,  3  Mer.  593.  See,  also,  Eager  v.  Barnes,  31  Beav- 

(d)  3  De  G.  &  Sm.  587.  579,  a  somewhat  similar  case. 

387 


*154  RIGHTS    AND    OBLIGATIONS.  [BOOK   II. 

had  been  invested;  whereas,  in  truth,  the  partner  who  had 
received  the  money  had  misapplied  it.  For  many  years  the 
client  was  regularly  paid  interest  by  the  solicitor  who  at- 
tended to  the  matter,  and  the  fraud  was  not  discovered 
until  he  became  bankrupt.  The  other  partner,  who  knew 
nothing  whatever  of  the  fraud,  was  nevertheless  held  liable 
to  make  good  the  money.  It  had  been  placed  to  the  part- 
nership account  at  the  bankers'  of  the  firm;  the  representa- 
tion that  it  had  been  duly  invested  was  within  the  scope  of 
the  duty  of  one  partner  with  reference  to  the  transaction 
in  question ;  and  it  was  held  that  the  innocent  partner  could 
not  divest  himself  of  his  liability  by  showing  that  he  had 
no  control  over  the  account  at  the  bankers',  and  did  not  in 
fact  attend  to  the  monetary  transactions  of  the  firm. 

In  Be  Rlbeyre  v.  Barclay,  ({/)  the  defendants  were 
[*154:]  in  partnership  as  stockbrokers,  and  were  in  the  habit 
of  receiving  moneys  from  the  friends  and  connec- 
tions of  the  firm,  and  of  the  individual  partners,  for  the 
purposes  of  investment.     They  also  seem  to  have  been  in 
the  habit  of  keeping  for  their  customers  the  securities  on 
which  the  investments  were  made.     The  plaintiff  had  some 
Portuguese  bonds,  held  by  one  of  the  partners  for  the  plaint- 
iff as  a  customer  of  the  firm.     The  plaintiff  married,  and 
these  bonds  were  assigned  to  trustees,  of  whom  that  part- 
ner was  one.     The  bonds  remained  in  his  custody  as  before, 
and  were  in  fact  deposited  (and,  as  it  seemed,  with  other 
securities  belonging  to  other  customers)  with  the  bankers 
of  the  firm.     The  bonds  were  afterwards  converted  by  the 
same  partner  into  other  bonds,  which  were  deposited  as  the 
first  had  been.     He  acted  in  this  matter  as  a  stockbroker, 
in  conformity  with  the  usual  course  of  business  of  the  firm, 
and  advised  the  plaintiff  from  time  to  time  in  the  name  of 
the  firm  of  what  had  been  done.     The  bonds  were  after- 
wards misapplied  by  him.     It  was  held  that  they  were 

(g)  23  Beav.  107.  Compare  this  Jersey,  2  Drew.  143;  Coomer  v. 
case  with  Ex  parte  Eyre,  1  Ph.  Bromley,  5  De  G.  &  Sm.  532, 
227 ;   Bishop    v.   The    Countess  of    noticed  infra,  p.  159. 

388 


CH.  I,  SEC.  III.]  LIABILITIES    OF   PARTNERS.  *155 

originally  clearly  in  the  custody  of  the  firm,  and  not  in  the 
custody  of  one  only  of  its  members,  simply  as  trustee.  It 
was  further  held  that  the  assignment  of  the  bonds  did  not 
take  them  out  of  the  custod}^  of  the  firm,  and  that  the  firm 
was  therefore  liable  for  the  loss  consequent  on  their  unau- 
thorized removal. 

In  the  same  case  the  firm  was  held  liable  for  the  loss  of 
other  bonds  and  securities  bought  by  them  for  the  plaintiff, 
and  left  in  their  custody  in  the  usual  way,  and  for  money 
borrowed  in  the  name  of  the  firm,  but  from  which  the  firm 
derived  no  benefit;  and  the  fact  that  the  plaintiff  dealt  only 
with  one  partner  was  held  immaterial,  the  business  trans- 
acted being  the  ordinary  and  regular  business  of  the  firm, 
and  appearing  as  such  in  its  books  and  accounts. 

Principle  of  foregoing  cases. —  The  principle  of  these 
cases  is  that  the  firm  has  in  the  ordinary  course  of  its  busi- 
ness obtained  possession  of  the  property  of  other  people, 
and  has  then  parted  with  it  without  their  authority.  Under 
such  circumstances  the  firm  is  responsible;  and  the  fact  that 
the  property  has  been  improperly  procured  and  placed  in 
the  custody  of  the  firm  by  one  of  the  partners  does  not 
lessen  the  liability  of  the  firm;  for  whether  the  firm  is  or  is 
not  liable  for  the  original  fraud  by  which  the  prop- 
erty got  into  his  hands,  it  is  responsible  for  the  sub-  [*155] 
sequent  misapplication  thereof  by  one  of  its  mem- 
bers. 

This  was  decided  in  the  cases  arising  out  of  the  notorious 
Fauntleroy  forgeries.  (A)  Fauntleroy,  who  was  a  partner 
in  the  banking  house  of  Marsh  &  Co.,  forged  powers  of 
attornev  for  the  sale  of  stock  belonging  to  the  customers  of 
the  bank.  Marsh  &  Co.  had  an  account  with  Martin  Stone 
&  Co.,  and  the  broker  who  sold  out  the  stock  under  the 

(h)  Stone  v.  Marsh,  6  B.  &  C.  551,  570 ;  Hume  v.  Bolland,  Ry.  &  Moo. 

and  Ry.  &  Moo.  364 ;  Keating  v.  371,  and  1  Cr.  &  M.  130.    This  last 

Marsh,  1  M.  &  A.  582;  Marsh  v.  case  is  hardly  consistent  with  Stone 

Keating,  .1  Bing.  N.   C.  198,  and  2  v.  Marsh,  Marsh  v.  Keating,  or  Ex 

CI.  &  Fin.  250;  Ex  parte  Bolland,  parte  Bolland. 
Mont.  &  McAr.  315,  and  1M.&A. 

389 


*156  BIGHTS    AND    OBLIGATIONS.  [liOOK    II. 

forged  powers  of  attorney  remit  ted  the  proceeds  of  the  sale  to 
the  credit  of  Marsh  &  Co.  with  Martin  Stone  &  Co.  Faunt- 
leroy then  drew  out  those  moneys  by  a  check  signed  by 
him  in  the  name  of  his  linn,  and  applied  them  to  his  own 
use.  The  firm  of  Marsh  &  Co.  was,  however,  held  liable 
for  them,  although  none  of  the  partners  except  Fauntleroy 
had  any  hand  in  his  forgeries  or  frauds,  or  in  fact  knew 
anything  of  what  had  taken  place.  The  liability  of  the 
firm  was  based  upon  the  ground  that  to  sell  stock  for  its 
customers  and  to  receive  the  proceeds  of  the  sale  fell  within 
the  scope  of  its  business;  that  the  sale  took  place  and  the 
money  was  received  in  the  usual  way;  that  the  fraud  of 
Fauntleroy  in  the  subsequent  appropriation  of  the  money 
afforded  no  defense  after  the  money  had  once  been  in  the 
custody  of  the  firm;  and  that  if  the  other  partners  knew 
nothing  of  the  receipt  of  the  money  they  might  have 
known  it,  and  would  have  ascertained  the  source  from 
which  it  had  been  derived,  if  they  had  used  ordinary  dili- 
gence, and  had  not  placed  such  implicit  confidence  in  their 
copartner.  (?') 

3.  Liability  of  firm  for   money  received,  but  not  in 
ordinary  course  of  business. —  If  a  partner,  in  the  course 
of  some  transaction  unconnected  with  the  business  of 
[*156]  the  firm,  or  not  with  in  thescope  of  such  ^business,  ob- 
tains money  and  then  misapplies  it,  the  firm,  is  not 
without  more  (j)  liable  to  make  good  the  loss,  (k) 

In  liar  man  v.  Johnson,  (I)  one  of  several  solicitors  was 
intrusted   with  money  for  the  purpose  of  investing  it  on 

(i)  In  Stone  v.  Marsh  and    Ex  the  receipt  of  the  money  by  the 

parte  Bolland,  Fauntleroy's  part-  firm   the  cases  cited  in  the  next 

ners  did  know  that  the  stock  was  four  pages. 

sold  by  their  broker,  but  did  not  (j)  As  to  the  effect  of  knowl- 
know  that  the  powers  of  attorney  edge  on  the  part  of  the  other  part- 
were  forged.  In  Marsh  v.  Keating  ners,  see  Cleather  v.  Twisden,  28 
they  do  not  seem  to  have  known  Ch.  D.  340,  noticed  infra,  and 
anything  either  of  the  sale  of  the  prop.  5,  infra. 
stock  or  of  the  receipt  of  the  pro-  (fc)  See,  also,  prop.  4,  infra. 
ceeds  of  the  sale.     Compare  as  to  (/)  2  E.  &  B.  61: 

390 


€11.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *157 

mortgage  when  a  good  opportunity  offered.  He  misap- 
plied it,  and  it  was  held  that  his  copartner  was  not  liable, 
inasmuch  as  there  was  no  evidence  to  show  that  it  was  part 
of  the  business  either  of  the  firm  in  question  or  of  solicitors 
generally  to  act  as  scriveners,  i.  e.,  as  depositaries  of  money 
waiting  for  investment.  The  court  intimated  that  if  it  had 
been  shown  that  the  money  was  given  to  the  defaulting 
solicitor  for  the  purpose  of  being  invested  on  some  specified 
mortgage,  his  copartner  would  have  been  liable  for  its  mis- 
application. 

In  Plumerv.  Gregory,  (m)  one  of  a  firm  of  solicitors  bor- 
rowed money  without  the  knowledge  of  his  copartners 
from  a  client,  saying  that  the  firm  wanted  to  lend  it  to 
another  client  on  mortgage.  The  other  partners  were  held 
not  liable  for  this  money,  although  two  of  them  had  bor- 
rowed money  from  the  same  client  before. 

In  Cleather  v.  Tvnsden,  (n)  bonds  payable  to  bearer  were 
placed  for  safe  custody  by  trustees  in  the  hands  of  one  of 
a  firm  of  solicitors  and  he  misappropriated  them.  The 
other  partners  were  held  not  liable;  it  being  no  part  of 
their  business  to  accept  such  securities  for  safe  custody,  and 
they  not,  in  fact,  knowing  that  their  partner  had  them. 
The  decision  would  have  been  the  other  way  if  it  had  been 
proved  that  the  innocent  partners  had  in  fact  known  that 
the  bonds  were  in  the  custody  of  their  copartner  as  rep- 
resenting the  firm.  Had  such  knowledge  been  proved,  they 
would  have  been  held  to  have  had  the  bonds  in  their  own 
custody,  and  would  have  been  liable  for  them,  (o) 

The  case  of  Sims  v.  Brutton  {p)  must  be  referred 
to  this  head  *if  its  authority  is  to  be  upheld.    There  [*157] 
the  defendants  Brutton  and  Clipperton  were  in  part- 
nership as  solicitors.     Brutton  received  500^.  from  a  client 

(m)  Plumer  v.   Gregory,  18  Eq.        (n)  28  Ch.  D.  340. 
621,  as  to  the  1,7007.    Compare  this        (o)  See  infra,  prop.  5,  p.  160. 
and  the  last  case  with  Willett  v.        (p)  5  Ex.  802.     See,  also,  Coomer 
Chambers,  and    other  cases  cited    v.  Bromley,  5  De  G.    &  Sm.  532, 
ante.  p.  151,  note  (u).  noticed  infra,  p.  159. 

391 


*157  BIGHTS    AND    OBLIGATIONS.  [B (    II. 

to  invest  on  a  mortgage,  and  the  money  was  duly  invested. 
The  mortgage  deed  remained  with  the  defendants,  and  the 
money  secured  by  it  was  ultimately  repaid  to  Clipperton, 
who  then  gave  up  the  deed  to  the  mortgagor.  Shortly 
after  this  Clipperton  relent  300/.,  part  of  the  500/.,  and  again 
received  back  the  mortgage  deed  as  a  security,  and  ulti- 
mately this  300/.  was  repaid  to  him  and  the  mortgage  deed 
was  again  delivered  up  to  the  mortgagor.  Clipperton  had  no 
authority  to  receive  payment  of  the  500/.  from  the  mortgagor, 
nor  to  relend  the  300/.,  nor  to  receive  repayment  of  it,  and  he 
acted  throughout  the  whole  of  these  transactions  without 
the  knowledge  of  his  copartner  or  of  the  mortgagee,  the 
client  of  the  firm.  The  books  of  the  firm,  however,  showed 
the  receipt  of  the  500/.  in  the  first  instance;  its  loan  and 
repayment;  and  also  the  loan  and  repayment  of  the  300/. 
The  client  was,  moreover,  credited  from  first  to  last  with 
the  receipt  of  interest  on  the  whole  500/.,  and  was  debited 
with  the  same  interest,  which  was  in  fact  regularly  paid  to 
his  agent.  Clipperton  misapplied  the  whole  500/.,  and  the 
court  held  that  Brutton,  his  partner,  was  not  liable  to  make 
it  good.  The  defendants,  it  was  said,  discharged  their  duty 
by  laying  out  the  money  as  directed,  and  they  had  no  au- 
thority receive  it  back.  Therefore  the  repayment  to  Clip- 
perton, though  treated  by  him  as  a  partnership  transaction, 
was  not  so  in  point  of  law,  and  did  not  create  any  partner- 
ship responsibility.  The  entries  in  the  books  were  only 
evidence  of  knowledge  on  the  part  of  Brutton,  and  the  case 
stated  for  the  opinion  of  the  court  expressly  found  that  he 
had  no  knowledge  of  the  facts. 

Upon  this  case  it  is  to  be  observed  that  if,  as  appears  to 
have  been  the  case,  the  500/.  when  paid  off  was  placed  to 
the  credit  of  the  firm  with  its  bankers,  the.  decision  is  diffi- 
cult to  reconcile  with  Stone  v.  Marsh  and  Marsh  v.  Keat- 
ing, (g) 

(q)  The  statute  of  limitations  priety  of  the  decision  in  that  respect 
afforded  a  good  defense  to  the  ac-  is  untouched  by  the  observations 
tion  in  Sims  v.  Brutton.     The  pro-    in  the  text. 

392 


CH.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *15S 

4.  Liability  of  firm  for  frauds  of  partner  acting  on  his 
own  account. — A  fraud  committed  by  a  partner  lohilst  act- 
ing on  his  own  separate  account  is  not  imputable  to 
the  firm,  although  had  he  not  *been  connected  with  [*158J 
the  firm  he  might  not  have  been  in  a  position  to  com- 
mit the  fraud.1 

This  is  little  more  than  another  mode  of  stating  proposi- 
tion 3;  and  the  cases  just  alluded  to  may  also  be  referred 
to  under  this  head.  In  addition  to  them  the  following 
deserve  notice: 

In  Ex  parte  Eyre,  (r)  the  customer  of  a  firm  of  bankers 
deposited  with  them  a  box  containing  securities  belonging 
to  himself,  and  he  authorized  one  of  the  firm  to  take  out 
some  of  the  securities,  replacing  others,  however,  in  their 
place.  The  partner  so  authorized,  after  obtaining  the  secu- 
rities he  was  authorized  tto  take  and  substituting  others, 
clandestinely  withdrew  these  last,  and  applied  them  to  his 
own  use.  It  was  held  that  the  firm  was  not  liable  for  this 
act,  and  was  not  bound  to  make  good  the  consequent  loss; 
for  it  did  not  appear  that  the  firm  had  any  authority  to 
open  the  box  or  to  examine  its  contents,  and  the  abstrac- 
tion of  the  securities  was  a  tortious  act  committed  by  one 
partner,  who  had  been  specially  authorized  to  open  the  box, 
and  who  took  out  the  securities,  not  for  the  partnership, 
nor  for  any  partnership  object,  but  in  his  separate  character 
and  for  his  own  individual  and  separate  purposes. 

In  Bishop  v.  The  Countess  of  Jersey,  (s)  one  of  a  firm  of 
bankers  advised  the  plaintiff,  a  customer  of  the  bank,  to  sell 
out  some  stock,  telling  her  that  there  was  an  opportunity 
to  place  out  5,000^.  on  a  good  security  at  51.  per  cent,  to  be 

1  Where  a  firm  bought  and  paid  part  of  the  other  members  of  the 
for  certain  property  and  the  vendor  firm,  no  responsibility  attached  to 
deposited    the    money    with    one  them  in  consequence  thereof.  Bat- 
member  of  the  firm  to  be  held  un-  tie  v.  Street,  2  So.  West.  R.  384. 
til  the  purchasers  should  be  satis-  (r)  1  Ph.  227,  affirming  S.  C.  2 
fied  with  the  title,  held,  that  in  the  M.  D.  &  D.  66. 
absence  of  any  knowledge  of  or  (s)  2  Drew.  143. 
connection  with  such  deposit  on  the 

393 


*159  EIGHTS    AND    OBLIGATIONS.  [iJOOK    II. 

given  by  his  son.  She  accordingly  authorized  the  sale,  and 
the  money  produced  was  placed  to  her  credit  at  the  bank. 
She  then  drew  a  check  for  5,000/.  which  she  gave  to  the 
partner  with  whom  she  had  been  in  communication.  No 
security  was  ever  given;  the  money  was  lost;  the  partner 
in  question  absconded.  Interest,  however,  on  the  5,000Z. 
was  for  some  time  placed  to  the  credit  of  the  plaintiff  in 
her  account  with  the  bank,  but  by  whom  did  not  appear. 
The  other  partners  know  nothing  of  what  had  taken  place 
until  after  the  fraud  had  been  committed,  and  it  was  held 
that  they  were  not  answerable.  The  transactions  had  noth- 
ing to  do  with  the  business  of  the  partnership,  and  if  they 
had  not  taken  place  at  the  bank  there  would  have 
[*159]  been  no  pretense  for  saying  that  the  one  ^partner 
was  acting  otherwise  than  in  a  separate  affair  of  his 
own. 

A  more  difficult  case,  but  one  turning  mainly  on  the  same 
principle,  is  to  be  met  with  in  Coomer  v.  Bromley,  (t)  There 
the  defendants,  William  and  Joseph  Bromley,  were  solic- 
itors. The  plaintiffs  were  their  clients,  and  were  trustees 
of  some  navy  5/.  per  cent,  annuities,  in  which  they  were 
themselves  beneficially  interested  for  their  lives.  William 
Bromley  was  associated  by  the  plaintiffs  with  them  as 
trustee  of  these  annuities.  Upon  their  reduction  from  51. 
to  U.  per  cent,  the  annuities  were  sold  at  the  request  of  the 
plaintiffs,  and  it  was  arranged  that  the  money  arising  from 
the  sale  should  be  invested  on  mortgage  to  be  taken  with 
the  plaintiffs'  consent  in  William  Bromley's  name  alone. 
The  annuities  were  sold;  the  money  arising  from  the  sale 
found  its  way  to  the  credit  of  the  firm  at  its  bankers,  but 
was  not  invested  on  mortgage  as  intended,  and  was  appar- 
ently used  as  partnership  money.  William  Bromley  pre- 
tended that  he  had  invested  the  money,  and  he  paid  interest 
accordingly.  Ultimately,  and  with  the  plaintiffs'  knowledge, 
a  mortgage,  of  which  William  Bromley  was  sole  mortgagee, 

(t)  5  De  G.  &  Sin.  532.     See,  too,     ante,  p.  156.     Compare  St.  Aubyn 
Sims  v.  Brutton,  5  Ex.  802,  noticed     v.  Smart,  5  Eq.  183,  and  3  Ch.  646. 

394 


•CH.  I,  SEC.  III.]  LIABILITIES    OF    PAETNERS.  *160 

was  appropriated  as  a  security  for  the  money  in  question. 
This  mortgage  was  sufficient  in  point  of  value  to  cover  the 
amount  realized  by  the  sale,  and  was  for  that  amount,  less 
a  few  pounds,  which  the  plaintiffs  divided  between  them. 
The  security  thus  appropriated  was  afterwards  realized  by 
William  Bromley,  and  he  misapplied  the  money,  but  it  was 
not  placed  to  the  credit  of  the  firm,  nor  did  Joseph  Brom- 
ley know  anything  of  its  receipt  or  application.  Under 
these  circumstances  it  was  held  that  Joseph  was  not  liable 
to  the  plaintiffs  for  the  loss,  for  the  plaintiffs  dealt  with 
William  Bromley  as  a  trustee  and  not  as  a  partner;  they 
authorized  him  to  take  a  mortgage  in  his  own  name  alone; 
they  acquiesced  in  the  appropriation  to  their  money  of  a 
security  which  was  of  sufficient  value,  and  Joseph's  duty 
was  then  at  an  end.  The  plaintiffs  could  not  hold  him 
liable  for  the  loss  of  the  mortgage  money  arising  subse- 
quently from  the  fraud  of  the  mortgagee. 

'Distinction  between  these  cases  and  those  no-  [*160] 
ticed  on  pages  152-155. —  In  these  cases  it  will 
be  observed  that  although  the  money  in  question  had  at  one 
time  been  in  the  custody  of  the  firm,  such  was  not  the  case 
when  the  money  was  misapplied.  This  circumstance  dis- 
tinguishes the  cases  last  referred  to  from  De  Eibeyre  v. 
Barclay  (u)  and  other  cases  of  that  class,  the  leading  facts 
in  which  have  been  already  stated,  (v) 

5.  Liability  of  firm  for  trust  moneys. —  If  a  partner -, 
being  a  trustee,  improperly  employs  the  money  of  his  cestui 
que  trust  in  the  partnership  business,  or  in  payment  of  the 
partnership  debts,  this  alone  is  not  sufficient  to  entitle  the 
cestui  que  trust  to  obtain  repayment  of  his  money  from  the 
firm,} 

(u)  23  Beav.  107.  creditor  a  creditor  of  the  firm,  un- 
(v)  Ante,  p.  153.  less  it  is  applied  with  the  knowl- 
1  "Where  one  partner  holds  money  edge  and  privity  of  his  copartners. 
in  trust  for  another,  or  borrows  Jaques  v.  Marquand,  6  Cow.  497; 
money  on  his  individual  credit  and  Logan  v.  Bond,  13  Ga.  192;  Tail- 
applies  it  to  the  use  of  the  firm,  madge  v.  Penoyer,  35  Barb.  120; 
this  does  not  make  the    original  Willett  v.   Stringer,    17  Abb.   Pr. 

395 


*160 


RIGHTS    AND    OBLIGAJ  I'   \  B. 


K     II. 


In  Ec parte  Apsey,  {x)  one  of  two  assignees  in  bankruptcy 
was  in  partnership,  and  lie  applied  part  of  the  assets  of  the 


153:  Guillon  v.  Peterson,  7  Weekly 
Notes  of  Cases,  268.  See  ante, 
299,  note. 

In  WeJker  v.  Wallace,  31  Ga. 
362,  however,  where  a  member  of 
a  firm  applied  to  its  business  money 
which  he  held  as  agent  of  a  third 
party,  it  was  held  that  the  firm 
was  liable,  whether  the  other  part- 
ners knew  at  the  time  that  the 
money  belonged  to  such  party  <>r 
not. 

Where  one  partner,  to  whom  a 
third  person  has  intrusted  money, 
applies  the  money  to  the  purposes 
of  the  firm  with  the1  consent  of  all 
the  partners,  but  without  the  con- 
sent of  the  owner  of  the  money, 
SUOh  owner  may  elect  to  consider 
the  firm  his  debtor,  instead  of  the 
separate  partner.  Hutchinson  v. 
Smith,  7  Paige,  26. 

Where  an  administrator,  a  mem- 
ber of  the  partnership,  used  the 
funds  of  the  estate  in  the  firm 
business,  and  the  other  members 
had  notice  thereof,  held,  that  the 
firm  and  its  members  became 
jointly  and  severally  liable  for  such 
funds.  In  re  Jordan,  2  Fed.  Rep. 
319. 

Where  in  such  a  case  the  admin- 
istrator died,  and  an  administra- 
trix de  bonis  was  appointed  in  his 
place,  and  the  firm  of  which  the 
former  was  a  member  became 
bankrupt,  held,  that  she  might 
prove  the  claim  for  such  fund 
against  both  estates.  In  re  Jordan, 
2  Fed.  Rep.  319. 

Where  one  partner  collected 
money  for  a  third  party  and  com- 


mingled  it  with  the  firm  moneys, 
ami  it  was  used  by  the  firm  in 
their  general  business,  a  partner- 
ship liability  i>  thereby  created  al- 
though the  money  was  so  com- 
mingled and  u-.'-,  1  without  the 
knowledge  of  the  other  partner. 
Palmer  v.  Scott,  68  Ala.  880. 

Where  one  of  two  pai  tnei  -  was 
township  treasurer,  and,  with  the 
knowledge  and  consent  of  his  co- 
partner, tbe  public  funds  were  de- 
posited to  the  firm's  credit  in  com- 
mon with  the  linn  funds  and 
checked  out  indiscriminately,  held, 
that  both  partners,  having  par- 
ticipated in  such  art-,  were  alike 
guilty  of  unlawful  conversion  of 
the  public  money,  and  that  the 
partnership  was  liable  to  the  pub- 
lic authorities  therefor.  Davis  v. 
Qelhaus,  -14  O.  St.  69.  See,  also, 
Denton  v.  Men  ill,  48  Hun.  284, 

Where  (J.  and  S.  and  W.,  the 
three  New  York  members  of  a  firm, 
contrary  to  the  articles  of  a  copart- 
nership, and  without  the  knowl- 
edge of  P.,  the  Philadelphia  mem- 
ber, went  into  stock  speculations 
with  the  trust  funds  of  an  estate 
of  which  S.  was  an  executor,  and 
involved  the  estate  in  a  large  loss, 
held,  that  a  legatee  thereof  could 
not  recover  against  P.  for  the  loss. 
Guillon  v.  Peterson,  9  Phil.  225. 

After  a  dividend  is  declared  by 
a  partnership,  and  the  partner 
holding  the  share  of  an  absent 
member,  under  a  resolution  of  the 
company,  pays  it  over  in  extin- 
guishment of  a  debt  clue  the  com- 
pany   by     another    partner     who 


(ar)  3  Bro.  C.  C.  265. 


See,  also,  Ex  parte  White,  6  Ch.  397. 
396 


CH.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *161 

bankrupt  in  paying  partnership  debts.  On  the  subsequent 
bankruptcy  of  the  partnership  it  was  held  that  the  amount 
so  applied  was  not  provable  against  the  joint  estate. 

In  Ex  parte  Heaton,  (y)  a  father  and  his  sons  were  part- 
ners; the  sons  were  trustees  of  a  will,  and  instead  of  apply- 
ing the  trust  moneys  according  to  the  trust  they  appropriated 
them  to  partnership  purposes ;  but  on  the  bankruptcy  of  the 
partnership  it  was  held  that  the  amount  of  the  mone}7s  so 
appropriated  was  not  provable  against  the  joint  estate,  un- 
less it  could  be  shown  that  they  were  employed  for  the  use 
of  the  partnership  trade  with  the  knowledge  of  the  father, 
that  they  were  trust  funds,  and  an  inquiry  as  to  that  was 
directed.  (3) 

Where  firm  knows  of  the  breach  of  trust. —  It  may  at 
first  sight  be  thought  that  these  cases  are  opposed  to  Marsh 
v.  Keating,  and  the  other  authorities  before  referred  to,  (a) 
in  which  the  firm  was  held  liable  for  money  which  came  to 
its  hands.    But  in  those  cases  the  money  came  to  the  hands 
of  the  firm  in  the  ordinary  course  of  its  business;  (b) 
whilst  in  *the  cases  now  under  consideration  it  is  [*161J 
supposed  to  come  otherwise.     Liability  must  there- 
promised  to  settle  with  the  absent    are  in  equity  liable  to  C.  therefor, 
partner,  all  the  members  present,     jointly  and  severally.     Wentworth 
not  dissenting  from  the  resolution,     v.  Raiguel,  9  Phil.  275. 
are  jointly  liable  for  the  amount  of        (y)  Buck.  386. 
the  dividend.     Peters  v.  Horbach,        (z)  Ex  parte  Clowes,  2  Bro.  C.  C. 
4  Pa.  St.  134.  595,  is  not  opposed  to  tbe  cases  in 

Where  one  member  of  a  firm  of  the  text,  for  there  the  joint  and 
real  estate  brokers  receives  money  separate  estates  were  consolidated, 
with  which  to  purchase  land  for  (a)  Ante,  pp.  152-155. 
the  person  advancing  the  same,  (b)  This  may  be  thought  incor- 
and  passes  it  over  to  his  partner,  rect  with  respect  to  Marsh  v.  Keat- 
who  deposits  it  to  the  credit  of  ing ;  but  it  was  the  business  of  the 
the  firm,  and  the  proof  fails  to  firm  there  to  sell,  through  their 
show  that  it  was  invested  as  broker,  stock  belonging  to  their 
agreed,  the  firm  will  be  liable,  customers,  and  to  receive  and  re- 
Kerr  v.  Sharp,  83  111.  199.  mit  the  proceeds;  and  the  money 

Where  assets  of  a  firm  of  A.,  B.  for  which  the  firm  was  held  an- 
and  C.  are  applied  to  pay  the  swerable  did  arise  from  the  sale  of 
debts  of  a  former  firm  of  A.  and  the  stock  of  a  customer,  though  it 
B.  without  C.'s  consent,  A.  and  B.     was  sold  under  a  forged  power  of 

397 


*1G1  EIGHTS   AND   OBLIGATIONS.  [iJOOK    U. 

fore  attach  to  the  firm,  if  at  all,  on  wholly  different  princi- 
ples, and  the  fact  that  the  firm  has  had  the  benefit  of  the 
trust  moneys  is  not  sufficient  to  render  it  responsible  for 
them.  To  be  liable  the  firm  must  be  implicated  in  the 
breach  of  trust,  and  this  it  cannot  be  unless  all  the  partners 
either  knew  whence  the  money  came,  or  knew  that  it  did 
not  belong  to  the  partner  making  use  of  it.  Knowledge  on 
the  part  of  one  partner  will  not  affect  the  others,  for  the 
fact  to  be  known  has  nothing  to  do  with  the  business  of  the 
firm ;  and  the  case  of  Ex  parte  Ileato?i,  already  referred  to, 
shows  that  in  cases  of  this  kind  the  liability  as  for  a  breach 
of  trust  does  not  extend  to  those  who  are  ignorant  of  the 
matters  before  mentioned.  But  if  knowledge  of  these  mat- 
ters can  be  imputed  to  the  other  partners;  if  they  know,  or 
ought  to  be  treated  as  knowing  that  trust  moneys  are  being 
employed  in  the  partnership  business,  they  will  be  held 
bound  to  see  that  the  trust  to  which  the  money  is  subject 
authorizes  the  use  made  of  it,  and  will  be  answerable  for  a 
breach  of  trust  in  case  of  its  misapplication  or  loss,  (c)  It  is 
important  to  bear  this  in  mind  when  one  partner  has  died; 
for  if  the  surviving  partners  deal  with  his  property,  know- 
ing that  it  belongs  to  his  estate,  knowledge  of  the  trust  on 
which  the  property  is  held  will  be  imputed  to  them,  and 
they  may  be  thus  involved  in  all  the  consequences  of  a 
breach  of  trust,  (d)  But  this  doctrine  can  hardly  extend  to 
the  case  of  incoming  partners,  who  do  nothing  except  leave 
matters  as  they  find  them  when  they  enter  the  firm,  (e) 

Liability  for  breach  of  trust,  joint  and  several — Bor- 
rowing trust  money. —  If  partners  are  implicated  in  a  breach 

attorney ;  and  although  Fauntle-  601 ;  Keble  v.  Thompson,  3  Bro.  C. 

roy's  partners  knew  nothing  of  the  C.  112.    And    compare    Ex  parte 

receipt  of  the  money,  their  igno-  Geaves,  8  De  G.  M.  &  G.  291 ;  Ex 

ranee  was  considered  culpable  and  parte  Barnewall,  6  De  G.  M.  &  G. 

of  no  avail.  801 ;  Ex  parte  Burton,  3  M.  D.  & 

(c)  See  Ex  parte  Woodin,  3  M.  D.  364. 
D.  &  D.  399;  Ex  parte  Poulson,  De        (d)  See  infra,  book  iv,  ch.  3,  §  3. 
Gex,  79 ;  Ex  parte  Watson,  2  V.  &        (e)  See  Twyford  v.  Trail,  7  Sim. 

B.  414;  Smith  v.  Jameson,  5  T.  R.  92. 

398 


CH.  I,  SEC.  III.]  LIABILITIES    OF   PARTNERS.  *1G2 

of  trust,  their  liability  is  joint  and  several;  (/)  and  a 
decree  for  costs  will  be  made  *against  them  all,  al-  [*162] 
though  they  may  not  be  all  equally  to  blame,  (g)  But 
persons  who  borrow  trust  money  from  executors  or  trustees 
are  only  liable  to  repay  it  with  interest;  and  although  the 
lenders  may  have  no  authority  to  lend  the  money,  the  bor- 
rowers are  not  liable  to  account  for  the  profits  which  they 
may  have  realized  by  its  employment,  (h) 

Following  trust  money.— Although  a  firm  is  not  liable 
to  make  good  trust  money  applied  to  its  use  by  one  of  its 
members  in  breach  of  the  trust  reposed  in  him,  unless  the  firm 
can  be  implicated  in  the  breach  of  trust,  this  doctrine  will 
not  preclude  a  cestui  que  trust  from  following  his  own 
money  into  the  hands  of  the  firm,  and  demanding  it  back, 
if  he  can  show  that  the  firm  still  has  it,  and  the  firm  did 
not  come  by  it  by  purchase  for  value  without  notice.  The 
true  owner  of  money  traced  to  the  possession  of  another 
has  a  right  to  have  it  restored,  not  because  it  is  a  debt,  but 
because  it  is  his  money.  His  right  is  incidental  to  his  owner- 
ship; and  whether  the  money  is  traced  to  the  hands  of  a 
single  individual,  or  to  the  hands  of  a  firm,  is  wholly  im- 
material. (i)1 

if)  Re  Oxford  Benefit  Building  (g)  Lawrence  v.  Bowie,  2  Ph.  140. 

Soc.  35  Ch.  D,  502 ;  Imperial  Mer-  (ft)  Vyse  v.  Foster,  L.  R.  7  H.  L. 

cantile  Credit  Assoc,  v.  Coleman,  318;  Stroud  v.  Gwyer,  28  Beav.  130. 

L.   R.    6   H.    L.    189;  Devaynes  v.  (i)  See,  as     to     tracing    money, 

Noble,  Sleech's   Case,   1   Mer.  563 ;  Lewin  on  Trusts,  edit.  8,  ch.  xxx, 

Baring's  Case,   id.  614;    Sadler  v.  §  2 ;  Re  Hallett's  Estate,  13  Ch.  D. 

Lee,  6  Beav.  324;  Brydges  v.  Bran-  696;  Re  West  of  England  Bank,  11 

fill,  12  Sim.  369 ;  Blair  v.  Bromley,  Ch.  D.  773 ;  Brown  v.  Adams,  4  Ch. 

2  Ph.  359;  Wilson  v.  Moore,  1  M.  &  764;  Pennell  v.  Deffell,  4  De  G.  M. 

K.  127  and  337 ;  Ex  parte  Poulson,  &  G.  372 ;  Frith  v.  Cartland,  2  Hem. 

De  Gex,   79.     Compare  Ex  parte  &  M.  417 ;  Scott  v.  Surman,  Willes, 

Burton,  3  M.  D.  &  D.  364.    It  how-  400;  Taylor  v.  Plumer,  3  M.  &  S. 

ever  by  no  means  follows  that  on  562 ;  Small  v.  Attwood,  Young,  507 ; 

the  bankruptcy  of  the  firm  there  Pannell  v.  Hurley,  2  Coll.  241. 

can  be  a  proof  against  the  joint  as  J  Price  v.  Mulford,  36  Hun,  247 ; 

well  as  against  the  separate  estate.  Bush  v.  Bush,  33  Kan.  557. 

See  Ex  parte  Barnewall,  6  De  G.  A.  and  B.  were  jointly  interested 

M.  &  G.  801.  This  will  be  discussed  in  a  claim  which  was  ultimately 

in  the  chapter  on  Bankruptcy.  decided  in  their  favor.    Before  the 

399 


*1G2 


KIGIITS    AND    OBLIGATIONS. 


[iJOOK    II. 


decision  was  made  A.  formed  a 
partnership  with  C,  and  the  money- 
was  remitted  to  the  firm  of  A.  and 
C,  and  placed  to  A.'s  credit  on  the 
books  of  the  firm.  A.  died  insolv- 
ent, largely  indebted  to  C.  It  ap- 
peared that  C,  previously  to  form- 
ing the  partnership  with  A.,  had 
full  knowledge  of  the  interest  of 
B.  in  the  claim.  Held,  that  C. 
could  not  apply  the  money  to  the 
satisfaction  of  his  debt  against  A., 
and  that  B.  was  entitled  to  recover 
his  proportion  of  all  the  money  re- 
ceived on  account  of  the  claim. 
Vanderwick  v.  Summerl,  2  Wash. 
41. 

The  rule  that  trust  property  may 
be  followed  into  whatsoever  hands 
it  goes  with  notice  of  the  trust  does 
not  apply  in  cases  where  an  officer 
of  a  bank,  being  a  member  of  a 
partnership,  without  due  security 
lends  to  his  linn  funds  of  the  hank 
which  become  mingled  with  the 
other  partnership  property.  Case 
v.  Beauregard,  1  Woods,  125. 

If  funds  of  a  married  woman, 
held  in  trust  under  the  code  by  her 
husband,  are  mingled  by  him  with 
the  funds  of  a  partnership  of  which 
he  is  a  member,  the  partnership 
funds  are  not  charged  with  the 
part,  either  during  the  life  of  the 
husband  or  after  his  death.  Dent  v. 
Slough,  40  Ala.  518. 

The  contribution  of  trust  prop- 
erty to  the  capital  stock  of  a  co- 
partnership at  the  time  of  its  for- 
mation, by  a  trustee,  as  his  own 
property,  and  so  contributed,  with- 
out notice  or  knowledge  to  the 
other  copartners  of  the  fact  of  its 
being  trust  property,  is  closely 
analogous  to  its  sale  and  purchase. 
There  is  but  little,  if  any,  differ- 
ence in  principle.     In  such  case  the 


cestui  que  trust  seeking  his  property 
(thus  converted)  from  partnership 
assets  can  only  claim  and  take 
therefrom  what  his  trustee  would 
be  entitled  to  take  had  he  been 
vested  with  absolute  ownership  of 
the  funds  invested  by  him  in  the 
copartnership,  instead  of  holding 
the  same,  as  he  did,  merely  in  trust. 
The  equities  of  the  copartners  of  a 
trustee,  dealing  with  him  as  the 
absolute  owner  of  the  property 
contributed  by  him  to  the  copart- 
nership, and  without  notice  or 
knowledge  of  any  trust  relations 
in  regard  to  the  same,  are  para- 
mount to  those  of  the  cestui  que 
I  rust  in  regard  to  such  property. 
1  [ollenback  v.  More,  44  N.  Y.  Supr. 
Ct,  107. 

Where  a  guardian  puts  his  ward's 
funds  into  the  business  of  the  firm, 
with  the  full  knowledge  of  his  co- 
partner, he  is  liable  to  account  to 
his  ward  for  only  such  profits  as 
he  actually  received,  and  not  for 
those  received  by  his  partner.  Se- 
quin's Appeal,  103  Pa.  St.  139. 

A  partner  who  fraudulently  ap- 
propriates money  of  the  partner- 
ship to  the  purchase  of  real  estate, 
taking  the  conveyance  in  his  own 
name,  and  of  policies  of  life  insur- 
ance payable  to  his  wife,  may  be 
charged  in  equity  as  trustee  for  the 
partnership;  and,  as  to  the  policies 
made  payable  to  his  wife,  she,  also, 
may  be  charged  as  trustee.  Shaler 
v.  Trowbridge,  28  N.  J.  Eq.  595. 
See,  also,  Renf row  v.  Pearce,  68  111. 
125. 

One  partner  took  money  from 
the  partnership  funds,  which  he 
put  into  a  new  partnership.  Held, 
that,  upon  the  insolvency  of  the 
new  partnership,  the  former  part- 
nership could  not  follow  the  funds 
400 


CH.  I,  SEC.  III.]  LIABILITIES   OF    PARTNERS. 


:162 


Liability  of  partnerships  for  the  false  representations  of  their  members.1 

In  considering  the  liability  of  a  firm  for  the  false  repre- 
sentations of  one  of  its  members,  it  is  necessary  to  dis- 


so  taken,  so  as  to  give  it  a  priority 
over  other  creditors.  Ramsay  v. 
Deas,  2  Dessau.  239. 

1  If  one  partner,  in  the  name  of 
his  firm,  makes  a  false  representa- 
tion as  to  a  fact,  under  circum- 
stances precluding  him  from  dis- 
puting it,  the  firm  and  its  members 
will  be  equally  precluded  if  the 
fact  is  such  a  one  that  tbe  repre- 
sentation would  be  binding  on  the 
firm  if  true,  and  is  also  one  con- 
cerning the  truth  of  which  the  firm 
and  its  members  possess  peculiar 
means  of  knowledge  not  enjoyed 
by  the  party  to  whom  the  repre- 
sentation is  made.  Coleman  v. 
O'Neil,  1  N.  W.  Rep.  846. 

One  partner  is  liable  for  the  acts 
of  another  partner  whereby  decep- 
tive appearances  are  created  in 
land  which  is  the  subject  of  the 
partnership,  and  whereby  the  part- 
nership realizes  the  proceeds  of  the 
fraud.  Chester  v.  Dickerson,  52 
Barb.  349;  54  N.  Y.  1. 

A  representation  made  by  one 
member  of  a  firm  to  a  person  who 
subsequently  purchases  commer- 
cial paper  of  the  firm  from  a  third 
party,  without  any  intimation  that 
the  latter  intends  to  make  such 
purchase,  does  not  render  the  part- 
ners liable  individually,  although 
it  is  false.  In  re  Schuehardt,  15 
Bankr.  Reg.  161. 

Representations  of  the  active 
partner,  made  at  the  time  of  bor- 
rowing money  in  the  course  of 
the  firm  business,  are  admissible 
against  the  dormant  partner.  Gavin 
v.  Walker,  14  Lea  (Tenn.),  643. 


A  silent  partner  who  did  not 
know  nor  assume  to  know  as  to  the 
truth  of  a  statement  of  the  condi- 
tion of  the  firm,  made  by  one  of  his 
copartners  to  a  person  who  pur- 
chased an  interest  in  the  firm  on 
the  faith  of  such  statement,  is  not 
liable  for  damages  to  such  person 
arising  from  fraud  in  the  state- 
ment. Chamberlin  v.  Prior,  1  Abb. 
App.  Dec.  338. 

Partners  selling  their  interest  in 
the  concern  are  not  liable  to  the 
purchaser  for  fraudulent  represen- 
tations in  relation  thereto  made  by 
one  partner  without  their  instiga- 
tion or  approval.  Such  purchaser, 
executing  a  note  in  the  name  of 
the  new  firm  for  an  amount  greater 
than  the  invoice  price,  and  after- 
wards, by  reason  of  the  insolvency 
of  his  partner,  compelled  to  pay 
the  whole  note,  can  only  recover, 
in  an  action  against  the  deceiving 
party  for  such  fraud,  his  proportion 
of  the  excess  of  the  rote  over  the 
value  of  the  property  actually  pur- 
chased. Schwabackcr  v.  Riddle, 
84  111.  517. 

In  an  action  against  a  partner- 
ship for  fraudulent  representations 
made  by  one  of  its  members,  a  dec- 
laration alleging  that  he,  acting  in 
behalf  of  the  firm,  procured  a 
writ  of  replevin  to  be  brought  in 
the  name  of  a  third  person  and 
signed  his  own  name  to  the  re- 
plevin bond  as  surety,  and  that  lie 
declared  to  the  plaintiff,  who  was 
a  deputy-sheriff,  that  the  firm  was 
responsible,  and  that  his  signature 
to  the  bond  bound  the  firm,  and 


Vol.  1—26 


401 


*103  EIGHTS    AND    OBLIGATIONS  [BOOK    II. 

tinguisb  actions  for  mere  damages  from  actions  to  rescind 
contracts,  and  to  recover  money,  or  property,  obtained  by 

the  firm  by  misrepresentation. 
('X"1G3]       *  Actions  for  deceit. —  An  action  for  damages  for 

misrepresentation  cannot,  as  a  general  rule,  be  main- 
tained unless  the  misrepresentation  is  fraudulent,  i.  <?.,  false, 
and  known  so  to  be  to  the  person  making  it,  or  false  and 
made  recklessly  without  any  reasonable  ground  for  believ- 
ing the  statement  to  be  true,  (k)  There  is,  therefore,  a 
difficulty  in  holding  any  person  liable  to  such  an  action 
unless  actual  fraud  by  him  can  be  proved.  On  the  other 
hand  it  is  difficult,  if  not  impossible,  to  draw  any  sensible 
distinction  between  the  case  of  fraud  and  any  other  wrong; 
and  the  weight  of  authority  certainly  is  in  favor  of  the 
proposition  that  actions  for  damages  will  lie  against  a  prin- 
cipal for  the  fraud  of  his  agent  committed  in  the  course  of 
his  employment,  and  for  his  principal's  benefit.  (I)  This 
doctrine  obviously  renders  a  linn  liable  in  an  action  of 
damages  for  the  fraud  of  one  of  its  members,  if  committed 
by  him  in  transacting  the  business  of  the  firm,  and  for  its 
benefit;  but  not  otherwise,  {m) 

that  he  was  authorized  hy  the  firm  being  referred  to  an  implied  war- 
to  bind  it  by  his  signature  alone,  ranty.  Lewis  v.  Nicholson,  18  Q. 
and  thus  induced  plaintiff  to  accept  B.  503;  Collen  v.  Wright,  8  E.  & 
the  bond  and  serve  the  writ,  B.  647,  and  7  id.  301;  Firbank's 
whereby  the  firm  obtained  and  dis-  Ex'rs  v,  Humphreys,  18  Q.  B.  D.  54. 
posed  of  the  goods  replevied  for  its  (7)  Barwick  v.  English  Jt.  St. 
own  benefit,  and  that  judgment  Bank,  L.  R.  2  Ex.  259;  Weir  v. 
was  rendered  for  the  defendant  in  Bell,  3  Ex.  D.  238;  Swire  v.  Fran- 
replevin,  and  the  goods  were  not  cis,  3  App.  Ca.  106;  Houldsworth 
returned,  and  the  firm  was  not  v.  City  of  Glasgow  Bank,  5  App. 
hound  by  the  signature  to  the  Ca.  317;  Mackay  v.  Commercial 
bond,  and  the  plaintiff  has  been  Bank  of  New  Brunswick,  L.  R.  5 
held  liable  for  taking  an  insuffi-  P.  C.  412;  Addie  v.  Western  Bank 
cient  bond,  does  not  set  forth  facts  of  Scotland,  L.  R.  1  Sc.  &  Div. 
sufficient  to  charge  the  other  part-  App.  Ca.  145,  are  the  leading  cases 
ner  for  the  fraud.  Gray  v.  Crop-  on  this  subject.  As  will  be  seen 
per,  1  Allen,  337.  from  them,  opinions  on  the  point 
(fc)  See  the  cases  in  the  next  two  greatly  differ.  See  Pollock  on 
notes,  and  Pollock  on  Torts,  236,  Torts,  83,  and  the  next  note, 
etc.     One  exception  is  obscured  by  (m)  See  British  Mutual  Bank  Co. 

402 


Cn.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *164 

Other  actions  based  on  fraud. —  Whatever  doubt  there 
may  be  as  to  the  liability  of  a  linn  to  an  action  for  deceit 
founded  on  the  fraudulent  statement  of  one  of  its  members, 
there  is  no  doubt  that  a  firm  can  be  compelled  to  restore 
property,  or  refund  money,  obtained  by  it  by  the  misrepre- 
sentation of  one  of  its  members.  Nor  in  such  a  case  is  it 
necessary  to  prove  that  the  misrepresentation  was  fraudu- 
lent as  well  as  false,  (n) 

*In  Rapp  v.  Latham,  (o)  the  defendants  (Parry  [*164] 
and  Latham)  were  in  partnership  as  wine  and  spirit 
merchants,  and  the  plaintiff  employed  them  to  purchase  wine 
for  him  on  commission  and  to  sell  the  same  as  opportunity 
might  offer.  Parry  was  the  active  partner,  and  he  alone 
attended  to  the  business  of  the  firm.  He  from  time  to 
time  represented  that  he  had  effected  purchases  and  sales 
on  the  plaintiff's  account,  and  he  remitted  to  the  plaintiff 
balances  alleged  to  be  due  to  him  on  the  pretended  sales. 
The  plaintiff  had  advanced  120,000?.  to  be  laid  out  in  the 
purchase  of  wines,  and  he  had  received,  on  account  of 
pretended  resales  anil  profits  arising  therefrom,  130,000Z. 
There  was,  however,  a  considerable  sum  advanced  by  the 
plaintiff  still  unaccounted  for,  but  which  the  defendant 
Parry  alleged  had  been  invested  in  the  purchase  of  wine  at 
so  much  a  pipe;  and  to  recover  this  sum  the  action  was 
brought  against  Parry  and  his  copartner.  No  purchase  or 
sale  had  ever  been  made  by  Parry,  and  the  whole  of  his 
representations  to  the  plaintiff  were  false  and  fraudulent. 

v.  Charnwood  Forest  Rail.  Co.  18  a   firm    was    held    liable    for    the 

Q.  B.  D.  714,  where  the  defendants  fraudulent  act  of  a  partner  who 

were  held  not  liable  for  a  fraudu-  had   falsified  an  abstract  of  title 

lent  statement  made  by  their  sec-  for  the  purpose  of  concealing  prior 

retary,  although  made  in  answer  incumbrances, 
to  inquiries  which  it  was  his  ap-        (n)  See   Arkwright  v.    Newbold, 

parent  duty  to  answer.     See,  also,  17  Ch.  D.  301;  Redgrave  v.  Hurd, 

Barnett,    Hoares  &  Co.    v.   South  20  Ch.  D.  1. 

Lon.  Tramways  Co.   18  Q.   B.   D.        (o)  2  B.  &  A.  795.      The  action 

815.      Compare  the  cases    in    the  was  for  money  had  and  received, 

last  note.      See,   also,   Sawyer    v.  and  a  set-off  was  pleaded. 
Goodwin,  33  L.  J.  Ch.  578,  where 

403 


*'lf!5  BIGHTS    AND   OBLIGATIONS.  [dOOK    II. 

It  was  contended  by  Latham  that  ho  was  not  afTccted  by 
the  fraud  of  his  copartner,  inasmuch  as  the  fictitious  pur- 
chases and  sales  were  not  in  the  ordinary  course  of  trade, 
and  were  not,  therefore,  partnership  transactions.  J>ut  it 
was  held  that  he  was  bound  by  the  acts  and  representations 
of  his  partner,  Parry,  and  could  not  be  allowed  to  say  that 
those  transactions  were  fictitious  which  Parry  represented 
to  be  real.  The  plaintiff  was  adjudged  entitled  to  retain 
the  130,000Z.  remitted  to  him,  and  to  recover  back  the  ad- 
vances for  the  supposed  purchases  in  respect  of  which  there 
had  been  no  remittance. 

Again,  where  one  of  several  partners  in  a  patent  induced 
the  plaintiff,  by  false  and  fraudulent  representations,  to  pay 
3,000/.  for  part  of  the  profits  to  be  obtained  by  its  work- 
ing, all  the  partners  were  held  liable  to  repay  the  money, 
all  hough  there  was   no  evidence  of  fraud   on   the   part  of 

more  than  one.  (p) 
[*1G5]  *TUe  case  of  Blair  v.  Bromley,  (o)  already  alluded 
to,  is  another  instance  in  point,  and  was  in  fact  de- 
cided by  the  lord  chancellor  expressly  npon  the  ground  that 
persons  who,  having  a  duty  to  perform,  represent  to  those 
who  are  interested  in  the  performance  of  it  that  it  has  been 
performed,  make  themselves  responsible  for  all  the  conse- 
quences of  non-performance;  and  as  one  partner  may  bind 
another  as  to  any  matter  within  the  limits  of  their  joint 
business,  so  he  may  by  an  act  which,  though  not  constitut- 
ing a  contract  by  itself,  is  on  equitable  principles  considered 
as  having  all  the  consequences  of  one. 

False  accounts  rendered  by  one  partner.— Whether 
accounts  rendered  by  one  partner  in  the  name  of  the  firm, 
and  showing  that  money  is  in  the  hands  of  the  firm,  when 
in  truth  he  has  misapplied  it,  are  to  be  treated  as  represen- 
tations by  the  firm,  is  a  question  which  has  given  rise  to 
much  discussion,  and  upon  which  the  cases  are  not  uniform. 
But  upon  the  whole  it  is  conceived  that  if  the  accounts  re- 

(p)  Lovell  v.  Hicks,  2  Y.  &  C.  (q)  5  Ha.  543,  and  2  Ph.  354,  ante, 
Ex.  46  and  481.  p.  153. 

404 


CB.  I,  SEC.  III.]  LIABILITIES    OF    PARTNERS.  *166 

late  to  matters  within  the  scope  of  the  partnership  business 
the  firm  is  bound  by  them,  (r) 

Statutory  exceptions. —  By  9  George  IV.,  chapter  14, 
section  6,  a  firm  is  not  liable  for  a  false  and  fraudulent  rep- 
resentation as  to  the  character  or  solvency  of  any  person 
unless  such  representation  is  in  writing,  signed  by  all  the 
partners.  The  signature  of  one  partner  in  the  name  of  the 
firm  will  not  bind  any  one  but  himself.  (V) 

Liability  of  firm  for  untrue  statement  as  to  authority. 
If  a  partner,  acting  apparently  beyond  the  limits  of  his 
authority,  untruly  represents  that  he  is  acting  with  his  co- 
partners' consent,  they  are  not  bound  by  this  representa- 
tion, nor  are  they  liable  for  what  may  be  done  on  the  faith 
of  it. 

Therefore,  in  Ex  parte  Agace,  (t)  where  one  partner  gave 
partnership  bills  in  payment  of  his  own  separate 
debt,  and,  on  "being  asked  whether  his  copartner  [*1GG] 
was  acquainted  with  the  transaction,  untruly  replied 
that  he  was,  and  that  he  consented  to  it,  it  was  held  that 
the  bills  were  not  provable  against  the  joint  estate  of  the 
firm,  they  not  being  in  the  hands  of  a  bona  fide  holder  for 
value  without  notice  of  the  circumstances  under  which  they 
had  been  given.  In  this  case  the  partner  who  gave  the 
bills  did  that  which  was  clearly  not  within  the  scope  of  his 
authority,  and  the  person  who  took  them  knew  it.  The  lat- 
ter was,  it  is  true,  misled  by  the  false  answer  to  his  ques- 
tion, but  that  answer  was  not  referable  to  a  matter  within 
the  scope  of  the  partnership  business;  and  the  other  part- 
ner did  nothing  to  lead  to  the  supposition   either  that  ho 

(r)  See  the  two   last  cases,  and        (s)  See  Swift  v.  Jewsbury,  L.  R. 

Rapp  v.   Latham,  2  B.  &  A.  795,  9  Q.    B.    301,    reversing   Swift    v. 

ante,  p.  164;  Marsh  v.  Keating,  2  Winterbotham,  L.  R.  8  Q.  B.  244 

CI.  &  Fin.  250:  Devaynes  v.  Noble,  In  this  case  the  letter  was  signed 

Baring's    Case,    1    Mer.    611;     De  by  A.  B.,  manager,  but  the  words 

Ribeyre  v.   Barclay,  23  Beav.  107.  of  the  statute,  as  construed  by  the 

See,  on  the  other  hand,  Hume  v.  court  of  appeal,  warrant  the  state- 

Bolland,  1  Cr.  &  M.  130;  Sims  v.  ment  in  the  text. 
Brutton,  5  Ex.  802.  (t)  2  Cox,  312. 

405 


*1G7  RIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

was  a  consenting  party,  or  that  he  had  authorized  his  co- 
partner to  say  that  he  was.  (u) 

Untrue  statement  as  to  nature  of  business. —  A  ques- 
tion of  more  difficulty  arises  when  a  partner  alleges  that 
the  business  of  the  firm  is  more  extensive  than  it  really  is, 
or  that  it  is  different  from  what  it  is.  But  even  in  this  case 
the  firm  would  probably  be  held  not  liable  for  such  a  mis- 
representation. Ex  hypothesi  the  representation  is  not 
referable  to  anything  falling  within  the  scope  of  the  part- 
nership business;  and  it  would  probably  be  contended  in 
vain  that  each  partner  was  impliedly  authorized  by  his  co- 
partners to  answer  questions  as  to  what  business  they  really 
carried  on  in  partnership.  If  the  person  seeking  to  make 
the  firm  liable  knew  anything  of  the  firm  and  of  its  busi- 
ness as  ordinarily  carried  on,  then  Ejc  parte  A<jace  is  an 
authority  to  show  that  he  could  not  succeed.  If  he  knew 
nothing  of  the  firm  he  would  be  in  the  position  of  a  per- 
son dealing  with  an  agent  whose  authority  is  wholly  un- 
known. Now,  an  agent  whose  authority  is  wholly  unknown 
cannot  bind  his  principal  by  misrepresenting  the  authority 
conferred;^)1  and  it  is  difficult,  therefore,  to  see  upon 
what  principle  a  partner  could,  in  the  case  now  supposed, 
bind  the  firm  by  misrepresenting  his  authority,  or  by  mis- 
representing the  nature  of  the  business  of  the  firm,  which, 
as  to  strangers,  determines  that  authority.  A  mem- 
[*1G7]  ber  of  a  banking  "firm  could  hardly  bind  it  by 
underwriting  a  policy  in  the  name  of  the  firm,  and 
)  y  untruly  representing  that  he  and  his  partners  were  in- 
surers as  well  as  bankers. 

Fraud  inducing  a  person  to  join  the  firm. —  It  is  not 
necessary,  in  order  to  carry  on  the  business  of  a  firm  in  the 

(»)  See,  also,   Kendal  v.  Wood,  etc.     The  case  supposes  that  all 

L.   R.  6  Ex.  243,  and  per  Kelly,  that  is  known  about  the  agent's 

C.  B.,  in  Mahoney  v.  East  Holy-  authority  is  what  he  himself  says, 
ford  Mining  Co.  L.  R.  7  H.  L.  879        l  See  the  authorities  collected  in 

and  880.  Ewell's    Evans    on    Agency,    *16, 

(f)  See  Story  on  Agency,  §  134,  note. 

406 


CH.  I,  SEC.  IV.]  LIABILITIES   OF   PARTNERS.  *167 

ordinary  wa}T,  that  any  of  its  partners  should  have  power 
to  induce  other  persons  to  join  the  firm.  Hence,  if  one 
partner  induces  a  person  lw  fraud  to  join  the  firm,  such 
fraud  cannot  be  imputed  to  the  firm,  unless  the  partner  in 
question  had  express  authority  to  seek  for  a  new  partner, 
or  unless  the  other  members  of  the  firm  ratify  the  fraud 
when  made  aware  of  it.  If,  however,  the  incoming  partner 
has  brought  in  money  to  the  firm,  a  retention  of  the  money 
bv  the  firm,  with  knowledge  of  the  fraud,  would  amount  to 
a  ratification  thereof,  and  would  be  equivalent  to  a  fraud  by 
all  the  partners  in  the  first  instance.  Hence  they  cannot 
retain  the  money,  as  has  been  already  seen,  (x) 

Section  IV. —  Liability  of  Partners  in  Eespect  of  Acts 
Which  are  Unauthorized  and  are  Known  so  to  be. 

Excess  of  authority. —  By  law  every  member  of  an  or- 
dinary partnership  is  the  agent  of  the  firm,  so  far  as  is  nec- 
essary for  the  transaction  of  its  business  in  the  ordinary 
way,  and  to  this  extent  his  authority  to  act  for  the  firm 
may  be  assumed  by  those  who  know  nothing  of  the  real 
limits  of  his  autiiority.  If  his  copartners  have  restricted 
his  authority  to  narrower  limits  (which  they  are  perfectly 
at  liberty  to  do),  (y)  still  they  will  be  bound  to  all  persons 
dealing  with  him  bona  fide  without  notice  of  the  restriction, 
so  long  as  he  acts  within  the  wider  limits  set  by  law,  as 
above  explained.1     On  the  other  hand,  if  a  person  seeks  to 

(x)  See  Lowell  v.  Hicks,  2  Y.  &  Ala.     453 ;  Manville    v.    Parks,    7 

C.  Ex.  46  and  481,  noticed  ante,  Colo.    128;  Osgood    v.     Glover,    7 

p.  164.  Daly,     367;  Gregg    v.     Fisher,     3 

(y)  See  infra.  Bradw.  261 ;  Benninger  p.  Hess,  41 

XU.  S.  Bank  v.  Binney,  5  Mason,  Ohio  St.  64;  Davis  v.   Richardson, 

176;  Frost  v.   Hanaford,    1   E.  D.  45  Miss.  499:  Lynch  v.  Thompson, 

Smith,  540;  Williams  v.  Rogers,  14  61  Miss.  354:  Franklin  v.  Hardie,  1 

Bush,  777 ;  Medberry  v.   Soper,  17  Tex.    App.     (Civ.)    700;    Bates    v. 

Kan.  369;  National  Union  Bank  v.  Forch,  1  So.  West/  Rep.  (Mo.)  120; 

Landon,   66  Barb.    189;  Bank    of  Gruner  v.    Stucken,    3    So.    Rep. 

Rochester  v.  Moateath,  1  Den.  402 ;  (La.)  338. 

Mulligan  v.  Entwhisle,  2  Del.  Co.         The  employment  of  one  member 

(Pa.  St.)  518;  Clark  v.  Taylor,  68  of  a  firm  of  attorneys  is  ordinarily 

407 


*1G8  EIGHTS    AND   OBLIGATIONS.  [HOOK    J  I. 

fasten  upon  the  firm  liability,  in  respect  of  some  act  of  one 
of  the  members  which  does  not  fall  within  the  limits  of  his 
authority  as  set  by  law,  a  more  extensive  authority  must  be 
shown  to  have  been  actually  conferred  upon  him  by  the 
other  partners;  and  if  no  sufficient  authority  can  be 
[*168]  shown  the  firm  will  not  >:be  liable,  even  though  the 
person  seeking  to  charge  it  had  no  notice  of  the 
real  authority  possessed  by  the  partner  with  whom  he  dealt.1 
Notice  of  want  of  authority. —  The  immateriality  of 
notice  of  want  of  authority  in  the  last  case,  and  its  materi- 
ality in  the  former,  is  a  necessary  consequence  of  the  law 
of  agency.  A  firm  can  only  be  made  liable  for  what  is 
done  by  one  of  its  members  on  the  supposition  that  the  act 
in  question  was  authorized  by  the  other  members.  Now, 
as  by  law  they  are  held  prima  facie  to  authorize  all  acts 
necessary  for  carrying  on  the  business  of  the  firm  in  the 
usual  way,  they  cannot  escape  liability  for  any  act  of  this 
character  unless  they  can  show  that  the  apparent  authority 
to  do  it  did  not  exist,  and  was  known  not  to  exist.  But 
■when  it  is  sought  to  make  the  firm  liable  for  some  act  not 
prima  facie  authorized  by  it,  an  actual  authority  by  it  must 
be  shown;  and  if  this  cannot  be  done  no  case  is  made  out 
against  the  firm,  however  ignorant  the  person  seeking  to 
charge  it  may  have  been  of  what  was  authorized  and  what 
was  not.     In  the  case  now  supposed  the  firm  did  not  mis- 

an  employment  of  the   firm,  and  and  the  transaction  inures  to  the 

the  client  is  not  affected  by  an  un-  benefit    of    the    partnership,    the 

derstanding  between  the  partners,  partnership  is   liable.     Johnson  v. 

without  his  knowledge,  that  each  Bernheim,  76  N.  C.  139. 
should  act  and  receive  compensa-        1  A  party  who  deals  with  a  part- 

tion  separately   in   the  particular  ner  in  matters  outside  the  business 

business  to  which  the  employment  of  the  firm  can  acquire  no  claim 

relates.     Williams  v.  More,  63  Cal.  against  the  partnership  unless  he 

50.  can  prove  a  previous  authority  for, 

In    a     special    partnership    the  or  a  subsequent  ratification  of,  the 

power  of  each  partner  in  regard  to  partner's  act ;  and  this  cannot  be 

dealings  with  third  persons  who  implied   from    the    mere    fact    of 

have  notice  of  the  terms  is  special,  partnership.      Selden  v.    Bank  of 

If,  however,  the  terms  are  violated,  Commerce,  3  Minn.  166.     See  ante, 

403 


CH.  I,  SEC.  IV.]  LIABILITIES    OF    PARTNERS.  *1G9 

lead  him;  and  if  he  was  misled  by  the  representations  of 
the  partner  with  whom  he  dealt  his  remedy  is  against  that 
partner;  (s)  just  as  when  an  agent  untruly  represents  his 
authority,  a  person  dealing  with  him  acquires  no  right 
against  the  principal,  but  must  look  to  the  agent  for  in- 
demnity, (a) 

From  the  above  observations  it  follows  that  actual  notice 
of  excess  of  authority  becomes  important  only  where  the 
firm  seeks  to  escape  liability  for  some  act  done  by  one  of 
its  members  with  the  apparent,  but  without  the  real,  au- 
thority of  the  others.  So  long  as  one  partner  does  nothing 
beyond  the  scope  of  his  apparent  authority,  as  determined 
by  the  principle  already  explained,  so  long  is  the  firm  re- 
sponsible for  his  conduct,  although  he  ma}r  have  acted 
beyond  or  in  direct  violation  of  the  authority  within  which 
his  copartners  may  have  attempted  to  confine  him.  Re- 
strictions placed  by  the  partners  upon  the  powers 
which  each  shall  exercise  do  not  affect  non--partners,  [*169] 
wrho  act  bona  fide  and  without  notice  of  the  restric- 
tion, (b)  If,  for  example,  the  business  of  a  firm  requires  a 
subdivision  of  labor,  and  it  is  agreed  between  the  partners 
that  one  shall  attend  to  one  department  and  another  to 
another,  the  firm  will  nevertheless  be  bound  by  the  acts  of 
one  of  the  partners  out  of  his  department,  provided  they 
are  such  as,  on  the  principles  already  explained,  would  be 
binding  on  the  firm,  (o) 

Cases  of  fraud  on  firm,  but  no  notice  of  it. —  So,  if  one 
partner  acts  in  fraud  of  his  copartners,  still  the}7  will  be 
bound  if  he  has  not  exceeded  his  apparent  authority,  and 

(z)  Ante,  p.  164  et  seq.     See,  too,  the  others  he  will  not  be  bound  by 

Lloyd  v.  Freshfield,  9  Dowl.  &  Ry.  their  acts.     See  Gleadon  v.  Tink- 

19.  ler,  Holt,  N.  P.  Ca.  586.  It  is  other- 

(a)  See,  as  to  the  liability  of  the  wise  where  there  is  notice.     See 

agent   in  such  a    case,    Collen  v.  Ex  parte   Holdsworth,  1  M.  D.  & 

Wright,  7  E.  &  B.  301,  and  8  id.  D.  475. 
617.     And  ante,  p.  163,  note  (&).  (c)  Morans  v.  Armstrong,  Arm. 

(o)  As  regards  such  persons,  it  is  McArt.  &  Ogle,  Ir.  N.  P.  Rep.  25. 
of  no  use  for  one  partner  to  tell 

409 


*170  RIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

if  the  person  dealing  with  him  had  no  notice  of  the  fraud. 
Thus,  in  Bond  v.  Gibson,  (d)  where  one  partner  ordered 
goods  on  the  credit  of  the  firm,  and  immediately  pawned 
them  for  his  own  benefit,  the  firm  was  held  liable  for  the 
price  of  the  goods.  So  if  one  member  of  an  ordinary  trad- 
ing partnership  draws,  accepts  or  indorses  a  bill  in  the 
name  of  the  firm,  but  for  some  private  purpose  of  his  own, 
and  in  fraud  of  his  copartners,  they  will  be  liable  upon  the 
bill  at  the  suit  of  any  holder  for  value,  without  notice  of 
the  fraud,  (e)  So,  as  has  already  been  seen,  if  one  partner 
fraudulently  misapplies  money  for  which  the  firm  is  answer- 
able, the  firm  is  liable  to  make  it  good,  although  the  other 
partners  may  have  been  grossly  deceived,  and  may  them- 
selves have  been  morally  blameless.  (/) 
[*170]  "Liability  of  retired  partner  in  the  absence  of 
notice. —  Upon  the  same  principle,  if  a  person  known 
to  be  a  partner  retires,  and  does  not  notify  his  retirement, 
he  will  continue  to  be  bound  by  the  acts  of  his  late  part- 
ners as  if  his  partnership  with  them  continued,  (g) 

Cases  of  restricted  authority  and  notice  of  it. —  On  the 
other  hand,  a  person  who  has  notice  that  the  authority  of 
a  partner  is  restricted  cannot  hold  the  firm  liable  if  he 
chooses  to  deal  with  that  partner  in  a  matter  beyond   his 

(d)  1  Camp.  1S5.  the  firm,  the  holder  cannot  recover 

(e)  Ex  parte  Bushell,  3  M.  D.  &  against  the  firm  unless  he  can  show 
D.  615;  Ex  parte  Meyer,  De  Gex,  that  he  gave  value  for  the  bill. 
632  (an  accommodation  bill);  Lane  Hogg  v.  Skene,  18  C.  B.  N.  S.  426, 
v.  Williams,  2  Vera.  277 ;  Wintlo  explaining  Musgrave  v.  Drake,  5 
v.  Crowther,  1  Cr.  &  J.  316;  Thick-  Q.  B.  185,  which  was  supposed  to 
nesse  v.  Bromilow,  2  id.  425 ;  Rid-  be  to  the  contrary.  See,  also, 
ley  v.  Taylor,  13  East,  175 ;  Sander-  Bailey  v.  Bidwell,  13  M.  &  W.  73 : 
sonu.  Brooksbank,  4  Car.  &  P.  286  ;  Smith  v.  Braine,  15  Jur.  287,  Q.  B. 
Lewis  v.  Reilly,  1  Q.  B.  349 ;  Sutton  and  16  Q.  B.  244 ;  Harvey  v.  Towers, 
v.  Gregory,  2  Peake.  150;  Swan  v.  6  Ex.  656;  Berry  v.  Alderman,  14 
Steele,  7  East,  210.  See,  as  to  the  C.  B.  95;  Heath  v.  Sansom,  2  B.  & 
plea  of  non  accepit,  Jones  v.  Cor-  Ad.  291. 

bett,  2   Q.    B.  828.     It  is  now  set-        (/)  Ante.  p.  151  et  seq. 
tied  that  if  a  bill  is  drawn  or  ac-        (g)  This  subject  will  be  alluded 
cepted  by  one  partner  in  fraud  of    to  hereafter.     See  ch.  2,  §  3. 

410 


CH.  I,  SEC.  IV.]  LIABILITIES    OF    PARTNERS. 


*170 


authority  as  restricted.  (A)1  Therefore,  where  the  defend- 
ant, who  was  in  partnership,  sent  the  plaintiff  a  circular 
telling  him  not  to  supply  goods  to  the  firm  without  the 
defendant's  written  order,  and  the  plaintiff,  notwithstand- 
ing, supplied  goods  to  the  defendant's  partner,  it  was  held 
that  the  defendant  was  not  liable  for  the  goods.  (?')     So  the 


{h)  Alderson  v.  Pope,  1  Camp. 
404,  stated  and  observed  upon  here- 
after. 

1Knox  v.  Buffington,  50  Iowa, 
320 ;  N.  Y.  F.  Ins.  Co.  v.  Bennett,  5 
Conn.  597 ;  Chapman  v.  Devereaux, 
32  Vt.  108;  Baxter  v.  Clark,  4  Ired. 
L.  127;  Coleman  v.  Bellhouse,  9 
U.  C.  (C.  P.)  31 ;  Radcliff  v.  Var- 
ner,  55  Ga.  427;  Williams  v.  Bar- 
nett,  10  Kan.  455;  Boardman  v. 
Gore,  15  Mass.  339;  Combs  v.  Bos- 
well,  1  Dana,  473;  Wilson  v.  Rich- 
ards, 28  Minn.  337;  Pollock  v.  Will- 
iams, 42  Miss.  88;  Mason  v.  Part- 
ridge, 66  N.  Y.  633 ;  Dow  v.  Say- 
ward,  12  N.  H.  271;  Cargill  v. 
Corby,  15  Mo.  425;  Bromley  v.  El- 
liot, 38  N.  H.  287;  Nolan  v.  Love- 
lock, 1  Mont,  224. 

If  a  firm  consists  of  but  two  part- 
ners, each  having  an  equal  voice  in 
the  direction  and  control  of  the 
common  business,  either  may  pro- 
tect himself  against  liability  on  a 
future  contract  by  giving  notice  of 
his  dissent  to  the  person  with  whom 
it  is  about  to  be  made ;  and  where 
the  partnership  consists  of  more 
than  two  persons,  one  of  whom 
gives  notice  of  his  dissent,  the  party 
contracting  with  the  others  acts  at 
his  peril,  and  cannot  hold  the  dis- 
senting party  liable,  unless  his  lia- 
bility results  from  the  articles  or 
from  the  nature  of  the  partnership. 
See  Johnston  z>.  Dutton,  27  Ala.  245 ; 
Monroe  v.  Conner,  15  Me.  178 ;  Mat- 
thews v.  Dare,  20  Md.  248 ;  Leavitt 


v.  Peck,  3  Conn.  124;  Yeager  v. 
Wallace,  57  Penn.  St.  365;  and  the 
cases  cited  below. 

If  one  of  two  attorneys  consti- 
tuting a  firm,  practicing  only  in 
the  city  of  Baltimore,  receives  from 
one  aware  of  this  limitation  a  note 
for  collection  in  Carroll  county,  the 
firm  will  not  be  responsible  unless 
the  privity  of  the  other  partner  is 
shown.     Brent  v.  Davis,  9  Md.  217. 

One  partner  cannot,  in  violation 
of  known  stipulations  in  the  articles 
of  partnership,  bind  the  firm  even 
for  money  which  is  applied  in  liqui- 
dation of  the  debts  of  the  firm. 
Langan  v.  Hewett,  21  Miss.  122. 

C.  and  H.  were  partners;  C.  was 
to  furnish  the  capital,  H.  the  labor. 
W.,  who  knew  of  the  agreement 
between  the  partners,  agreed  with 
H.  to  perform  labor  for  the  use  and 
benefit  of  the  partnership.  Held, 
that  C.  was  not  liable  for  the  value 
of  the  labor  performed  by  W. 
Pollock  v.  Williams,  42  Miss.  88. 

Where,  in  a  partnership  to  work 
a  farm,  it  was  agreed  that  each 
partner  was  to  supply  and  pay  for 
Ins  portion  of  labor,  and  a  laborer 
who  contracted  with  one  partner 
had  knowledge  of  such  agreement, 
held,  that  he  could  not  recover 
against  the  partnership  in  an  action 
for  services  rendered  on  the  farm. 
Urquhart  v.  Powell,  54  Ga.  29. 

(0  Willis  v.  Dyson,  1  Stark.  164; 
Minnit  v.  Whitney,  Vin.  Ab.  Partn. 
A.  PI.  12,  and  5  Bro.  P.  C.  489.    See, 


411 


*171  RIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

authority  of  any  partner  to  accept  bills  in  the  partnership 
name  may  be  determined  by  a  public  notice,  and  such 
notice  will  affect  those  whom  it  reaches,  subject  to  the 
qualification  that  an  indorsee  with  notice  may  avail  him- 
self of  the  ignorance  of  his  indorser.  (k) 

In  Galavmy  v.  Mathew,  {I)  the  defendants,  Mathew  and 
Smithson,  were  partners;  Smithson  caused  an  advertise- 
ment to  be  published  warning  all  persons  not  to  give  credit 
to  Mathew  on  his,  Smithson's,  account,  and  stating  that  he 
would  not  be  liable  for  any  bills  or  notes  issued  by  Mathew 
in  the  name  of  the  partnership.  The  plaintiff  had  seen 
this  advertisement,  but  he  was  nevertheless  prevailed  upon 
by  Mathew  to  accept  a  bill  for  the  accommodation  of  the 
firm,  taking  in  exchange  a  promissory  note  drawn  by 
Mathew  in  the  name  of  the  firm.  Mathew  got  the  bill  dis- 
counted, and  bona  fide  applied  almost  all  of  the  money 
thus  procured  in  payment  of  the  debts  of  the  firm.  The 
plaintiff  paid  his  acceptance  at  maturity,  and  then 
[*171]  ^brought  an  action  against  the  firm  on  the  note. 
But  it  was  held  that,  having  seen  the  advertisement, 
he  could  not  recover. 

Restricted  powers  not  inconsistent  with  continuance  of 
partnership. —  It  will  be  observed  that  in  these  cases  the 
notices  were  effectual  though  the  partnership  w7as  not  de- 
termined. The  continuance  of  the  partnership  is  not  in- 
consistent with  a  notice  by  one  partner  that  as  to  some 
particular  matter  he  will  not  be  bound  by  the  acts  of  his 
copartner.  (?n) 

too,  Vice  v.  Fleming,  1   Y.  &  J.  without  authority.      See  further, 

227;  Ex  parte  Holdsworth,  1  M.  on  this  point,  infra,  p.  174. 

D.  &  D.  475.  ('«■)  See,  in  addition  to  the  cases 

(fc)  Rooth  v.  Quin,  7  Price,  193.  cited  in  the  last  few  notes,   the 

(0  1  Camp.  402,  and  10  East,  264.  judgment  of  L.    J.    Bramwell   in 

See,  too,  Ex  parte  Holdsworth,    1  Bullen    v.   Sharp,    L.   R.    1   C.  P. 

M.  D.  &  D.  475,  where  the  drawer  pp.    125-6,   and.  the  judgment  in 

of  bills  accepted  by  the  firm   had  Vice  v.  Fleming,  1  Y.  &  J.  227. 

notice  that    they   were    accepted 

412 


CII.  I,  SEC.  IV.]  LIABILITIES    OF    PARTNERS. 


'171 


Bills  accepted  in  name  of  firm  for  private  debt. — 

Again,  a  person  who  knows  that  a  partner  is  using  the 
name  or  assets  of  the  firm  for  a  private  purpose  of  his  own 
knows  that  he  is  prima  facie  committing  a  fraud  on  his 
copartners.  Therefore,  notwithstanding  the  implied  power 
of  a  member  of  an  ordinary  trading  firm  to  accept  bills  or 
make  notes,  if  one  partner  accepts  a  bill  or  makes  a  note 
in  the  name  of  the  firm,  and  gives  the  bill  or  note  in  pay- 
ment of  a  private  debt  of  his  own,  the  creditor  who  takes 
the  bill  or  note,  knowing  the  circumstances  under  which  it 
has  been  accepted  or  made,  will  not  be  able  to  enforce  it 
against  the  firm,  unless  it  was,  in  fact,  given  with  the  au- 
thority of  the  other  partners,  which  it  is  for  the  creditor  to 
prove,  (n) l     And  if  a  bill  is  drawn  by  one  partner  in  the 


(n)  Leverson  v.  Lane,  13  C.  B.  N. 
S.  278,  and  3  Fos.  &  Fin.  221 ;  Re 
Riches,  4  De  G.  J.  &  S.  581,  and  5 
N.  R.  287.  See,  also,  Ellston  v. 
Deacon,  L.  R.  2  C.  P.  20.  Older 
cases  to  the  same  effect  are  Wells 
v.  Masterman,  2  Esp.  731 ;  Green 
v.  Deakin,  2  Stark.  347;  Ex  parte 
Thorpe,  3  M.  &  A.  716;  Ex  parte 
Austen,  1  M.  D.  &  D.  247;  Arden 
v.  Sharpe,  2  Esp.  524;  Ex  parte 
Agace,  2  Cox,  312;  Miller  v.  Doug- 
las, 3  Ross,  L.  C.  500;  Ex  parte 
Bonbonus,  8  Ves.  540;  Frankland 
v.  M'Gusty,  1  Knapp,  274.  And  see 
post,  p.  173. 

1  Ranst  v.  Hanselt,  41  N.  Y.  Su- 
perior Ct.  467 ;  Clay  v.  Cottrell,  18 
Penn.  St.  408;  King  v.  Faber,  22 
Penn.  St.  21 :  Bank  of  Commerce 
v.  Selden,  3  Minn.  155;  Taylor  v. 
Hillyer,  3  Blackf.  433;  Hickman  v. 
Reineking,  6  id.  388;  Maudlin  v. 
Branch  Bank,  2  Ala.  502;  Robin- 
son v.  Aldridge,  34  Miss.  352; 
Hickman  v.  Kunkle,  27  Mo.  401; 
Stainer  t\  Tysen,  3  Hill,  279;  Mil- 
ler v.  Manice,  6  id.  115;  Weed  v. 
Richardson,  2  Dev.  &  B.  L.  535; 


Baird  v.  Cochran,  4  Serg.  &  R.  397 ; 
Porter  v.  Gunnison,  2  Grant,  Cas. 
297;  Burleigh  v.  Parton,  21  Tex. 
585;  Huntington  v.  Lyman,  1  D. 
Chip.  438 ;  Cotton  v.  Evans,  1  Dev. 
&  B.  Eq.  284;  Lanier  v.  McCabe,  2 
Fla.  32 ;  Munroe  v.  Cooper,  5  Pick. 
412;  Williams  v.  Wallbridge,  3 
Wend.  415;  Davenport  v.  Runlett, 
3  N.  H.  386;  Gansevoort  v.  Will- 
iams, 14  Wend.  133;  Wilson  v. 
Williams,  id.  146;  Foster  v.  An- 
drews, 2  Pa.  160 ;  Powell  v.  Messer, 
18  Tex.  401 ;  Williams  v.  Gilchrist, 
11  N.  H.  535;  Tompkins  v.  Wor- 
yard,  5  W.  Va.  216.  See,  also, 
Wagner  v.  Clay,  1  A.  K.  Marsh. 
257;  Cooper  v.  McClurkan,  22 
Penn.  St.  80;  Rutledge  v.  Squires, 
23  Iowa,  53;  ante,  note. 

One  partner  cannot  bind  his  firm 
by  signing  the  partnership  name  in 
renewal  of  a  premium  note  given 
by  such  partner  in  the  name  of  the 
firm  for  a  policy  of  insurance  upon 
his  individual  property.  Lime 
Rock,  etc.  Ins.  Co.  v.  Treat,  58 
Me.  415. 

If  money  is  borrowed  by  a  part- 


413 


171 


Kl<  i  UTS    AND    OBLIGATIONS. 


[BOOK    IX. 


name  of  the  firm  in  fraud  of  his  copartners,  and  is  accepted 
by  the  drawee,  and  is  afterwards  indorsed  by  the  drawer 


ner  in  his  own  name  and  on  his 
own  credit,  and  his  individual  note 
is  given  therefor,  it  is  no  fraud 
afterwards  to  execute  the  note  of 
the  firm  in  renewal,  provided  the 
money  goes  into  the  business  of 
the  firm.  Union  Bank  v.  Eaton,  5 
Humph.  490. 

If  it  is  within  the  ordinary 
course  of  a  partnership  business 
for  one  partner  to  borrow  money 
on  the  credit  of  a  firm,  proof  that 
a  loan  is  made  to  the  firm,  at  their 
place  of  business,  through  one  of 
the  partners,  at  six  per  cent.,  upon 
a  statement  by  the  latter  that  the 
firm  could  use  the  money  to  ad- 
vantage at  that  rate;  that  the 
lender  took  a  transfer  of  bank 
stock  as  collateral  security;  and 
that  he  knew  that  the  partner  with 
whom  he  transacted  the  business 
owned  real  estate,  in  which  the 
firm  was  not  interested, —  is  not 
sufficient  to  affect  the  lender,  if  he 
acted  in  good  faith,  with  construct- 
ive notice  of  fraud  in  such  partner 
in  procuring  the  money  for  his 
own  personal  use.  Warren  v. 
French,  6  Allen,  317. 

It  is  not  competent  to  charge  a 
firm  for  the  act  of  a  partner  in 
giving  firm  security  for  an  indorse- 
ment of  his  individual  note  by 
evidence  that  at  the  time  of  ob- 
taining the  indorsement  the  part- 
ner stated  that  the  money  was 
wanted  for  the  use  of  the  firm. 
Uhler  v.  Browning,  28  N.  J.  L.  79. 

In  an  action  upon  a  note,  signed 
by  one  of  two  partners,  in  the  part- 
nership name,  for  a  purpose  not 
connected  with  the  partnership, 
and  without  the  knowledge  of  the 


other  partner,  testimony  tending 
to  show  a  subsequent  recognition 
of  the  note  by  the  latter  is  within 
the  exclusive  jurisdiction  of  the 
jury  to  weigh.  Jones  v.  Booth,  10 
Vt.  268. 

Where  one  of  two  partners,  dur- 
ing the  existence  of  the  partner- 
ship, gave  a  promissory  note  in  the 
name  of  the  firm  for  his  private 
debt;  and  the  other  partner  after- 
wards, knowing  these  facts,  by  a 
promise  to  pay  the  note,  induced 
the  holder  to  forbear  attempting  to 
collect  it,  held,  that  a  jury  would 
be  warranted  in  returning  a  verdict 
against  both  in  an  action  on  the 
note,  without  expressly  finding 
that  the  note  had  been  ratified  by 
the  other  partner.  Wheeler  v.  Rice, 
8  Cush.  205. 

The  rule  stated  in  the  text  is  the 
same  in  the  case  of  an  accommoda- 
tion indorsement  by  one  partner  in 
the  name  of  the  firm.  Bank  of 
Tenn.  v.  Safforans,  3  Humph.  597 ; 
Fielden  v.  Lahens,  9  Bosw.  436; 
Whitmore  v,  Adams,  17  Iowa,  567 ; 
Elliott  v.  Dudley,  19  Barb.  320. 

Where  one  member  of  a  partner- 
ship, in  order  to  pay  his  individual 
debt,  makes  his  promissory  note 
and  indorses  it  in  the  firm  name, 
without  the  knowledge  or  consent 
of  his  copartners,  and  his  creditor, 
with  knowledge  of  the  facts,  re- 
ceives the  note,  and  in  order  to 
bind  the  firm  transfers  it  before 
maturity  to  a  bona  fide  holder,  the 
creditor  is  guilty  of  a  fraud  and  is 
liable  therefor.  But  the  fraud  is 
not  upon  the  firm ;  it  is  only  upon 
those  who  did  not  consent  to  the 
indorsement.     Hence,  the  cause  of 


414 


CH.  I,  SEC.  IV.J  LIABILITIES    OF    PARTNERS. 


171 


in  the  name  of  the  firm,  the  acceptor  may  successfully 
deny  the  indorsement,  although  he  cannot  deny  the  draw- 
ing. 0) 


action  arising  therefrom  is  no  part 
of  the  assets  of  the  firm,  although 
the  note  has  been  paid  out  of  such 
assets;  and  title  thereto  does  not 
pass  by  a  general  assignment  of  all 
the  property  and  effects  of  the  firm, 
nor  is  any  interest  therein  con- 
veyed by  an  assignment  made  by 
one  of  the  parties  injured  of  his 
right  and  interest  in  the  partner- 
ship assets.  Calkins  v.  Smith,  48 
N.  Y.  614. 

B.,  a  member  of  a  firm  of  which 
he  and  A.  were  partners,  fraudu- 
lently made  a  promissory  note  in 
the  name  of  the  firm  and  delivered 
it  to  C,  who  had  knowledge  of  the 
fraud.  C.  delivered  it  to  D. ,  an 
innocent  holder,  for  value.  The 
firm  was  aftervva)-ds  dissolved  and 
a  receiver  appointed.  D.  brought 
an  action  at  law  upon  the  note.  A. 
then  brought  a  bill  in  equity  against 

B.  and  C,  the  prayer  of  which  was 
that  C.  might  be  ordered  to  pay, 
take  up  and  cancel  the  note  and 
restrained  from  enforcing  it.  Held, 
that  the  bill  could  not  be  main- 
tained. Fuller  v.  Percival,  126 
Mass.  381. 

B.,  a  member  of  a  firm  of  which 
he  and  A.  were  partners,  fraudu- 
lently made  a  promissory  note  in 
the  name  of  the  firm,  and  delivered 
it  to  C,  who  had  knowledge  of  the 
fraud.  The  firm  was  afterwards 
dissolved  and  a  receiver  appointed. 
A.,  after  the  note  became  due,  and 
while  it  was  still  in  the  hands  of 

C,  no  suit  having  been  begun  on 
it,  brought  a  bill  in  equity  against 


B.  and  G,  the  prayer  of  which  was 
that  C.  might  be  ordered  to  pro- 
duce and  cancel  the  note  and  be 
restrained  from  enforcing  it.  Held, 
that  the  bill  could  be  maintained. 
Fuller  v.  Percival,  supra. 

One  partner,  without  r-onsent  of 
his  copartner,  cannot  indorse  a 
partnership  note,  belonging  at  the 
time  to  the  firm,  in  payment  of  an 
individual  debt.  Fletcher  v.  An- 
derson, 11  Iowa,  228;  Fall  River, 
etc.  Bank  v.  Sturtevant,  12  Cush. 
372. 

Where  a  promissory  note  belong- 
ing to  a  partnership  is  transferred 
or  paid  over  by  an  individual  mem- 
ber thereof  in  satisfaction  of  his 
own  private  debt,  it  is  incumbent 
on  the  plaintiffs,  in  a  suit  brought 
on  the  note,  to  show  the  assent  of 
the  other  partner  in  order  to  bind 
him ;  and  such  knowledge  and  as- 
sent must  be  clearly  shown,  and 
not  left  to  be  inferred  from  vague 
and  slight  circumstances.  Kemeys 
v.  Richards,  11  Barb.  312;  Mecut- 
chen  v.  Kennady,  27  N.  J.  L. 
230. 

One  partner  cannot,  without  the 
express  concurrence  of  his  copart- 
ner, make  a  note  of  the  firm  pay- 
able to  himself,  and  charge  the  firm 
therewith.  Brown  v.  Haynes,  6 
Jones,  Eq.  49. 

Where  a  partner  in  two  firms 
draws  a  bill  by  one  firm  on  the 
other,  payable  to  himself,  for  his 
individual  debt,  which  is  accepted 
by  the  firm,  such  bill  cannot  be  re- 
covered by  the  payee  against  the 


(o)  Garland  v.  Jacomb,  L.  R.  8  Ex.  216. 

415 


•171 


incurs  and  obligations. 


[book    II. 


Again,  although  a  partner  may  be  a  bona  fide  holder,  for 

his  own  separate  use,  of  the  paper  of  his  firm,  yet,  if  he 


drawers  or  acceptors.     Babcock  v. 
Stone,  8  McLean,  172. 

If  a  partner  draws  notes  in  tin- 
name  of  the  firm,  payable  to  him- 
self, ami  then  indorses  them  to  a 
third  party  for  a  personal,  and  not 
a  partnership,  consideration,  the 
first  indorsee  cannot  maintain  an 
action  on  them  against  the  linn,  if 
lie  knew  (hat  the  notes  were  an- 
tecedent. Smyth  v.  Strader,  4  How. 

101. 

An  indorsee  of  a  note,  indorsed 
by  one  of  several  partners,  in  the 
partnership  name,  for  his  individ- 
ual purposes,  without  the  consent 
or  knowledge  of  the  other  partners, 
cannot  avail  himself  of  such  note 
to  subject  the  partnership,  even  if 
lie  did  not  know  that  it  was  in- 
dorsed under  Buch  circumstances, 
where  his  ignorance  arises  from 
gross  negligence.  New  York  Firo 
Ins.  Co.  v.  Bennett,  5  Conn.  574. 

An  indorsee  who  received,  six 
months  after  date,  as  collateral 
security,  from  the  payee,  a  note  on 
demand,  given  in  the  name  of  a 
partnership  to  one  of  the  firm, 
takes  it  subject  to  all  the  equity 
existing  against  it  in  the  hands  of 
the  payee.  Thompson  v.  Hale,  6 
Pick.  259. 

A  note  was  indorsed  by  a  firm 
and  pledged  by  them  as  collateral 
security  to  a  creditor,  whose  claim 
was  afterwards  paid  by  A.,  one  of 
the  firm,  with  his  own  money,  and 
the  note  was  delivered  by  the  cred- 
itor to  him.  Subsequently,  and 
after  the  dissolution  of  the  partner- 
ship, but  before  the  maturity  of 
the  note,  A.  delivered  it,  with  the 
partnership    indorsement   still   re- 


maining thereon,  to  B.,  in  pay- 
ment of  his  own  individual  debt, 
//</</.  that  the  partnership  indorse- 
ment became  legally  extinct  when 
A.  paid  the  pledgee's  claim,  and 
that  the  linn  were  not  liable  to  B. 
upon  the  note  as  indorsers.  Dana 
v.  Conant,  80  Vt.  846. 

The  plaintiff,  at  the  request  of 
M.,  a  member  of  the  firm  of  M.  & 
H.,  made  an  accommodation  note 
paj able  to  the  order  of  the  firm, 

and  delivered  it  t < >  M..  taking  from 
M.  in  exchange  therefor  a  note  of 
the  same  amount,  executed  by  M. 
in  t  he  partnership  name,  the  plaint- 
iff supposing  that  his  note  was  to 
be  used  for  the  benefit  of  the  firm. 
M.,  however,  without  the  knowl- 
edge of  his  partner,  indorsed  it  in 
the  partnership  name  and  deliv- 
ered ittoG.  in  payment  of  a  private 
debt,  (i.  taking  it  with  full  knowl- 
edge of  all  the  facts.  When  the 
plaintiff's  note  fell  due  he  learned 
the  facts  with  regard  to  the  fraud- 
ulent use  made  of  it.  He,  how- 
ever, gave  a  new  note  to  G.  for  the 
amount  due  and  took  up  the  for- 
mer one,  surrendering  also  to  M. 
the  note  which  he  held  against  M. 
&  H.,  and  taking  a  new  note  of 
the  same  amount  with  his  own,  ex- 
ecuted by  M.  in  the  name  of  the 
firm.  The  plaintiff  afterwards  paid 
his  note  when  it  fell  due.  In  a  suit 
brought  by  him  against  M.  &  H. 
on  the  note  last  taken  by  him  and 
for  money  paid  to  their  use,  it  was 
held:  1.  That  the  arrangements 
between  M.  &  G.,  under  which  the 
latter  received  the  original  note  of 
the  plaintiff,  indorsed  in  the  part- 
nership name,  in  payment  of  his 


416 


•OH.  I,  SEC.  IV.]  LIABILITIES    OF    PARTNERS.  *172 

gives  such  paper  in  payment  of  a  separate  debt  of  his  own, 
this  is  prima  facie  an  irregular  proceeding  and  a  fraud  on 
his  copartners.  Consequently  the  creditor  taking 
the  paper  ^must  rebut  this  prima  facie  inference  be-  [*172] 
fore  he  can  compel  the  firm  to  pay.  (p)  A  bona  fide 
holder  for  value  without  notice  is  of  course  in  a  different 
position,  (q) 

Pledge  of  partnership  goods  for  private  debt. —  As  a 
partner  has  no  implied  authority  to  pledge  the  partnership 
name  for  purposes  of  his  own,  so  neither  has  he,  for  similar 
purposes,  any  implied  power  to  pledge  its  goods.  There- 
fore, if  two  firms  are  jointly  interested  in  consignments, 
and  one  of  them  pledges  the  bills  of  lading  with  its  bankers 
as  a  security  for  advances  on  its  separate  account,  the  bank- 
ers cannot  hold  those  goods  against  the  other  firm  if  they 
knew  when  the  goods  were  pledged  what  the  real  facts 
were  respecting  them,  (r)  So,  if  one  partner  pays  a  sepa- 
rate debt  of  his  own  with  money  of  the  firm,  and  the  cred- 
itor who  is  paid  is  aware  of  the  facts,  he  cannot  retain  the 
money  as  against  the  firm,  unless  he  can  prove  that  the 
payment  was  authorized  by  the  other  partners,  or  unless 
they  have  estopped  themselves  from  den}7ing  the  author- 
ity, oo 

private    claim   against  M.,  was  a  as  money  had  to  the  use  of  the 

fraud  on  the  other  partner,  and  firm.    Mix  v.  Muzzy,  28  Conn.  186. 

that  G.  obtained  thereby  no  right  (p)  See  Leverson  v.  Lane,  13  C. 

to  the  note,  either  against  the  firm  B.  N.  S.  278,  and  Re  Riches,  4  De 

or    the   plaintiff.     2.  That   as  the  G.  J.  &  S.  581,  and  5  N.  R.  287, 

plaintiff  had  full  knowledge  of  the  qualifying  Ex  parte  Bubhell,  3  M. 

facts  when  he  gave  his  new  note,  D.  &  D.  615,  and  Ridley  v.  Taylor, 

and  took  a  new  note  in  the  name  13  East,  175,  in  which  the  contrary 

of  the  firm,  he  could  not  recover  doctrine  was  countenanced, 

upon  the  latter  note  against  the  (q)  See  ante,  p.  169. 

firm.    3.  That  as  the  plaintiff  was  (r)  Snaith  v.    Burride,  4  Taunt, 

not  legally  liable  to  pay  G.  the  note  684. 

originally  given  by  him,  his  pay-  (s)  Kendal  v.  Wood,  L.  R.  6  Ex. 

ment  of  the  same,  either  in  cash  or  243;  Heilbut  v.  Nevill,  L.  R.  4  C. 

by  giving  a  new  note,  would  give  P.  354,  and  5  id.  478.     See  further, 

him  a  right  to  recover  the  amount  as  to  such  cases,  ante,  pp.  165,  166. 
Vol.  1  —  27                        417 


*173  EIGHTS   AND   OBLIGATIONS.  [lJOOK    II. 

Private  bargain  by  one  partner. —  Another  case,  illus- 
trating the  want  of  authority  of  one  partner  to  bind  the 
firm  by  transactions  inuring  only  to  his  advantage,  is 
afforded  by  Bignold  v.  Waterhouse.  (t)  There  the  defend- 
ants were  proprietors  of  a  coach  running  between  London 
and  Norwich,  and  they,  by  notice  affixed  in  their  office, 
stated  that  they  would  not  be  accountable  for  any  parcel 
above  the  value  of  51.,  unless  the  same  was  entered  and 
paid  for  accordingly.  The  plaintiffs  were  bankers  at  Nor- 
wich, and  one  of  the  defendants,  for  a  consideration  mov- 
ing to  him  alone,  agreed  that  the  plaintiffs'  parcels  should 
always  go  free  by  the  coach.  This  agreement  was  acted 
on  for  some  time,  but  it  did  not  appear  that  the  other  de- 
fendants were  aware  of  its  existence,  or  of  the  fact  that 
the  plaintiffs  were  treated  differently  from  other  people.  A 
parcel  of  the  plaintiffs'  sent  by  the  coach  being  lost. 
[*173]  it  was  held  that  the  contract  entered  into  by  *the 
one  defendant  was  not  binding  on  the  others,  and 
that  they  were  not  liable  for  the  loss  of  the  parcel,  its  value 
not  having  been  declared  as  required  by  the  notice. 

Fraud  on  incoming  partners. —  The  same  principle  was 
acted  upon  in  the  important  and  well-known  case  of  Shirreff 
v.  Wilks.  (u)  There  the  plaintiffs  sold  some  porter  to  Bishop 
and  Wilks,  who  were  partners;  and  the  porter  was  entered 
in  the  plaintiffs'  books  in  the  names  of  Bishop  and  Wilks. 
Afterwards  Robson  became  a  partner  with  Bishop  and 
Wilks,  and  the  plaintiffs,  knowing  this,  drew  a  bill  on  all 
three  partners  for  the  price  of  the  porter,  and  Bishop  ac- 
cepted the  bill  in  the  name  of  the  three.  It  was  held  that 
Robson  was  not  liable  on  this  bill,  there  being  no  evidence 
to  show  that  he  knew  anj'thing  of  it.  Lord  Kenyon  went 
so  far  as  to  say  that  the  transaction  was  fraudulent  on  the 
face  of  it;  but  that  is  going  rather  far,  as  it  is  not  uncom- 
mon for  incoming  partners  to  agree  to  take  upon  themselves 
the  existing  liabilities  of  the  firm.     When  such  an  agree- 

(t)  1  M.  &  S.  255.  (u)  1  East,  48. 

418 


CH.  I,  SEC.  IV.]  LIABILITIES    OF   PARTNERS.  *174: 

ment  is  entered  into,  the  incoming  partner  can  hardly  say 
he  has  been  defrauded  if  a  bill  in  the  name  of  the  new  firm 
is  accepted  for  a  debt  of  the  old  firm  without  any  specific 
authority  on  his  part.  But  if  the  creditor  cannot  show  an 
authority  on  the  part  of  the  incoming  partner  for  the  accept- 
ance of  a  bill  in  his  name  for  a  debt  of  the  old  firm,  the 
principle  acted  on  in  Shirrejfv.  Wilks  will  apply,  for  that 
case  is  clear  law,  and  has  often  been  followed  as  such,  (x) 

Liability  of  retired  partners  after  notice. —  The  doctrine 
that  a  person  who  deals  with  a  partner,  knowing  that  he  is 
exceeding  his  authority,  cannot  impute  the  acts  of  that 
partner  to  the  firm,  is  further  illustrated  by  the  decisions 
establishing  the  non-liability  of  a  retired  partner  for  acts 
done  by  his  copartners  after  notice  of  his  retirement.  These 
decisions  will  be  examined  at  length  hereafter. 

Notice  of  private  stipulations  of  partners. —  Granting 
that  a  person,  knowing  the  limits  of  a  partner's  authority  as 
set  by  his  copartners,  cannot  hold  them  responsible  for  an 
act  done  by  him  in  excess  of  his  authority,  it  still  remains 
to  determine  the  effect  of  notice  by  non-partners  of  stipula- 
tions entered  into  between  the  partners  themselves. 

*In  Galway  v.  Mathew,  (y)  Lord  Ellenborough  is  [*174] 
reported  to  have  said,  "It  is  not  essential  to  a  part- 
nership that  one  partner  should  have  power  to  draw  bills 
and  notes  in  the  partnership  firm  to  charge  the  other:  They 
may  stipulate  between  themselves  that  it  shall  not  be  done',  and 
if  a  third  person,  having  notice  of  this,  will  take  such  a 
security  from  one  of  the  partners,  he  shall  not  sue  the  others 
upon  it  in  breach  of  such  stipulation." 

Again,  in  Alder  son  v.  Pope,  (s)  the  same  judge  held  "  that 
where  there  was  a  stipulation  between  A.,  B.  and  C,  who 
appeared  to  the  world  as  copartners,  that  C.  should  not  par- 
ticipate in  profit  and  loss,  and  should  not  be  liable  as  a 

(.r)  See  ante,  p.  171,  and  Ex  parte    9  Dowl.  Pr.  Ca.   18,   sub  nomine 
Goulding,  2  Gl.  &  Jam.  118;  Wil-    Wilson  v.  Bailey, 
son  v.  Lewis,  2  Man.  &  Gr.  197,  and        (y)  10  East,  264. 

(z)  1  Camp.  404 
419 


*175  KIGHTS    AND    OBLIGATIONS.  [BOOK  II. 

partner,  C.  was  not  liable  as  such  to  those  who  had  notice 
of  this  stipulation." 

Principle  examined. —  These  dicta  appear  to  authorize 
the  statement  that,  if  partners  stipulate  amongst  themselves 
that  certain  things  shall  not  be  done,  no  person  who  is  aware 
of  the  stipulation  is  entitled  to  hold  the  firm  liable  for  what 
may  be  done  by  one  of  the  members  contrary  to  such  stipu- 
lation. But  it  is  submitted  that  this  proposition  is  too  wide. 
A  stranger  dealing  with  a  partner  is  entitled  to  hold  the 
firm  liable  for  whatever  that  partner  may  do  on  its  behalf 
within  certain  limits.  To  deprive  the  stranger  of  this  right 
he  ought  to  have  distinct  notice  that  the  firm  will  not  be 
answerable  for  the  acts  of  one  member  even  within  these 
limits,  (a)  Now  notice  of  an  agreement  between  the  mem- 
bers that  one  of  them  shall  not  do  certain  things  is  by  no 
means  necessarily  equivalent  to  notice  that  the  firm  will  not 
be  answerable  for  them  if  he  does.  For  there  is  nothing  in- 
consistent in  an  agreement  between  the  members  of  a  firm 
that  certain  things  shall  not  be  done  by  one  of  them,  and  a 
readiness  on  the  part  of  all  the  members  to  be  responsible 
to  strangers  for  the  acts  of  each  other,  as  if  no  such  an 
agreement  had  been  entered  into.  It  is  immaterial  to  a 
stranger  what  stipulations  partners  may  make  amongst 
themselves,  so  long  as  they  do  not  seek  to  restrict  their  re- 
sponsibility as  to  him;  and  it  is  only  when  knowledge  of  an 
agreement  between  partners  necessarily  involves  knowl- 
edge that  they  decline  to  be  responsible  for  the  acts 
[*175]  of  each  other  within  the  ^ordinary  limits,  that  a 
stranger's  rights  against  a  firm  can  be  prejudiced  by 
what  he  may  know  of  the  private  stipulations  between  its 
members. 

In  Galway  v.  3Iathew,  (h)  the  plaintiff's  knowledge  of  want 
of  authority  was  derived,  not  from  notice  of  any  agreement 
between  the  partners,  but  from  an  advertisement  published 

(a)  See,  as  to  the  sufficiency  of        (6)  1  Camp.  403,  and  10  East,  264, 
such  notices,  Vice  v.  Fleming,  1  Y.    and  ante,  p.  170. 
&  J.  227. 

420 


CH.  I,  SEC.  IV.]  LIABILITIES    OF    PARTNERS.  *175 

by  one  of  them,  warning  all  persons  that  he  would  no  longer 
be  liable  for  drafts  drawn  by  the  others  on  the  partnership 
account,  (c)  The  passage,  therefore,  in  the  judgment  ex- 
tracted above  was  by  no  means  necessary  for  the  decision 
of  the  case.  With  respect  to  Alderson  v.  Pope,  (d)  if  all 
that  was  meant  was  that  a  person  knowing  that  C.  did  not 
authorize  A.  or  B.  to  act  on  his  behalf  could  not  hold  C. 
liable  for  their  acts,  the  case  presents  no  difficulty ;  but  if 
anything  more  than  this  was  meant  the  authority  of  the 
decision  becomes  at  least  doubtful;  for  it  has  been  held  in 
another  case  that  a  person  who  holds  himself  out  as  a  part- 
ner with  others  with  whom  he  has  no  concern  is  liable  for 
their  acts,  even  to  persons  having  notice  of  the  true  state 
of  affairs;  and  the  decision  was  based  upon  the  very  ground 
that  a  person  who  holds  himself  out  as  a  partner  with 
others  expresses  his  readiness  to  incur  the  responsibilities 
of  a  partner  as  regards  strangers,  whatever  he  may  intend 
shall  be  the  case  between  him  and  those  with  whom  he  as- 
sociates his  name,  (e) 

Private  stipulations  restrictive  of  liability. —  Against 
the  general  proposition  in  question  it  may  be  further  urged 
that  if  partners  agree  not  to  be  liable  beyond  a  certain 
amount,  and  a  stranger  has  notice  of  that  agreement,  the 
notice  avails  nothing  against  him.1  Such  an  agreement, 
coupled  with  notice  of  it  on  the  part  of  a  person  dealing 
with  the  firm,  is  by  no  means  equivalent  to  a  contract  be- 

(c)  Distinct  notice  to  the  same  to  third  persons  without  notice 
effect  existed  in  Minnit  v.  Whit-  thereof,  and  therefore  evidence  as 
ney,  16  Vin.  Ab.  244,  and  5  Bro.  to  ouch  agreement  is  irrelevant. 
P.  C.  489 ;  Willis  v.  Dyson,  1  Stark.  Maltby  v.  Northwestern,  etc.  R.  R. 
164.  Co.  16  Md.  422;  Cargill  v.  Corby, 

(d)  1  Camp.  404.  15  Mo.  425 ;  Perry  v.  Randolph,  14 

(e)  Brown  v.  Leonard,  2  Chitty,  Miss.  335;  Nichols  v.  Cheairs,  4 
120.  Sneed,  229;  Tillier  v.  Whitehead,  1 

1  A  private  agreement  between  Dall.  269 ;  Devin  v.  Harris,  3  Iowa, 
partners  in  relation  to  a  particular  186 ;  Barber  v.  Mann,  5  Bush,  672 ; 
transaction,  although  binding  as  Lawrence  v.  Kinsting,  1  Mont 
between  themselves,  does  not  af-  Ter.  290;  Everett  v.  Chapman,  6 
feet  their  liability  to  the  public  or    Conn.  347.     See  ante. 

421 


*17G  BIGHTS    AND    OBLIGATIONS.  ,  [BOOK    II. 

tween  him  and  it  that  he  shall  not  hold  the  members  re- 
sponsible beyond  the  amount  which  they  may  have  agreed 
between  themselves  to  contribute  respectively.  {/) 
[*176]      "Contracts  on  the  basis  of  such  stipulations. — 

The  writer  is  not  acquainted  with  any  case  in  which 
it  has  been  decided  that  persons  who  are  aware  of  the  terms 
upon  which  partners  have  agreed  together  to  carry  on  busi- 
ness are  deemed  to  contract  with  them  upon  the  basis  of 
the  agreement  come  to  amongst  the  partners  themselves. 
In  all  cases  of  this  description  the  real  question  to  be  de- 
termined seems  to  be  whether  there  was  distinct  notice 
that  the  firm  would  not  be  answerable  to  strangers  for 
acts  which,  without  such  notice,  would  clearly  impose  lia- 
bility upon  it;  and  whenever  there  is  any  doubt  upon  this 
point  the  firm  ought  clearly  to  be  liable,  the  onus  being  on 
it  to  show  sufficient  reason  why  liability  should  not  attach 
to  it.  {g) 

Section  V". —  Of  the  Liability  of  Partners  in  Respect  of 
Contracts  Not  Entered  into  on  Behalf  of  the  Firm, 
or  Not  so  in  Proper  Form. 

Observations  on  foregoing  propositions. —  The  general 
proposition  that  a  partnership  is  bound  by  those  acts  of  its 
agents  which  are  within  the  scope  of  their  authority,  in 
the  sense  explained  in  the  foregoing  pages,  must  be  taken 
with  the  qualification  that  the  agent  whose  acts  are  sought 
to  be  imputed  to  the  firm  was  acting  in  his  character  of 
agent,  and  not  as  principal.  If  he  did  not  act  in  his  char- 
acter of  agent,  if  he  acted  as  a  private  individual  on  his 
own  account,  his  acts  cannot  be  imputed  to  the  firm,  and 
he  alone  is  liable  for  them,  even  though  the  firm  may  have 

(/)  See  Greenwood's  Case,  3  De  mine,  though  the  prospectus  of 
G.  M.  &  G.  476.  the  mining  company  stated   that 

(g)  See  Hawken  v.  Bourne,  8  M.  all  goods  were  to  be  bought  for 
&  W.  703,  where  the  defendant  was  cash  prices  and  no  debt  was  to  be 
held  liable  for  goods  supplied  to  a    incurred. 

422 


CH.  I,  SEC.  V.]  LIABILITIES    OF   PARTNERS. 


M77 


benefited  by  them.  Whether  a  contract  is  entered  into  by 
•an  agent  as  such,  or  by  him  as  a  principal,  is  often,  but  not 
always,  apparent  from  the  form  of  the  contract. 

With  reference  to  the  forms  of  contracts  it  will  be  con- 
venient to  consider  — 

1.  Contracts  under  seal. 

2.  Ordinary  contracts  not  under  seal. 

3.  Bills  of  exchange  and  promissory  notes. 


*1.  Contracts  under  seal. 


[*177J 


1 .  Covenants,  etc. —  A  distinction  is  taken  between  deeds 
and  other  instruments  with  respect  to  the  person  bound  bv 
them.  If  a  deed  is  executed  by  an  agent  in  his  own  name, 
he  and  he  only  can  sue  or  be  sued  thereon,  although  the 
deed  may  disclose  the  fact  that  he  is  acting  for  another,  (h)1 


(h)  Appleton  v.  Binks,  5  East, 
148;  Pickering's  Case,  6  Ch.  525. 
And  see  next  note. 

1  See  the  cases  collected  in  Ewell's 
Evans  on  Agency,  *172,  note.  See 
also,  generally,  ante  and  post, 
notes. 

In  an  attachment  suit  brought 
by  a  firm,  the  attachment  bond  is 
properly  executed  by  signing  the 
firm  name.  Gray  v.  Steedman,  63 
Tex.  95. 

An  instrument  executed  by  one 
partner  in  the  firm  name  and 
legally  binding  upon  the  partner- 
ship, and  entitled  to  be  recorded 
under  the  registry  statutes  of  Flor- 
ida, may  be  admitted  to  record 
upon  the  acknowledgment  of  the 
partner  who  executed  it.  McCoy 
v.  Boley,  21  Fla.  803;  Sanders  v. 
Pepoon,  4  Fla.  465,  approved. 

The  certificate  of  acknowledg- 
ment of  an  instrument  executed  in 
the  name  of  a  firm  should  show  by 
which  member  of  the  firm  the  sig- 
nature was    made   and    acknowl- 


edged. If  the  signing  and  acknowl- 
edgment purported  to  have  been 
done  by  the  firm  and  in  the  firm 
name,  the  instrument  will  not  be 
entitled  to  record.  Sloan  v.  The 
Owens,  etc.  Mch.  Co.  70  Mo.  206. 

Where  a  contract  of  sale,  which 
must  by  law  be  in  writing,  is  made 
in  writing  under  seal  with  one  part- 
ner, who  gives  his  bill  single  for  the 
price  of  the  thing  purchased,  the 
other  partner  cannot  be  sued  upon 
the  consideration.  Harris  v.  Miller, 
1  Meigs,  158. 

If  one  partner  borrows  money  on 
his  own  credit,  and  gives  his  sealed 
note  for  the  amount,  the  firm  is  not 
liable,  though  the  money  be  used 
in  the  partnership  transactions. 
Willis  v.  Hill,  2  Dev.  &  B.  L.  231. 

So,  where  a  partner  buys  real  es- 
tate in  his  own  name,  and  gives  his 
individual  bond  and  mortgage  in 
part  payment  therefor,  the  firm  is 
not  liable  to  the  seller  for  the  un- 
paid purchase  money,  though  it  ap. 
pear  by  the  firm    books  that  the 


423 


177 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Therefore,  where  a  partner  covenants  that  anything  shall  be 
done,  he  and  he  only  is  liable  on  the  covenant,  and  the  firm 


land  was  bought  on  firm  account, 
and  a  declaration  of  trust  was 
afterwards  executed  by  the  pur- 
chaser but  not  recorded,  declaring 
that  the  money  paid  was  partner- 
ship funds,  and  that  the  land  was 
held  by  him  in  trust  as  partnership 
property.  North  Pennsylvania  Coal 
Co.'s  Appeal,  45  Pa.  St.  181.  See, 
also,  Williams  v.  Gillies,  75  N.  Y. 
197;  Patterson  v,  Brewster,  4  Edw. 
352. 

A  lease  from  one  of  the  copart- 
ners, sealed  with  his  seal,  and,  in 
terms,  binding  himself  only,  is  not 
admissible  evidence  to  support  an 
avowry  laying  a  demise  by  the  co- 
partners, notwithstanding  the  deed 
is  expressed  as  "  for  himself  and 
his  partner,"  and  it  is  proved  that 
the  other  party  knew  of  the  de- 
mise and  was  satisfied  with  it.  Tut- 
tle  v.  Eskridge,  2  Munf.  330. 

Two  partners  took  an  assignment 
of  a  lease  of  certain  rooms,  and 
afterwards  one  of  them,  A. ,  by  an 
agreement  under  seal,  without  the 
knowledge  of  the  other,  sublet  a 
part  of  the  room  and  granted  other 
privileges  to  the  plaintiff  for  a  term 
of  three  months  beyond  the  ter- 
mination of  the  lease.  Subse- 
quently the  other  partner  sold  his 
interest  to  B.  A.  and  B.  received 
rent  from  the  plaintiff.  At  the  ter- 
mination of  the  first  lease  the 
plaintiff  was  dispossessed,  and 
'/brought  an  action  of  assumpsit 
against  A.  and  B.  for  the  damage 
he  had  sustained.  Held,  that  the 
agreement  under  seal  was  not  evi- 
dence in  the  action ;  that  from  the 
receipt  of  rent  by  A.  and  B.  no 
contract  could  be  implied  against 


B.,  the  incoming  partner;  and  that 
none  such  was  to  be  implied  from, 
the  partnership.  Bewley  v.  Tarns, 
17  Pa.  St.  485. 

A.  brought  assumpsit  against  B. 
and  others,  whom  A.  claimed  to  be 
copartners  of  B.,  for  goods  fur- 
nished them  under  a  sealed  agree- 
ment executed  by  A.  and  B.  Held, 
that  an  action  would  not  lie  as 
against  B.  A,'s  claim  rested  on  a 
specialty,  and  as  B.  alone  could  not 
be  made  liable  in  assumpsit,  so  B. 
in  company  with  others  could  not 
be  held  in  assumpsit. 

Semble,  that  if  a  partnership  ex- 
isted between  B.  and  his  co-defend- 
ants, the  partners  who  did  not  exe- 
cute the  sealed  agreement  could 
only  be  reached  by  a  bill  in  equity 
filed  by  A.  Boston  &  Col.  S.  Co.  v. 
Smith,  22  Alb.  L.  J.  232 ;  13  R.  I.  27. 
A  lease  under  seal,  executed  by 
one  partner  in  the  name  of  the 
firm  as  lessees,  the  firm  occupying 
thereunder  for  two  years,  paying 
rent  directly  to  the  lessor,  has  been 
held  to  be  evidence  of  an  agree- 
ment for  a  lease,  which,  as  they 
have  had  the  benefit  of  it,  will  be 
enforced  against  the  surviving 
partners  after  the  death  of  him 
who  executed  it.  Kyle  v.  Roberts, 
6  Leigh,  495. 

A  writing  under  seal,  executed 
by  one  partner  in  the  name  of  the 
firm,  is  held  admissible  in  an  action 
of  assumpsit  to  prove  a  promise 
by  the  firm,  if  made  on  sufficient 
consideration.  Fagely  v.  Bellas,  17 
Pa.  St.  67. 

A  contract  was  made,  under 
seal,  with  a  partnership,  for  build- 
ing a  dam ;  but  it  was  executed  by 


424 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS. 


177 


is  not  bound  thereby  to  the  covenantee,  (a)     A  person  who 
has  to  execute  a  deed  as  an  agent  should  take  care  that  the 


one  only  of  the  partnership,  and 
without  any  authority  from  the 
other.  The  work  was  duly  per- 
formed. Held,  that  assumpsit 
would  lie  against  such  partner,  the 
work  being  within  the  scope  of  the 
partnership,  and  the  supposed  con- 
tracts with  the  firm  having  no 
legal  existence  as  such.  Van 
Deusen  v.  Blum,  18  Pick.  229. 

A  partner  who  has  pleaded  non 
est  factum  to  a  note  under  seal, 
executed  by  a  partner  without  au- 
thority, is  thereby  estopped  to  deny 
his  responsibility  in  a  joint  suit 
against  himself  and  partners  for 
the  demand  in  assumpsit.  Doni- 
phan v.  Gill,  1  B.-Mon.  199. 

If  one  partner,  for  the  benefit  of 
the  partnership,  executes  a  bond, 
with  surety,  which  the  surety  is 
compelled  to  pay,  he  does  not 
thereby  acquire  a  right  of  action 
against  the  other  partners.  Tom 
v.  Goodrich,  2  Johns.  213.  See 
ante,  note. 

Where  money  was  lent  to  a  firm, 
and  the  partner  who  conducted 
the  transaction  by  mistake  exe- 
cuted a  penal  bond  for  the  sum,  in 
the  name  of  the  firm,  instead  of 
giving  a  promissory  note  therefor, 
held,  that,  though  at  law  the  cred- 
itor had  no  remedy  on  the  bond 
except  against  the  partner  who 
executed  it,  yet  equity  would  cor- 
rect the  mistake,  and  hold  all  the 
partners  bound  for  the  debt.  Gait 
v.  Calland,  7  Leigh,  594. 

A  vendor  of  goods,  taking  the 
bond  of  the  vendee  for  the  price, 


may  afterwards  file  a  bill  for  relief, 
on  the  ground  that  the  purchase 
was  on  account  of  a  partnership, 
of  which  the  obligor  was  one. 
Spear  v.  Gillet,  1  Dev.  Eq.  466. 

So,  where  one  partner  hired 
slaves  in  his  individual  name,  but 
in  fact  for  the  use  of  the  firm, 
which  had  the  benefit  of  their 
labor,  and  he  gave  his  individual 
bond  with  surety  for  the  hire,  on 
which  judgment  was  subsequently 
recovered,  and  paid  by  the  surety, 
who  then  filed  his  bill  against  his 
principal  and  his  copartners,  on 
which  it  appeared  that  the  princi- 
pal in  the  bond  was  a  non-resident 
of  the  state  and  insolvent,  held, 
that  the  surety  was  entitled  to  a 
decree  against  his  copartners  for 
the  amount  paid  by  him.  Weaver 
v.  Tapscott,  9  Leigh,  424. 

In  an  action  by  a  surviving  part- 
ner on  an  obligatory  writing  given 
to  a  firm,  the  plea  was  that  the 
bond  was  not  given  to  the  firm, 
but  to  the  deceased  partner  in  the 
firm's  name.  At  the  trial  the 
court  instructed  the  jm-y  that,  if 
they  believed  "  from  the  testimony 
that  the  bond  in  evidence  was 
given  for  a  debt  contracted  prior 
to  the  dissolution  of  the  partner- 
ship, the  name  of  the  partnership 
could  be  used  after  the  dissolution, 
and  the  suit  maintained  by  the 
surviving  partner."  Held,  that 
this  instruction  was  unexception- 
able. Stillwell  v.  Gray,  17  Ark. 
473.     See  Survivorship,  post. 

A  joint  obligation  under    seal, 


(i)  Hancock  v.  Hodgson,  4  Bing.  269;  Hall  t\  Bainbridge,  1  Man.  & 
Gr.  42. 

425 


*178  EIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

deed  and  the  covenants  in  it  are  expressed  to  be  made  not 
by  him,  but  by  the  person  intended  to  be  bound.  Thus,  if 
A.  is  the  principal  and  B.  his  agent,  the  deed  and  covenants 
should  not  be  expressed  to  be  made  by  B.  for  A.,  but  by  A. ; 
and  the  execution  in  like  manner  should  be  expressed  to  be 
made  by  A.  by  his  agent  B.  (k) 

2.  Ordinary  contracts  not  under  seal. 

2.  Ordinary  simple  contracts.— When  a  person  enters 
into  a  contract  as  the  agent  of  another,  the  name  of  that 
other  may  be  either  disclosed  or  not.  If  it  is  disclosed  the 
contract  is  treated  as  that  of  the  principal  and  not  as  that 
of  the  agent;  (I)1  whilst  if  it  is  not  disclosed  the  contract 
is  considered  as  that  of  the  agent.2  But  in  this  last  case 
the  person  dealing  with  the  agent  can,  when  he  discovers 
the  undisclosed  principal,  hold   him   liable  instead  of  the 

agent,  (m)3 
[*178]      *Firm  liable  though  not  named  —  Written  con- 
tracts.—  If,  therefore,  one  partner  only  enters  into 
a  written  contract,  the  question  whether  the  contract  is  con- 
fined to  him,  or  whether  it  extends  to  him  and  his  copart- 

executed  by  all  the  members  of  a  5  Ex.  173 ;  Calder  v.  Dobell,  L.  R. 

firm,    in   its  business  and  for   its  6  C.  P.  486. 

benefit,  will  be  regarded  as  a  co-  J  See  Ewell's  Evans  on  Agency, 

partnership  obligation  and  payable  *177,  note. 

out  of  the  firm  assets,  although  2  Edged    v.     Macqueen,    8    Mo. 

the  firm  name  is  not  mentioned  App.  71. 

therein,   and  it   appears  upon   its  (m)  See  Paterson  v.  Gandasequi, 

face   to  be  simply  the    obligation  15  East,  62;  Thompson  v.  Daven- 

of  the   copartners,   contracted    in  port,  9  B.  &  C.  78 ;  and  the  note  to 

their  individual  names.     Berkshire  those  cases  in  2  Smith,  L.  C.     If  a 

Woolen  Co.  v.  Juillard,  75  N.  Y.  man  contracts  for  "  my  principal," 

535 ;  Carson  v.  Byers,  67  la.  606.  the  principal,  although  undisclosed, 

(fc)  Combe's     Ca?e,    9     Co.    76&;  and  not  the  agent,  is  liable,  unless 

Wilks  v.  Back,  2  East,  141.  there  is  some  special  custom  ren- 

(l)  Fairlie  v.  Fenton,  L.  R.  5  Ex.  dering  the  agent  personally  liable. 

169 ;  Ex  parte  Hartop,  12  Ves.  352 ;  But  if  there  be  such  a  custom  the 

Russell  v.  Reece,  2  Car.  &  Kir.  669.  agent  will  be  liable.     See  Fleet  v. 

But  even  in  this  case  the  contract  Murton,  L.  R.  7  Q.  B.  126. 

may  be  so  worded  as  to  bind  the  3  See  Ewell's  Evans  on  Agency, 

agent.     See  Paice  v.  Walker,  L.  R.  *304,  308,  442,  and  notes. 

426 


CH.  I,  SFC.  V.]  LIABILITIES    OF   PARTNERS. 


'178 


ners,  cannot  be  determined  simply  by  the  terms  of  the 
contract.  For  supposing  a  contract  to  be  entered  into  by 
one  partner  in  his  own  name  only,  still  if  in  fact  he  was 
acting-  as  the  agent  of  the  firm,  his  copartners  will  be  in  the 
position  of  undisclosed  principals;  and  the}r  may  therefore 
be  liable  to  be  sued  on  the  contract  although  no  allusion  is 
made  to  them  in  it.1     This  was  expressly  decided  in  the 


iSee  Burnley  v.  Rice,  18  Tex. 
481 ;  Everett  v.  Chapman,  6  Conn. 
347;  Snead  v.  Barringer,  1  Stew. 
134;  Mann  v.  Clapp,  1  Tex.  App. 
(Civ.)  249;  Franklin  v.  Hardie,  1 
Tex.  App.  (Civ.)  700;  Gribble  v. 
Harry,  2  Tex.  App.  (Civ.)  702. 

A.,  B.  and  C.  entered  into  part- 
nership in  the  business  of  tanning 
hides,  stipulating,  in  the  articles, 
that  A.  should  furnish  hides  for 
one-half  of  the  stock  necessary  to 
keep  the  tannery  in  operation,  and 
should  receive  and  make  market 
for  one-half  of  the  leather,  and  that 
B.  and  C.  should  furnish  the  other 
half  of  the  stock,  and  receive  and 
make  market  for  the  other  half  of 
the  leather;  and  that  in  making 
purchases  each  should  use  his  own 
credit  separately.  B.  purchased  of 
D.,  in  another  state,  a  quantity  of 
hides,  which  D.,  being  ignorant  of 
the  partnership,  charged  to  B.  in- 
dividually. These  hides  were  re- 
ceived at  the  tannery  and  manu- 
factured into  leather  for  the  joint 
benefit  of  the  partners.  In  an  ac- 
tion of  book  debt  brought  by  D. 
against  A.,  B.  and  C,  as  partners, 
to  recover  the  value  of  these  hides, 
it  was  held  that  the  manner  in 
which  the  goods  were  in  fact  pur- 
chased and  charged  did  not  pre- 
clude the  seller  from  resorting  to 
the  partnership  when  discovered. 
Everett  v.  Chapman,  6  Conn.  347. 

A  written  contract,  in  its  cap- 


tion, named  "Charles  W.  Weeks" 
as  one  of  the  parties ;  in  the  body 
he  was  called  "the  said  Charles 
Weeks,"  and  in  the  subscription, 
at  the  end,  he,  as  well  as  the  other 
party,  employed  only  the  initials 
of  his  Christian  name.  In  neither 
the  body  of  the  contract  nor  in  the 
signatures  was  there  any  indication 
that  it  was  the  contract  of  a  co- 
partnership. At  the  date  of  the 
contract  C.  W.  Weeks  was  a  part- 
ner in  a  firm  doing  business  under 
the  name  of  C.  W.  Weeks,  but  the 
matters  included  in  the  contract 
did  not  relate  to  the  partnership 
business.  There  was  no  proof  that 
the  other  party  to  the  contract 
knew  that  C.  W.  Weeks  repre- 
sented a  partnership  firm  until 
after  the  execution  of  the  contract. 
The  contract  was  drawn  by  Weeks, 
and  in  all  the  correspondence,  etc., 
relating  to  it,  the  personal  pronoun 
"I"  was  employed  by  him;  the 
words  "  firm"  or  "  we  "  not  at  all. 
Held,  that  this  was  the  individual 
contract  of  C.  W.  Weeks,  and  not 
that  of  the  firm  of  which  he  was  a 
member.  Marvin  v.  Buchanan,  62 
Barb.  468. 

Where  there  are  two  firms  hav- 
ing the  same  firm  name,  with  the 
names  of  all  the  partners  on  the 
letter-heads,  the  first  firm  being 
composed  of  A.,  B.  and  C,  and  the 
second  firm  of  A.,  B.,  C.  and  D.,  but 
the  business  of  the  two  firms  i3 


427 


IT- 


RIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


well-known  case  of  Beckham  v.  Drake,  (n)  There  Drake, 
Knight 'and  Sturgey  were  in  partnership  as  type-founders; 
but  Drake  was  a  secret  partner.  A  written  agreement  rel- 
ative to  the  partnership  business  was  entered  into  between 


kept  distinct,  the  second  firm  keep- 
ing no  bank  account,  and  borrow- 
ing from  first  firm  when  necessary, 
and  one  of  the  partners  of  the  first 
firm  made  a  note  in  firm  name  and 
discounted  it,  in  an  action  upon  it 
by  the  bank  advancing  the  money 
the  jury  found  that  the  loan  was 
made  exclusively  upon  the  credit 
of  the  original  three  partners,  and 
it  appeared  that  the  money  was  net 
borrowed  or  used  for  the  benefit  of 
the  latter  firm.  Held,  that  the  addi- 
tional partner  was  not  liable  upon 
such  note.  Hastings  Bank  v.  Hib- 
bard,  48  Mich.  452. 

Conversely,  such  undisclosed 
principals  may  sue  upon  such  con- 
tract. See  E well's  Evans  Agency, 
*308,  note. 

Thus,  where  one  partner  enters 
into  a  simple  contract,  though  in 
writing,  in  his  individual  name, 
but  in  fact  for  his  firm,  although 
that  fact  is  not  known  to  the  other 
contracting  part}',  an  action  may 
be  maintained  on  it  in  the  name  of 
the  firm,  by  alleging  that  it  was 
entered  into  by  the  firm  by  the 
name  and  style  of  the  name  of  the 
one  partner,  each  partner  being  the 
agent  of  the  firm.  Havana,  etc. 
R.  R.  Co.  v.  Walsh,  85  111.  58. 

Two  partners  may  maintain  a 
suit  in  the  name  of  both  for  breach 
of  a  contract  to  transport  property 
of  the  firm,  though  the  same  was 
executed  only  in  the  name  of  one, 
and  the  partners  had  sometimes 
6igned  in  the  name  of  both.     Illi- 


nois, etc.   R.  R.  Co.  v.  Owens,  53 
111.  391. 

A.  orders  goods  of  B.  by  letter  -T 
the  copartnership  of  which  B.  was 
a  member  forwarded  the  goods  to 
A.,  without  a  bill  or  letter,  who  re- 
ceived them,  supposing  them  to 
have  been  forwarded  by  B.  indi- 
vidually. Held,  that  the  copart- 
nership might  maintain  an  action 
for  goods  sold  and  delivered  against 
A.     Child  v.  Wofford,  3  Ala.  564. 

In  an  action  brought  b}r  a  tan- 
nery firm  for  a  false  warranty  of 
a  mule  bought  by  one  member 
thereof,  without  mention  that  it 
was  for  the  firm,  held,  that  the 
burden  of  proof  was  on  the  defend- 
ant to  sustain  his  motion  for  a  non- 
suit, although  there  was  no  show- 
ing that  the  mule  had  ever  been 
used  in  the  tannery.  Little  v.  Ham- 
ilton, Phill.  Law,  30. 

A  mechanic's  claim  for  a  lien 
may  be  filed  by  a  firm,  one  of 
whose  members  is  named  as  the 
contractor.  Chambersburg,  etc. 
Manfg.  Co.  v.  Hazelet,  3  Brews.  98. 

A  partner  insured  firm  property 
in  his  own  name,  being  assured  by 
the  agents  of  the  company  that 
this  would  cover  the  interest  of  the 
firm.  Afterwards  the  agents  re- 
fused to  correct  the  policy.  Held, 
that  the  firm  were  entitled  to  have 
the  policy  reformed.  Snell  v.  At- 
lantic, etc.  I.  Co.  18  Am.  Law  Reg. 
(N.  S.)  79. 

(n)  9  M.  &  W.  79,  and  11  M.  &  W. 
315,  overruling  Beckham  v.  Knight, 
4  Bing.  N.  C.  243. 


428 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS.  *179 

the  plaintiff  and  Knight  and  Sturgey,  and  for  a  breach  of 
this  agreement  by  them  the  action  was  brought.  Drake's 
name  did  not  appear  in  the  agreement;  he  did  not  sign  it; 
nor  when  the  contract  was  made  was  he  known  to  the 
plaintiff  to  be  a  partner.  It  was  nevertheless  held  that  all 
three  partners  were  liable  jointly  for  a  breach  of  the  agree- 
ment, inasmuch  as  the  agreement  itself  was  clearly  entered 
into  by  the  firm,  and  Drake,  like  any  other  undisclosed 
principal,  was  liable  to  be  sued  as  soon  as  his  position  was 
discovered. 

Parol  contracts. —  In  conformity  with  the  same  prin- 
ciple, if  one  partner,  acting  in  fact  for  the  firm,  orders  goods, 
and  they  are  supplied  to  him,  the  firm  will  be  liable  to  pay 
for  them,  although  no  mention  was  made  of  his  copart- 
ners, (o)  and  they  were  unknown  to  the  seller  of  the 
goods,  (p) l  So  if  A.,  in  his  own  name  only,  underwrites  a 
policy  of  insurance,  but  the  profit  or  loss  arising  from  the 
transaction  is  to  be  divided  between  him  and  B.,  both  A. 
and  B.  will  be  liable  to  the  insured,  (q) 

Liability  of  dormant  partners. —  These  cases  establish 
the  important  proposition  that  dormant  partners  are 
liable  for  the  debts  of  the  firm,  notwithstanding  [*179] 
their  connection  with  the  firm  was  unknown  to  its 
creditors  when  the  debts  were  contracted.2 

(o)  City  of  Lond.  Gas  Lt.  and  Coke  land,  4  Cow.  2S2;  Roth  v.  Moore, 

Co.  v.   Nicholls,  2  Car.  &  P.  365 ;  19  La.  Ann.  80 ;  Tucker  v.  Peaslee, 

Whitwell  v.  Perrin,  4  C.  B.  N.  S.  36  N.   H.   167;  Baxter  v.   Clark,  4 

412.  Ired.  L.  127;  Given  v.   Albert,  5 

(p)  Ruppell  v.  Roberts,  4  Nev.  &  Watts  &  S.  333 ;  Bisel  v.  Hobbs,  6 

Man.  31 ;  Robinson  v.  Wilkinson,  3  Blackf.  479;  Griffith  v.  Buffum,  22 

Price,  538:  Bottomley  v.  Nuttall,  5  Vt.  181 ;  McNair  v.  Rewey,  62  Wis. 

C.  B.  N.  S.  122.  167. 

1  To  the  point  that  partners  are  See,  however,  Watt  v.  Kirby,  15 

liable  for  goods  furnished  for  the  111.    200 ;    Sinklear  v.   Lambert,   5 

use  of  the  firm,  though  the  vendor  Phila.  36. 

supposed  himself  dealing  with  and  (q)  Brett  v.  Beckwith,  3  Jur.  N.  S. 

giving  credit  to  an  individual  part-  31,  M.  R. 

ner,  not  knowing  of  the  existence  2  A  partnership  for  the  manufact- 

of  the  firm,   see  Poole    v.    Lewis,  ure  of  iron  was  composed  of  four 

75  N.  C.  417 ;  Reynolds  v.  Cleve-  persons,  the  names  of  two  of  whom 

429 


'179 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


One  partner  only  liable,  he  only  being  dealt  with.—  On 

the  other  hand,  if  one  partner  only  is  dealt  with,  and  the 
circumstances  are  such  as  to  show  that  he  was  acting  and 
was  dealt  with  on  his  own  account,  i.  e.,  as  a  principal,  and 
not  as  the  agent  of  the  firm,  he  alone  is  responsible,  (r)1 


did  not  appear,  and  these  lived  at 
a  distance.  The  two  acting  part- 
ners bought  land  in  their  own 
name  for  the  purpose  of  obtaining 
from  it  wood  to  be  used  in  the 
manufacture  of  iron ;  and,  so  far 
as  it  was  paid  for,  it  was  paid  for 
out  of  the  partnership  effects. 
Held,  that  the  land  was  partnership 
property,  and,  the  partnership  hav- 
ing failed,  the  two  dormant  part- 
ners were  liable  to  the  vendor  for 
the  balance  of  the  purchase  money. 
Brooke  v.  Washington,  8  Gratt. 
248. 

See,  however,  contra,  as  to  the 
liability  of  dormant  partners  in 
land,  Gray  v.  Palmer,  9  Cal.  616. 
(r)  See,  in  addition  to  the  cases 
cited  below,  Ex  parte  Eyre,  1  Ph. 
227. 

1  A  copartner  may  contract  on 
his  own  account  and  make  him- 
self alone  liable  for  merchandise 
bought  for  the  copartnership  ac- 
count, if  the  vendor  choose  to 
accept  him.  Merchants'  Bk.  v. 
Thompson,  3  Ont.  541;  Sylvester 
v.  Smith,  9  Mass.  119;  McDonald  v. 
Parker,  Ky.  Dec.  245;  Smith  v. 
Hoffman,  2  Cranch,  C.  C.  651 ;  Sink- 
lear  v.  Lambert,  5  Phila.  36.  See 
Jenkins  v.  Davis,  54  Wis.  253; 
Payne  v.  James,  36  La.  Ann.  476. 
One  who,  as  a  member  of  a  firm, 
has  contracted  with  another  for 
the  performance  of  a  certain  thing, 
is  not  thereby  prevented  from  mak- 
ing a  verbal  promise  as  an  individ- 
ual concerning  the  same  matter. 


Pond  v.  Starkweather,  99  N.   Y. 
411. 

When  no  credit  is  given  and 
there  is  no  expectation,  originally, 
of  looking  to  one  partner  for  debts 
incurred  by  the  other,  no  recovery 
against  the  former  can  be  had. 
Chapman  v.  Devereux,  32  Vt.  616 ; 
Floyd  v.  Wallace,  31  Geo.  688. 
See,  also,  Watt  v.  Kirby,  15  111. 
200. 

Defendant's  being  a  partner  in  a 
firm  charged  in  book  account  is- 
not,  of  itself,  conclusive  of  his  lia- 
bility in  an  action  thereon ;  for  it 
may  be  shown  by  parol  on  whose 
account  the  articles  charged  were 
delivered;  and  the  parties  were 
competent  witnesses  for  them- 
selves or  each  other  to  that  point. 
Burton  V.  Ferris,  Brayt.  78. 

The  fact  of  the  creditors  keeping 
their  books  and  stating  their  ac- 
counts in  the  names  of  the  firm 
with  whom  their  dealings  were  had, 
without  mentioning  the  defendant, 
who  was  also  interested  in  the 
transaction,  does  not  alone  exon- 
erate the  defendant  from  his  lia- 
bility to  them  nor  manifest  an  in- 
tention to  waive  their  claim  upon 
him.  Baring  v.  Crafts,  9  Metcl 
380. 

The  plaintiff  was  employed  by 
the  defendant,  on  his  credit  alone, 
to  open  and  develop  a  coal  mine  on 
lands  owned  by  the  defendant  with 
others.  It  not  appearing  that  the 
other  proprietors  requested  the  de- 
fendant to  engage  in  this  enter- 


430 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS. 


*179 


Examples. —  Thus,  where  persons  work  a  coach  in  part- 
nership, each  having  his  own  horses,  and  one  of  them  orders 
fodder  on  his  own  account,  he  alone  is  liable  for  it.  (s)  So, 
in  the  ordinary  case  of  an  agreement  between  an  author 
and  a  publisher,  to  the  effect  that  the  publisher  shall  pay 
for  the  paper,  printing  and  other  expenses  of  publication, 
and  that  after  reimbursing  himself  and  deducting:  a  com- 
mission  the  profits  shall  be  divided  equally,  the  author  is 
not  liable  for  the  paper  or  printing  which  may  have  been 
supplied  and  executed  for  the  publisher,  (t) 

Form  of  written  contracts. —  With  respect  to  contracts 
in  writing  it  is  to  be  observed  that  a  contract  or  other  in- 


prise,  or  authorized  him  to  employ 
the  plaintiff  to  perform  this  serv- 
ice, held,  that  the  mere  fact  that 
they  were  co-tenants  with  the  de- 
fendant in  the  land  was  not  enough 
to  warrant  the  presumption  that 
they  were  partners  with  him  in  his 
scheme  to  develop  a  coal  mine  upon 
it.     Stannard  v.  Suiith,  40  Vt.  513. 

Where  one  copartner  makes  a 
sale  or  disposition  of  the  partnership 
property  in  his  own  name,  and 
without  disclosing  the  name  of  his 
copartner  or  copartners  having  an 
interest  therein,  at  the  same  time 
warranting  the  soundness  thereof, 
also  in  his  own  name,  suit  may  be 
maintained  against  him  for  a 
breach  of  this  warranty  without 
joining  his  copartner  in  the  action. 
Cookingham  v.  Lasher,  38  Barb. 
656 ;  Clark  v.  Holmes,  3  John.  148. 

Where  a  debt  is  contracted  by 
one  partner  in  his  own  name  alone, 
in  order  to  charge  the  firm  it  must 
appear  that  the  consideration  was 
used  by  the  firm  with  the  knowl- 
edge and  approbation  of  the  de- 
fendant, or  that  the  debt  was  sub- 
sequently assumed  by  the  firm. 
Nichols  v.  English,  3  Brews.  260. 


Where  money  is  loaned  to  mem- 
bers of  a  partnership  on  their  in- 
dividual contract,  the  fact  that  it 
is  applied  to  the  payment  of  part- 
nership debts  does  not  constitute 
the  lender  a  creditor  of  the  firm. 
National  Bank  v.  Thomas,  47  N.  Y. 
15. 

A  contract  executed  by  one 
member  of  a  copartnership,  signing 
his  name  as  superintendent  of  the 
firm  business,  it  being  inferable 
from  the  contract  that  it  was  his 
intent  to  bind  the  firm,  is  binding 
upon  the  copartnership.  Pearson 
v.  Post,  2  Dak.  220. 

(s)  Barton  v.  Hanson,  2  Taunt. 
49.  Mr.  Colly er  treats  this  as  an 
exception  depending  on  particular 
custom,  but  this  view  is  not  cor- 
rect. The  law  is  the  same  in  Scot- 
land. See  Jardine  v.  M'Farlane,  3 
Ross.  L.  C.  on  Com.  Law,  575. 

(t)  See  the  Scotch  case  of  Ven- 
ables  v.  Wood,  3  Ross.  L.  C.  on 
Com.  Law,  529 ;  Wilson  v.  White- 
head, 10  M.  &  W.  503.  But  see 
Gardiner  v.  Childs,  8  C.  &  P.  345, 
where  the  paper  was  supplied  for 
the  specific  book. 


431 


M.80 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


strument  required  by  statute  to  be  in  writing,  and  signed 
by  the  party  to  be  charged,  only  binds  those  parties  who 
actually  sign  it;  (u)  but  if  signature  by  the  party  to  be 
charged,  or  his  agent,  is  sufficient,  the  signature  of  one  part- 
ner, in  the  name  or  on  behalf  of  the  firm,  will  bind  all  the 
partners,  (v) 

It  is  often  a  matter  of  difficulty  to  determine  whether  a 
particular  contract  is  entered  into  by  the  firm  through  one  of 
the  partners  or  by  that  one  partner  only.  There  is  nothing 
to  prevent  one  person  from  entering  into  a  contract  as  a 
principal,  and  yet  for  and  on  behalf  of  another ;  (x) 
[*180]  and  when  A.  enters  *into  a  contract  for  B.  it  may 
not  be  easy  to  say  whether  it  is  B.  who  contracts,  or 
whether  it  is  A.  for  B.'s  benefit.  And  yet  the  true  answer 
to  this  question  determines  whether  B.  is  or  is  not  liable  on 
the  contract.1     The  cases  on  this  subject  relate  principally 


(it)  Swift  v.  Jewsbury,  L.  R.  9 
<J.  B.  301,  reversing  Swift  v.  Win- 
terbotham,  8  Q.  B.  244. 

(v)  See  Duncan  v.  Lowndes,  3 
Camp.  478.  In  Ex  parte  Harding, 
12  Ch.  D.  557,  a  letter  of  guaranty- 
was  so  framed  as  to  bind  the  firm 
and  also  those  who  signed  it  sep- 
arately. 

(x)  See,  in  addition  to  the  cases 
cited  hereafter,  Gadd  v.  Houghton, 
1  Ex.  D.  357 ;  Hough  v.  Manzanos, 
4  Ex.  D.  104;  Southwell  v.  Bow- 
ditch,  1  C.  P.  D.  374;  Paice  v. 
Walker,  L.  R.  5  Ex.  173.  See,  also, 
Kay  v.  Johnson,  2  Hem.  &  M.  118, 
where  an  agreement  for  a  lease 
entered  into  by  directors  was  en- 
forced against  them  individually. 
1  An  agreement  in  form  in  the 
singular  number,  signed  in  the 
name  of  a  firm,  is  joint,  and  not 
joint  and  several,  or  several.  Brown 
v.  Fitch,  33  N.  J.  L.  418;  Carney  v. 
Hotchkiss,  48  Mich.  276 ;  George  v. 
Tate,  102  U.  S.  564. 


Where,  however,  one  partner 
signed  the  firm  name  to  a  guaranty 
in  the  following  form :  "If  you 
rent  your  house  to  H.  I  will  be  re- 
sponsible for  the  rent  of  the  same  as 
long  as  said  H.  remains  in  our  em- 
ploy. J.  S.  Rowell  &  Co.,"  it  was 
held  that  that  partner  alone  and 
not  the  firm  was  bound.  Avery  v. 
Rowell,  59  Wis.  82. 

A  contract  drawn  by  one  partner 
and  signed  by  the  other  in  the 
partnership  name  is  the  agreement 
of  both  as  partners.  Witter  v. 
M'Neil,  4  111.  433. 

An  agreement  signed  by  one  of 
three  copartners,  who  together 
furnished  the  funds  for  the  busi- 
ness to  a  fourth  partner,  who  was 
managing  agent,  contracting  to 
pay  him  $500  per  annum  and  his 
traveling  expenses,  held,  not  an  in- 
dividual but  a  partnership  con- 
tract.    Hills  v.  Bailey,  27  Vt.  548. 


432 


CH.  I,  SEC.  V.]  LIABILITIES   OF    PARTNERS. 


180 


to  bills  of  exchange  and  promissory  notes,  to  which  it  is 
now  proposed  to  pass. 

3.  Bills  of  exchange  and  promissory  notes. 
3.  Bills  and  notes. —  Although  an  ordinary  contract  not 
under  seal,  entered  into  by  an  agent  for  an  undisclosed 
principal,  is  binding  on  that  principal  when  discovered,  and 
he  can  be  sued  upon  it,  the  same  rule  does  not  apply  to  bills 
of  exchange  and  promissory  notes.  For,  subject  to  the 
qualification  that  the  name  of  a  firm  is  equivalent  to  the 
name  of  all  the  persons  liable  as  partners  in  it,  (?/)  no  person 
whose  name  is  not  on  a  bill  or  note  is  liable  to  be  sued  upon 
it.  (s)  In  order,  therefore,  that  a  bill  or  note  may  be  bind- 
ing on  a  firm,  the  name  of  the  firm  or  the  names  of  all  its 
members  must  be  upon  it;  and  if  the  names  of  one  or 
more  of  the  partners  only  are  upon  it,  the  others  will  not 
be  liable  to  be  sued  upon  the  instrument,  whatever  may  be 
their  liability  as  regards  the  consideration  for  which  it  may 
have  been  given,  (a)1 


(y)  45  and  46  Vict.  ch.  61,  §  23  (2) ; 
and  infra,  note  (b)  et  seq. 

(z)  Id.  §  23:  and  Lloyd  v.  Ashby, 
2  C.  &  P.  138 ;  Ducarry  v.  Gill,  4 
id.  121 ;  Eastwood  v.  Bain,  3  H.  & 
N.  738. 

(a)  Bottomley  v.  Nuttal,  5  C.  B. 
N.  S.  122;  Miles'  Claim,  9  Ch.  635. 
As  to  the  difference  between  an  ac- 
ceptance in  the  form  A.  for  B.,  and 
B.  per  proc.  A.,  see  O'Reilly  v. 
Richardson,  17  Ir.  Com.  Law  Rep. 
74.  Bills  may  be  made  payable  to 
the  holder  of  an  office  for  the  time 
being.  45  and  46  Vict.  ch.  61 ,  §  7  (2). 
In  Odell  v.  Cormack,  19  Q.  B.  223, 
a  bill  drawn  on  Cormack  Brothers 
was  accepted  by  Carter  for  Mar- 
garet Cormack  and  self.  Carter 
was  not  a  partner  with  her,  and 
had  no  authority  to  accept  bills  for 
her,  either  in  her  own  name  or  in 
the  name  of  the  firm  in  which  she 


carried  on  business,  and  she  was 
held  not  liable  on  the  bill. 

1  Dunnica  v.  Clinkscales,  78  Mo. 
500. 

Where  the  proprietors  of  a  line 
of  canal-boats,  by  articles  between 
themselves,  agreed  that  the  busi- 
ness of  the  concern  at  Roches- 
ter should  be  conducted  by  J.  A., 
one  of  the  proprietors,  in  his  own 
name,  and  that  at  Albany  it  should 
be  conducted  by  W.  M.,  an  agent, 
but  in  behalf  and  upon  the  respon- 
sibility of  the  defendants,  who 
were  two  of  the  proprietors;  that 
no  copartnership  name  should  be 
used  and  no  paper  made,  accepted 
or  indorsed  in  the  name  or  on  ac- 
count of  the  copartnership;  and 
that  each  party  should  raise  his 
share  of  the  money  needed  by  the 
concern  upon  his  own  responsibil- 
ity, and  the  other  parties  were  not 


Vol.  1  —  28 


433 


*181 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


{a)  Bills  in  name  of  firm. —  First,  as  regards  hills  having 
the  name  of  the  firm  upon  them}  A  bill  drawn,  indorsed 
or  accepted  in  the  name  of  the  firm  is  considered  as  bear- 
ing the  names  of  nil  the  persons  who  actually  or  ostensibly 
compose  the  firm  at  the  time  its  name  is  put  to  the 
[-181]  bill;  and  consequently  all  those  persons,  including 
as  well  dormant  as  quasi-p&rtners,  may  be  sued  upon 
the  bill,  {h) 

Thus,  where  A.  emplo}'ed  B.  to  carry  on  his  business,  and 
such  business  was  carried  on  by  B.  for  A.  under  the  name 
of  B.  &  Co.,  a  bill  accepted  by  B.  in  the  name  of  B.  &  Co., 
for  the  purposes  of  the  business,  was  held  to  be  the  accept- 
ance of  A.;  although  B.  had  positive  instructions  not  to 

Williams,     2    Hill 


to  be  liable  therefor,  but  all  the 
parties  were  to  share  equally  in 
the  profits,  held,  that  a  bill  of 
exchange  drawn  by  J.  A.  in  his 
own  name  to  raise  money  for  the 
business  of  the  concern  upon  and 
accepted  by  W.  M.  in  his  name, 
and  which  was  discounted  by  the 
plaintiffs,  bound  all  the  proprietors 
as  acceptors.  Held,  further,  that 
all  the  proprietors  were  chargeable 
as  drawers,  and  that  no  notice  of 
non-payment  was  necessary,  the 
drawers  and  acceptors  being  the 
same  persons.  Bank  of  Rochester 
v.  Monteath,  1  Den.  402. 

1  A  note  made  by  one  partner, 
in  which  he  says,  "  I  promise  to 
pay,"  etc.,  but  subscribes  the  part- 
nership name,  "A.  B.  &  Co.,"  is 
binding  on  the  firm,  and  not  on 
the  partner  alone  who  executed  it. 
Doty  v.  Bates,  11  Johns.  544. 

Where  the  articles  of  copartner- 
ship do  not  fix  the  name  of  the 
firm,  and  a  contract  is  made  by 
one  partner  for  the  joint  account, 
a  note  executed  by  one  for  the 
whole,  in  the  name  of  himself  and 
company,    is    binding    upon    all. 


Aspinwall 
(S.  C),  64. 

A  party  can  only  be  bound  on  a 
note  executed  in  a  firm  name  who 
is  actually  a  member  of  the  firm 
executing  the  same,  or  who  has 
held  himself  out  as  a  member,  so 
as  to  give  the  firm  credit  on  his 
responsibility.  Sargent  v.  Collins, 
3  Nev.  260. 

A  bill  of  exchange  drawn  up 
and  addressed  to  the  M.  S.  Co.  as 
drawees  is  accepted  by  F.  M.,  one 
of  the  partners,  for  the  "  M.  S.  Co. 
and  self."  Held,  that  the  accept- 
ance did  not  entitle  the  drawer 
to  be  paid  out  of  the  separate  es- 
tate of  F.  M.  in  a  suit  for  the  ad- 
ministration of  assets.  Malcomsou 
v.  Malcomson,  1  L.  E.  Ir.  228. 

(b)  45  and  46  Vict.  ch.  61,  §  23  (2). 
See,  as  to  dormant  partners,  Swan 
v.  Steele,  7  East,  210;  Wintle  v. 
Crowther,  1  Cr.  &  J.  316;  and  as 
to  gwasi-partners,  Gurney  v.  Evans, 
3  H.  &  N.  122.  A  clerk  who  affixes 
the  name  of  the  firm  is  not  liable 
on  the  bill.  Wilson  v.  Barthrop,  2 
M.  &  W.  863. 


434 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS. 


*181 


accept  bills,  and  the  holder  of  the  bill,  who  was  an  indorsee 
for  value,  knew  nothing  of  A.  or  B.  or  of  the  business,  (c) 

Moreover,  if  two  partners,  A.  &  B.,  carry  on  business  in 
the  name  of  A.,  a  bill  accepted  by  B.  in  the  name  of  A.  for 
the  purposes  of  the  partnership  will  bind  both  partners, 
although  addressed  to  A.  at  a  place  where  he  carries  on  a 
separate  business,  (d) 

Two  firms  with  one  name. —  If  there  are  two  firms  with 
one  name  a  person  who  is  member  of  both  firms  is  liable  to 
be  sued  on  all  bills  bearing  that  name,  and  binding  on  either 
firm.  But  if  a  member  of  only  one  of  the  two  firms  is  sued 
on  the  bill  his  liability  will  depend  first  on  the  authority 
of  the  person  giving  the  bill  to  use  the  name  of  the  firm  of 
which  the  defendant  is  a  member;  and,  secondly,  on  whether 
the  name  of  that  firm  has  in  fact  been  used.  If  both  these 
questions  are  answered  in  the  affirmative  he  will  be  liable, 
but  not  otherwise.1 


(c)  Edmunds  v.  Bushell,  L.  R.  1 
Q.  B.  97. 

(d)  Stephens  v.  Douglas,  5  H.  & 
N.  513,  and  at  Nisi  Prius,  1  Fos.  & 
Fin.  739,  and  2  id.  147.  N.  B.— The 
bill  was  drawn  on  Reynolds  at 
Woolwich,  not  at  Walworth,  as 
stated  in  1  Fos.  &  Fin.  740. 

1  Where  the  plaintiff  delivered 
property  to  W.  Downer  and  H. 
Dana,  and  executed  to  them,  by 
the  name  of  Downer  and  Dana,  a 
bill  of  sale  of  the  property,  in 
which  he  acknowledged  receipt  of 
payment  by  note,  and  the  note 
which  he  received  was,  by  Dana, 
signed  "  Downer  &  Dana,"  and  it 
appeared  in  evidence  that  there 
was  in  existence  at  that  time,  doing 
business,  such  a  firm  as  "  Downer 
&  Dana,"  consisting  of  those  two 
individuals,  it  was  held  that  the 
plaintiff  could  not  recover  on  the 
note  against  another  firm  of  differ- 
ent style,  consisting  of  the  same 


Downer  and  Dana  and  a  third  per- 
son, notwithstanding  it  might  ap- 
pear that  the  latter  firm  was  also 
then  doing  business  at  the  same 
place,  there  being  no  testimony 
tending  even  to  prove  that  the  lat- 
ter firm  had,  at  any  time,  done  any 
act  which  could  have  induced  the 
plaintiff  to  believe  that  Downer 
and  Dana  had  ever  been  authorized 
to  use  their  own  name  and  style 
for  the  purposes  of  the  other  firm  ; 
and  that  upon  the  testimony  it 
was  improperly  left  to  the  jury  to 
find  whether  the  note  was  exe- 
cuted and  received  by  the  plaintiff 
as  the  note  of  the  latter  firm. 
Miner  v.  Downer,  19  Vt.  14. 

A  partnership  is  not  bound  by 
the  acts  of  another  partnership 
having  a  common  member,  unless 
it  authorizes  and  sanctions  those 
acts.  Cobb  v.  Illinois  Central  R.  R. 
Co.  33  Iowa,  601. 

Two  firms  of  the  same  name  did 


435 


*1S2  EIGHTS   AND   OBLIGATIONS.  [BOOK    II- 

Thus,  in  Swan  v.  Steele,  (e)  there  were  two  firms  of  Wood 
&  Payne,  one  a  cotton  firm,  the  other  a  grocer's  firm.  The 
defendant  Steele  was  a  partner  in  the  cotton  firm  only.  A 
bill  was  paid  to  the  cotton  firm  for  a  debt  due  to  it,  and 
was  made  payable  to  its  order.  This  bill  was  indorsed  in 
the  name  of  "  Wood  &  Payne"  by  Steele's  copartners,  for  a 
debt  owing  to  the  plaintiff  by  the  grocer's  firm,  to  which 

Steele  did  not  belong.  Steele  was  nevertheless  held 
[*1S2]  liable  on  this  bill,  *the  plaintiff  being  a  bona  fide 

holder  for  value,  without  notice  that  any  fraud  on 
Steele  was  being  committed.  In  this  case  the  bill  was  prop- 
erly indorsed  "Wood  &  Payne,"  and  the  only  question  was 
who  constituted  that  firm.  The  bill  could  only  have  been 
indorsed  by  the  cotton  firm.  Steele  was  a  member  of  it, 
though  he  was  not  a  member  of  the  firm  for  whose  debt  his 
partners  paid  it  away.  Lord  Ellenborough  held  Steele's 
liability  to  be  too  clear  for  argument;  for  Steele  was  a 
member  of  the  indorsing  firm,  and  his  copartners  in  that 
firm  were  guilty  of  a  fraud  on  him,  of  which  the  plaintiffs 
had  no  notice. 

Name  of  firm  same  as  that  of  individual.— Again,  per- 
sons may  carry  on  business  in  partnership  in  the  name  of 
one  of  themselves,  and  if  they  do  they  expose  themselves 
to  serious  liability.1     Prima  facie  his  acceptances  will  bind 

business  in  the  same  town.  De-  A  merchant  who  sells  goods  to 
fendant,  who  was  a  partner  in  one  one,  knowing  him  to  be  a  mem- 
firm  but  not  in  the  other,  was  sued  ber  of  two  different  firms,  for 
as  a  member  of  the  firm  to  which  either  of  which  the  goods  sold 
he  did  not  belong,  for  the  value  of  would  be  suitable,  should  ascertain 
goods  which  had  not  been  pur-  by  iuquiry  with  which  firm  he  is 
chased  by  him  individually  nor  by  dealing,  and  if  he  fails  to  make 
his  authority.  Held,  that  he  could  such  inquiry  he  cannot  hold  the 
only  be  held  liable  as  a  partner  in  firm  for  which  the  goods  were  not 
tlie  firm  to  -which  he  did  not  be-  purchased  responsible,  dishing 
long,  where  the  two  firms  con-  v.  Smith,  supra. 
ducted  their  business  in  such  a  (e)  7  East,  210. 
manner  as  to  justify  the  conclusion  l  Where  a  partnership  is  carried 
by  their  customers  that  there  was  on  in  the  name  of  an  individual, 
an  identity  of  interest.  Cushing  v.  and  a  suit  is  brought  against  the 
Smith,  43  Tex.  261.  partners  on  a  note  or  other  obliga- 

436 


CU.  I,  SEC.  V.]  LIABILITIES    OF   PAETSERS. 


>1S2 


them,  even  although  dishonestly  given.  (/)  At  the  same 
time,  if  they  can  show  that  he  gave  the  bills  as  his  own  and 
not  as  the  bills  of  the  firm,  they  will  not  be  liable  even  to 
a  lona  fide  holder  for  value.  This  was  decided  by  the  court 
of  appeal  in  The  Yorkshire  Banking  Co.  v.  Beatsoii,  ((/)  in 
which  the  law  on  this  subject  will  be  found  exhaustively 
examined.  In  that  case  an  accommodation  acceptance 
given  by  one  partner  in  his  own  name  was  held  not  binding 
on  his  dormant  partner,  as  the  acceptance  was  not  intended 
to  bind  him,  and  was,  in  truth,  a  private  transaction,  and 
was  not  entered  in  the  books  of  the  firm.  The  fact  that 
the  plaintiffs  took  the  bill  as  the  bill  of  the  persons,  who- 
ever they  were,  who  might  be  associated  with  the  partner 
Avhose  name  was  on  the  bill,  was  held  immaterial.  The 
plaintiffs  never  knew  or  gave  credit  to  any  one  else. 


tion  signed  by  such  individual,  the 
legal  presumption  is  that  it  is  the 
note  of  the  individual  and  not  of 
the  partners.  The  plaintiff,  to  re- 
cover against  the  partners,  must 
not  only  prove  the  execution  of 
the  note,  but  go  further,  and  prove 
either  that  the  money  for  which 
the  note  was  given  was  borrowed 
on  the  credit  of  the  partnership,  or 
that,  when  obtained,  it  was  used  in 
the  business  of  the  partnership. 
Oliphant  v.  Mathews,  10  Barb.  008; 
Mercantile  Bank  v.  Cox,  38  Me. 
500;  Chemung  Bank  v.  Ingraham, 
58  Barb.  290.  See,  also,  U.  S.  Bank 
v.  Binney,  5  Mason,  176. 

On  the  formation  of  a  partner- 
ship between  S.  &  I.  under  the  firm 
name  of  "  J.  S.,"  a  note  was  made 
by  J.  S.  in  his  own  name,  which 
he  procured  to  be  discounted  by 
the  plaintiff  for  the  purpose  of 
enabling  him  to  pay  in  his  share 
of  the  capital.  S.  did  not  represent 
to  the  plaintiff  that  it  was  a  firm 
note,  and  the  payees,  as  officers  of 


the  plaintiff's  bank,  knew,  or  had 
good  reason  to  believe,  that  the 
note  was  not  the  note  of  the  firm, 
but  was  the  individual  note  of  S. 
Held,  that  I.  was  not  liable  as  a 
party  to  the  note  in  any  form ;  and 
no  recovery  could  be  had  against 
him  by  the  plaintiff  as  holder 
thereof;  that  if  the  lender  did  not 
know  of  the  partnership,  or  if  the 
money  was  loaned  on  the  individ- 
ual credit  of  the  maker  of  the 
note,  the  fact  that  the  money  was 
applied  to  the  business  of  the  firm 
did  not  create  a  liability  on  the 
part  of  the  firm,  or  constitute  the 
lender  a  creditor  of  the  firm. 
Chemung  Bank  v.  Ingraham,  58 
Barb.  290. 

(/)  See  5  C.  P.  D.  123  and  124. 

(g)  5  C.  P.  D.  109,  affirming  S.  C. 
4  id.  204,  but  on  different  grounds. 
N.  B. —  The  court  set  aside  the  ver- 
dict of  the  jury.  See,  also,  South 
Carolina  Bank  v.  Case,  8  B.  &  C. 
427 ;  Ex  parte  Law,  3  Deac.  541. 


437 


*]83  EIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

If  A.,  B.  &  C.  are  partners,  and  A.  draws  a  bill  of  ex- 
change on  B.,  and  he  accepts  the  bill,  A.,  B.  &  C.  cannot  be 
sued  upon  it;  and  this  is  so  whether  A.,  B.  &  C.  have  a  busi- 
ness name  or  not;  (h)  and  even  although  the  bill  may  have 
been  used  for  the  joint  benefit  of  the  three  partners.  (*) 
Even  if  it  is  agreed  that  the  business  of  the  three 
[*183]  shall  be  carried  on  in  the  name  *of  one  of  them,  it 
will  not  follow  that  all  bills  accepted  by  him  will 
bind  all  the  three  partners.  The  question  remains,  whose 
bill  is  it? 

This  was  decided  by  the  court  of  appeal  in  chancery  in 
Miles'  claim,  (j)  There  four  firms,  F.  &  Co.,  M.  &  Co., 
M.  &  L.,  and  A.  &  Co.,  engaged  in  a  joint  adventure,  and 
agreed  to  carry  on  business  under  the  name  of  F.  &  Co.,  and 
to  divide  profits  and  losses  in  equal  shares.  They  also 
agreed  that  funds  for  the  adventure  should  be  raised  by  the 
drafts  of  any  one  of  the  four  firms  on  the  others;  bills  were 
drawn  by  M.  &  Co.  on  A.  &  Co.,  on  M.  &  L.,  and  on  F.  & 
Co.,  and  were  duly  accepted.  It  was  held  that  none  of  these 
bills  bound  all  four  firms  jointly.  As  regard  the  bills  drawn 
on  A.  &  Co.,  and  on  M.  &  L.,  the  case  presented  no  diffi- 
culty, for  it  is  plain  that  these  bills  were  not  drawn  or  ac- 
cepted in  the  name  in  which  the  joint  adventure  was  carried 
on.  As  regards  the  bills  accepted  by  F.  &  Co.,  which  was 
the  name  under  which  the  joint  adventure  was  carried  on, 
there  was  an  ambiguity ;  but  the  court  held  that  this  name, 
used  as  it  was,  really  meant  the  separate  firm  F.  &  Co.,  and 
not  the  four  firms  engaged  in  the  adventure,  and  that  there 
was  no  sufficient  reason  for  holding  it  to  mean  anything 
else. 

Again,  in  Hall  v.  West,  (Jc)  three  brothers  of  the  name  of 
Dawson  carried  on  in  partnership,  under  the  name  of  Daw- 

(h)  See  Nicholson  v.  Ricketts,   2  exchequer,  and  afterwards  in  the 

E.  &  E.  497,  and  Miles'  Claim,  9  exchequer  chamber,  in  June,  1875. 

Ch.  635.  The  above  note  of  the  case  is  taken 

(i)  Ibid.  from   shorthand-writer's  notes  of 

(j')9Ch.  635.  the  judgments. 

(Jc)  A  special  case  decided  in  the 

438 


CH.  I,  SEC.  V.]  LIABILITIES    OF   PAETNEKS.  *18-t 

son  <&  Sons,  the  business  of  millers,  farmers,  coal  and  corn 
dealers,  and  bone  crushers.  The  defendant  was  a  dormant 
partner  in  the  bone-crushing  business  only.  Dawson  &  Sons 
overdrew  their  account  with  their  bankers,  who  knew  noth- 
ing of  West,  nor  of  his  connection  with  the  bone  business. 
Having,  however,  discovered  this,  they  sued  him  for  the 
amount  of  the  overdrawn  account.  He  was  held  not  liable; 
for  in  point  of  fact  the  balance  due  to  the  bankers  was  not 
in  respect  of  any  debt  contracted  by  Dawson  &  Sons  in  con- 
nection with  the  bone-crushing  business;  it  was  not,  there- 
fore, as  between  the  partners  themselves,  a  debt  of 
the  firm  of  which  the  defendant  *was  a  member;  [*184:] 
and  there  was  no  apparent  as  distinguished  from 
real  authority  on  which  the  bankers  could  rely  as  against 
West. 

In  the  same  case  bills  were  drawn  by  West  on  and  ac- 
cepted by  Dawson  &  Sons.  With  one  exception  these  bills 
were  drawn  for  purposes  unconnected  with  the  bone  busi- 
ness. On  the  facts  stated  (but  which  it  is  unnecessary  here 
to  detail)  the  court  held  that  all  these  bills  had  in  fact  been 
paid;  it  became  unnecessary,  therefore,  to  consider  whether 
West  could  have  been  sued  as  an  acceptor.  It  was  contended, 
on  the  authority  of  Baker  v.  Charlton,  (I)  that  he  was  liable; 
but  the  court  of  exchequer  (m)  dissented  from  that  case  and 
expressed  a  clear  opinion  that  West  could  not  have  been 
liable  as  an  acceptor  of  the  bills,  with  the  exception  of  the 

(l)  In  Baker  v.  Charlton,  Peake,  the  other ;  but  Lord  Kenyon  de- 
ll 1  (ed.  3),  two  firms  carried  on  clared  the  defense  invalid.  Hav- 
business  under  the  name  of  J.  ing  traded  with  persons  under  the 
King  &  Co.  The  defendant  was  style  of  "J.  King  &  Co.,"  the  de- 
partner  in  one  of  them  only,  but  fendant  was  liable  on  bills  drawn 
his  copartners  were  members  of  by  them  in  that  name.  See,  also, 
both  firms ;  the  defendant  was  sued  Davidson  v.  Robertson,  3  Dow.  218 ; 
by  an  indorsee  on  a  bill  drawn  by  McNair  v.  Fleming,  1  Mont.  Part 
his  copartners  in  the  name  of  "  J.  37,  and  3  Dow,  229.  But  Baker  v. 
King  &  Co. ; "  the  defendant  re-  Charlton  cannot  now  be  relied  on. 
sisted  the  action  on  the  ground  (m)  i.  e.,  Kelly,  C.  B.,  and  Am- 
that  the  bill  was  not  drawn  by  the  phlett,  B. 
firm  to  which  he  belonged,  but  by 

439 


;184 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    II. 


one  which  had  been  given  for  the  purposes  of  the  bone 
business  in  which  he  was  a  partner.  The  court  of  excheq- 
uer chamber  expressed  no  opinion  on  this  point,  it  being 
unnecessary  to  do  so. 

(b)  Bills  not  in  name  of  firm. —  Secondly,  as  regards  bills 
not  drawn,  accepted  or  indorsed  by  the  firm  in  proper  form , 
In  the  absence  of  evidence  to  the  contrary,  a  partner  has 
no  authority  to  use  for  partnership  purposes  any  other  name 
than  the  name  of  the  firm;  (n)  and  if  he  does,  and  there  is 
any  substantial  variation  which  cannot  be  shown  to  be 
authorized  by  his  copartners,  the  firm  will  not  be  liable. 
If,  however,  there  is  no  substantial  variation,  the  firm  will 
be  bound.1 


(n)  Kirk  v.  Blurton,  9  M.  &  W. 
284;  Hambro'  v.  Hull  and  London 
Fire  Inaur.  Co.  3  H.  &  N.  789. 

1  Where  the  partners  of  a  firm 
have  a  copartnership  name  which 
they  ordinarily  use,  they  will  not 
be  bound  by  the  use  of  a  new 
name,  unless  it  be  shown  that  all 
the  partners  have  assented  to  the 
use  of  such  new  name,  or  that  the 
partner  who  was  intrusted  with 
the  control  and  management  of 
the  business  of  the  firm  had  so  as- 
sented. Palmer  v.  Stephens,  1 
Den.  471. 

A  member  of  the  firm  of 
"Charles  G.  Ramsay  &  Co."  signed 
a  promissory  note  "  Chas.  G.  Rani- 
say  &  Co."  Held,  in  a  suit  upon 
the  note  against  the  firm,  that  it 
was  a  question  of  fact  whether 
there  was  any  substantial  differ- 
ence between  the  signature  and  the 
firm  name,  and  that  the  jury  were 
well  warranted  in  finding  that  the 
name  and  signature  were  the  same. 
Til  ford  v.  Ramsey,  37  Mo.  563. 

A.,  B.,  C.  and  D.  were  partners 
under  the  style  of  A.,  B.  &  Co.  C. 
executed  a  note,  signing  the  names 


of  each  of  the  firm.  Held,  on  a 
plea  of  non  est  factum  filed  by  A., 
B.  and  D.,  that  C.  had  no  power  to 
bind  them  by  such  signature ;  but 
that  it  constituted  the  note  prima 
facie  an  individual  transaction. 
Crouch  v.  Bowman.  3  Humph.  209. 
See,  also,  Ellinger's  Appeal,  7  Atl. 
Rep.  180. 

However,  in  McGregor  v.  Cleve- 
land, 5  Wend.  475,  it  was  held  that 
a  promissory  note  given  by  one  of 
two  partners  in  the  business  of 
farming  and  coopering,  signed 
"A.,  B.  &  C.  D.,"  was  binding 
upon  both. 

Where  the  priority  of  different 
creditors  attaching  the  property  of 
a  firm  is  to  be  determined  by  the 
individual  or  partnership  character 
of  their  respective  claims,  the  mere 
fact  that  a  promissory  note  is 
signed  by  the  individuals  who  com- 
pose the  firm  is  insufficient  to  show 
that  it  is  a  partnership  debt.  Gay 
v.  Johnson,  45  N.  H.  587. 

A  note,  however,  signed  by  three 
partners  individually,  rather  than 
by  their  partnership  name,  for 
money  used  in  their  partnership 


410 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS.  *185 

In  Faith  v.  Richmond,  [p)  persons  carrying  on 
business  in  ^partnership  under  the  name  of  The  [*185] 
Newcastle  and  Sunderland  Wallsend  Coal  Company 
were  held  not  liable  on  a  note  issued  in  the  name  of  The 
Newcastle  Coal  Company;  and  in  Kirk  v.  Blurton,  (p) 
where  two  persons  carried  on  business  under  the  name  of 
John  Blurton,  one  of  them  was  held  not  liable  on  a  bill 
drawn  and  indorsed  by  the  other  in  the  name  of  John, 
Blurton  db  Co. 

On  the  other  hand,  in  Norton  v.  Seymour,  {q)  where  the 
name  of  the  firm  was  Seymour  c&  Ayres,  a  promissory  note 
signed  by  one  of  the  partners  thus:  " Thomas  Seymour  <& 
Sarah  Ayres,"  was  held  to  bind  both. 

Effect  of  frequent  use  of  wrong  name. —  In  the  above 
cases  of  Faith  v.  Richmond  and  Kirk  v.  Blurton,  the  name 
used  was  not  the  name  of  the  firm  sought  to  be  made  liable, 
nor  was  there  any  evidence  to  show  that  the  firm  was  in 
the  habit  of  making  use  of  the  name  in  question.  If  there 
had  been  such  evidence  the  firm  would  have  been  liable; 
for  whatever  the  name  used  may  be,  if  it  is  that  ordinarily 
employed  by  a  partner  whose  business  it  is  to  attend  to  the 

business,  on  account  of  the  prefer-  drawn,  not  only  in  an  action  for 

ence  of  the  payee,  is  a  partnership  money  lent,  but  also  as  a  party  to 

note.     Kendrick  v.  Tarbell,  27  Vt.  the    bill.     Wright  v.    Hooker,    10 

512.     See,  also,  Dunnica  v.  Clink-  N.  Y.  51. 

scales,   73    Mo.    500.     Also,    ante,  See  ante. 

note.  (o)ll  A.  &  E.  339. 

Where  two  firms  in  different  lo-  (p)  9   M.  &  W.  284.     This  case 

calities  enter  into  an  agreement,  in  was  decided  on  the  right  principle ; 

express  terms,  creating  a  partner-  but    most    persons    will   probably 

ship  for  the  purpose  of  carrying  on  agree  with  Martin,  B.,  in  thinking 

the  legitimate  freighting  business,  that  the  principle  was  not  prop- 

and,  adopting  no  partnership  name,  erly  applied,   and  that  it  should 

carry  on  the  business  in  each  local-  have  been  left  to  the  jury  to  say 

ity  under  the  name  of  the  firm  whether  John  Blurton  and  John 

there  established,  a  bill  of  exchange  Blurton  &  Co.  did  not  in  fact  mean 

drawn  by  one  firm  upon  the  other,  the  same  thing.     See  per  Martin, 

the  proceeds  of  which  are  applied  B.,  5  H.  &  N.  517. 

to  the   partnership    business,  will  (g)  3  C.  B.  792. 
bind  the  firm  against  which  it  is 

441 


*1SG  EIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

bills  and  notes  of  the  firm,  the  other  partners  will  not  be 
heard  to  say  that  such  name  is  not  the  name  of  the  firm  for 
the  purpose  for  which  he  has  habitually  used  it. 

Therefore,  where  the  name  of  a  firm  was  Hapgood  & 
Co.,  but  the  managing  partner  was  in  the  habit  of  indors- 
ing bills  of  the  firm  in  the  name  of  Hapgood  &  Fowler, 
which  had  formerly  been  the  name  of  the  firm,  it  was  held 
that  such  indorsement  was  valid,  although  the  other  part- 
ners were  not  shown  to  have  authorized  the  use  of  the  name 
in  question,  (r) 

Liability  of  persons  using  the  wrong  name.— Again, 
although  in  Faith  v.  Richmond  and  Kirk  v.  Blurton  the 
firm  was  held  not  bound  in  consequence  of  the  name  of 
the  firm  not  being  used,  those  members  of  the  firm  who 
actually  made  use  of  the  names  in  question  were  held  liable; 
for  the  name  used  was  made  theirs  by  their  own 
[*186]  act.  0)  Upon  the  *same  principle,  if  blank  bills  are 
drawn  and  indorsed  by  a  firm,  and  before  they  are 
negotiated  one  partner  dies  and  the  name  of  the  firm  is 
changed  by  the  surviving  partners,  and  the  bills  previously 
drawn  and  indorsed  are  then  negotiated,  these  bills  will  be 
binding  on  the  new  firm,  although  the  name  on  the  bills  is 
that  of  the  old  firm  and  not  that  of  the  new.  (t) 

Cases  in  which  error  in  name  is  unimportant  —  Drawee 
and  acceptor  not  identical.— A  bill  drawn  on  a  firm  by  a 
wrong  name  and  accepted  in  its  right  name  binds  the 
firm;  (u)  and  a  bill  drawn  on  a  firm  and  accepted  by  one 
partner  in  his  own  name  only  has  been  held  to  bind  the 
firm  on  the  ground  that  the  word  "  accepted,"  if  written  by 

(r)  Williamson  v.  Johnson,  1  B.  and  by  a  mistake  a  contract  is  en- 

&  C.  146.  tered  into  with  it  in  its  old  name, 

(s)  So  in  Wild  v.  Keep,  6  C.  &  P.  the  members  of  the  new  firm  may 

235,  a  person  of  the  name  of  Joseph  sue  op  it,  provided  the  other  party 

Keep  was  held  liable  on  a  bill  ac-  is  not  prejudiced  by  their  so  doing, 

cepted  by  himself  in  the  name  of  Mitchell  v.  Lapage,  Holt,  N.  P.  Ca. 

John  Keep  &  Co.  253.     But  see  Boulton  v.  Jones,  2 

(t)  Usher  v.   Dauncey,  4  Camp.  H.  &  N.  564. 

97.    If  a  change  is  made  in  a  firm,  (u)  Lloyd  v.  Ashby,  2  B.  &  Ad.  23. 

442 


CH.  I,  SEC.  V.]  LIABILITIES    OF    PARTNERS. 


:186 


one  of  the  partners,  is  sufficient  without  any  signature;  and 
that  his  signature,  if  affixed,  may  be  treated  as  redun- 
dant, (a;) l  But  there  is  no  other  case  in  which  a  firm  is 
liable  on  a  negotiable  instrument,  made,  drawn  or  indorsed 
in  the  name  of  one  of  the  partners  only,  {y)  unless,  indeed, 
his  name  is  the  name  of  the  firm,  (z)  Even  a  bill  drawn  on 
one  partner  and  accepted  by  him  on  behalf  of  the  firm  does 
not  bind  the  firm,  the  other  partners  not  being  drawees,  (a)2 


(x)  Mason  v.  Rumsey,  1  Camp. 
384 ;  Jenkins  v.  Morris,  16  M.  &  W. 
879;  Byles  on  Bills,  43  and  45,  ed. 
11;  p.  47  et  seq.,  ed.  14.  In  such  a 
case  the  acceptor  may  also  be  sued 
alone.     See  infra. 

1  Beach  v.  State  Bank,  2  Ind.  488 ; 
Panned  v.  Phillips,  55  Geo.  618; 
Tolman  v.  Hanrohen,  44  Wis.  133. 
Contra,  Heenan  v.  Nash,  8  Minn. 
407. 

The  act  of  drawing  a  bill  by  one 
partner  in  his  own  name  on  the 
firm  of  which  he  is  a  member,  for 
the  use  of  the  partnership,  is  in 
law  an  acceptance  by  the  drawer 
in  behalf  of  the  firm;  and  an  ac- 
tion may  be  maintained  against  the 
firm  as  on  an  accepted  bilk  Dou- 
gal  v.  Cowles,  5  Day,  511. 

If  a  partner,  acting  under  the 
authority  of  the  firm,  given  by 
parol,  to  take  up  money  on  joint 
account  and  draw  therefor  on  A., 
does  draw  a  bill  of  exchange  in  his 
own  name,  but  directs  the  amount 
to  be  charged  to  account  of  the 
firm,  and  the  parties,  knowing  the 
facts,  receive  the  cargo,  purchased 
with  the  funds  so  raised,  without 
objection,  the  payee  may  recover 
of  the  partners  as  on  a  partnership 
draft,  or  a  draft  guarantied  to  the 
holder  by  them.  Reirnsdyk  v. 
Kane,  1  Gall.  630. 

A  firm  did  business  in  Richmond 


under  the  name  of  D.  M.  &  Co.,  all 
the  members  residing  there  except 
A.,  who  was  in  London,  where  he 
carried  on  business  in  his  own 
name.  B.  drew  a  bill  of  exchange 
on  A.  in  London,  "  on  account  of 
D.  M.  &  Co.,"  which  was  accepted 
by  A.  Held,  in  a  suit  by  B.,  the 
drawer,  that  this  was  the  individ- 
ual acceptance  of  A.,  who  alone 
was  liable  thereon,  though  the  firm 
of  D.  M.  &  Co.  might  be  liable  for 
the  amount  of  the  bill  on  proof 
that  the  bill  was  drawn  on  account 
of  money  contracted  to  be  paid  by 
D.  M.  &  Co.  Cunningham  v. 
Smithson,  12  Leigh,  32. 

A  draft  drawn  by  one  only  of 
three  partners,  but  on  their  joint 
credit  and  for  their  joint  benefit, 
may  be  recovered  as  an  item  in  an 
account  against  the  firm.  Beebe 
v.  Rogers,  3  Iowa,  319. 

(^)Emly  v.  Lye,  15  East,  7;  Ex 
parte  Bolitho,  Buck,  100 ;  Lloyd  v. 
Ashby,  2  C.  &  P.  138;  Williams  v. 
Thomas,  6  Esp.  18. 

(z)  As  to  which,  see  ante,  pp.  182, 
183. 

(a)  Nicholls  v.  Diamond,  9  Ex. 
154 ;  Mare  v.  Charles,  5  E.  &  B.  978. 

2  One  of  the  members  of  a  part- 
nership carrying  on  business  in 
Virginia  resided  in  London,  but  no 
house  was  established  in  London. 
The  plaintiff  drew  a    bill  on  the 


443 


*1S7 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


A  bill  drawn  on  a  firm  and  accepted  by  one  partner  in 
the  name  of  the  firm  and  in  his  own  name  does  not  bind 
him  separately  if  the  firm  is  bound  by  his  acceptance.  (5) 
But  if  he  has  no  authority  to  bind  the  firm  he  is  himself 
liable  on  the  bill.  This  was  held  in  Owen  v.  Van  Uster,  (c) 
where  a  bill  was  drawn  on  "  The  Allty- Crib  Mining 
[*187]  Company?  and  was  ^accepted  "per  proa.  The 
Allty- Crib  Mining  Company,  W.  T  Van  Uster,  Lon- 
don, Manager^  It  was  held  that  Yan  Uster  was  personally 
liable  on  this  bill,  he  being  one  of  the  company  on  which 
the  bill  was  drawn,  and  therefore  one  of  the  drawees,  and 
also  an  acceptor. 

(c)  Promissory  notes.—  Thirdly,  as  regards  promissory 
notes.1  With  respect  to  promissory  notes  the  following  rules 
are  deducible  from  the  cases : 

Promise  by  one  partner.— 1.  If  a  partner  promises  for 
himself,  and  not  for  himself  and  copartners,  he  only  is  liable 


member  of  the  firm  residing  in 
London,  expressed  to  be  "on  ac- 
count of  "  the  partnership.  The  bill 
was  accepted  by  the  drawee  in  his 
own  name.  Held,  that  the  partner- 
ship was  not  liable  on  the  accept- 
ance. Cunningham  v.  Smithson, 
12  Leigh,  32. 

(b)  Re  Barnard,  32  Ch.  D.  447 ; 
Malcolmson  v.  Malcolmson,  L.  R. 
Ir.  1  Ch.  D.  228. 

(c)  10  C.  B.  318.  The  company  in 
this  case  was  a  mere  partnership. 

1  See,  generally,  Ewell's  Evans 
on  Agency,  *177,  186  et  seq.,  and 
notes. 

The  mere  form  of  an  instrument 
is  not  conclusive  as  to  its  character 
as  being  either  a  separate  or  joint 
debt.     In  re  Waldron,  98  N.  Y.  671. 

Generally,  however,  when  a 
member  of  a  firm  makes  a  note  or 
draws  a  bill  in  his  own  name, 
though  it  is  known  to  be  on  the 
partnership  account,  the  firm  will 


not  be  bound.  Be  Warren,  Davies, 
320;  Farmers'  Bank  v.  Bayless,  35 
Mo.  428 ;  Foster  v.  Hall,  4  Humph. 
346. 

A  note,  given  in  the  individual 
name  of  one  partner,  is  prima  facie 
deemed  his  individual  obligation, 
unless  his  partner  be  a  dormant 
partner.  Scott  v.  Colmesnil,  7  J.  J. 
Marsh.  416 ;  Graeff  V.  Hitchman,  5 
Watts,  454 ;  City  Bank's  Appeal,  54 
Conn.  269;  Davis  v.  Blackwell,  5 
Bradw.  32. 

Conversely,  where  money  is 
loaned  to  one  partner  and  not  to 
the  firm,  the  fact  that  the  several 
members  signed  the  note  given 
therefor  does  not  make  the  note  a 
partnership  transaction,  nor  does 
the  fact  that  the  partner  borrow- 
ing applied  the  greater  part  of  the 
money  in  payment  of  the  partner- 
ship indebtedness.  Lill  r.  Egan, 
89  111.  609. 

If,   on  the  sale    of  partnership 


414 


CII.  I,  SEC.  V.J  LIABILITIES    OF    PARTNERS. 


:'1S7 


on  the  note,  though  he  may  promise  to  pay  a  partnership 
debt,  (d) 


property,  a  promissory  note  due  at 
a  future  day  is  given  for  the  price, 
and  made  payable  to  the  oi-der  of 
one  of  the  partners  as  an  individ- 
ual, the  partnership  having  a  name 
different  from  that  of  the  payee  of 
the  note,  the  note,  though  part- 
nership property,  cannot  be  in- 
dorsed by  another  partner  in  the 
name  of  the  payee  so  as  to  pass  the 
legal  title  with  the  incidents  of  ne- 
gotiable paper  transferred  before 
due,  without  more  authority  than 
that  resulting  by  operation  of  law 
in  the  partnership  relation.  Mc- 
Cauley  v.  Gordon,  G4  Ga,  221. 

The  taking,  not  as  payment,  of 
the  individual  note  of  one  partner 
for  money  loaned,  though  it  may 
be  evidence  that  the  loan  was  not 
made  to  the  firm,  is  not  conclusive 
of  that  fact.  Where  such  individ- 
ual note  of  one  partner  is  taken  for 
a  loan  made  at  the  time  to  the 
firm,  the  presumption  is  that  it 
was  not  taken  as  payment.  Hoef- 
linger  v.  Wells,  47  Wis.  628. 

It  has  been  held  that  to  bind  a 
partner  by  a  note  drawn  by  his  co- 
partner in  his  own  individual  name 
it  must  appear  that  such  individual 
name  was  the  style  of  the  firm. 
Macklin  v.  Crotcher,  6  Bush,  401. 

The  signature  of  one  partner  to 
negotiable  paper,  however,  binds 
all,  though  he  signs  only  his  own 
name,  if,  from  the  paper  itself,  it 
appears  to  be  on  partnership  ac- 
count, and  to  be  intended  to  have 
a  joint  operation.  Crozier  v.  Kirker, 


4  Tex.  252.  See,  also,  Seekell  v. 
Fletcher,  53  la.  330. 

Where  only  one  member  of  a 
firm  signs  his  individual  name  to 
a  note,  the  firm  will  be  bound 
thereby  if  they,  as  partners,  made 
the  contract,  and  the  credit  was 
given  to  them  as  such.  Puckett  v. 
Stokes,  58  Tenn.  442.  See,  also, 
Seekell  v.  Fletcher,  supra. 

In  order  to  make  a  note,  signed 
in  the  individual  name  of  one  of 
the  partners,  binding  upon  the 
firm,  it  must  be  made  to  appear, 
affirmatively,  that  it  was  given  and 
received  as  a  firm  note,  binding 
upon  all  the  partners.  Hubbell  v. 
Woolf,  15  Ind.  204;  Buckner  v. 
Lee,  8  Ga.  285;  Staats  v.  Howlett, 
4  Den.  559;  Seekell  v.  Fletcher, 
supra;  Anderson  v.  Norton,  15 
Lea,  14. 

Whether  a  note  in  suit  arose 
from  the  indebtedness  of  the  firm 
or  of  an  individual  partner  is  a 
question  for  the  jury.  Roberts  v. 
Pepple,  55  Mich.  367. 

When  a  partnership  is  sued  upon 
a  promissory  note,  signed  by  one 
partner  only  in  his  individual 
name,  which  was  not  the  firm 
style,  the  burden  of  proof  is  on  the 
plaintiff  to  show  that  the  note  was, 
in  fact,  a  partnership  transaction; 
and  the  partnership  will  not  be 
made  liable  by  proof  that  the 
money  was  borrowed  for  the  use 
of  the  firm,  and  was  so  used  by 
them,  and  that  the  parties  to  the 
note  were  aware  of  those  facts,  if 


(rf)Siffkin  v.   Walker,   2  Camp.     9! 
308 ;  Murray  v.  Somerville,  2  Uamp.     1 

445 


),  note.    And  see  Ex  parte  Harris, 
Madd.  583. 


:1S7 


MGIITS    AND    OBLIGATIONS. 


[book  II. 


Promise  hy  several  partners.— 2.  If  several  partners 
sign  a  note  in  this  form,  "I  promise  to  pay,"  all  who  sign 
the  note  are  liable  on  it,  jointly  and  severally,  (e) 


it  also  appears  that  the  money  was 
advanced  on  the  personal  credit  of 
the  individual  partner,  and  the 
parties  knew  that  the  note  was  to 
be  negotiated  as  the  individual 
note  of  the  maker.  Farmers'  Bank 
v.  Bayliss,  41  Mo.  275. 

A  note  payable  to  several  per- 
sons not  partners  can  only  be  trans- 
ferred by  the  joint  indorsement  of 
all:  but  when  payable  to  two  or 
more  as  partners  it  may  be  trans- 
ferred by  the  indorsement  of  any 
one  of  them.  Ryhineru.  Feickert, 
92  111.  305. 

Where  one  partner  keeps  the 
bank  account  of  the  firm  in  his 
own  name,  with  the  knowledge 
and  consent  of  the  others,  all  part- 
nership debts  and  accounts  being 
paid  by  checks  drawn  and  signed 
by  him  alone,  the  firm  is  liable 
upon  such  a  check  drawn  in  its 
business.  Crocker  v.  Colwell,  46 
N.  Y.  212. 

Where  a  firm,  consisting  of  three 
members,  is  engaged  in  business  as 
a  private  bank,  and  has  been  so  en- 
gaged for  about  a  year,  with  M., 
one  of  the  partners,  as  resident  and 
managing  partner,  and  F.,  who  has 
been  in  the  habit  of  dealing  with 
the  bank,  goes  into  its  ordinary 
place  of  business,  and,  intending  to 
deal  with  it,  hands  over  the  coun- 
ter, to  such  manging  partner,  $50, 
in  the  usual  manner  for  deposit, 
and  receives  therefor,  upon  a 
printed  blank  in  the  name  of  the 
bank,  a  certificate  of  deposit  signed 


by  M.,  and  nothing  is  said  about 
any  personal  loan  to  M.,  and  no  in- 
timation given  of  any  other  than, 
as  F.  intended,  a  transaction  with 
the  bank,  and  F.  has  no  knowledge 
of  any  agreement  between  the  part- 
ners as  to  the  form  of  the  firm's 
blanks  or  the  manner  of  the  firm's 
signature,  held,  that  such  certifi- 
cate is  binding  upon  the  firm,  and 
that  notwithstanding  that  M.  did 
not  affix  to  his  signature  to  the 
certificate  any  such  words  as 
"  cashier''  or  "  managing  partner,"' 
and  although  M.  intended  to  take 
it  as  a  loan  to  himself  and  did  not 
enter  the  transaction  in  the  books 
of  the  firm,  nor  pass  over  to  its 
credit  the  money,  but  appropriated 
the  same  to  his  own  use,  and  al- 
though the  blank  form  used  for  the 
certificate  was  not  the  one  gener- 
ally used  by  the  bank  after  the 
formation  of  the  partnership,  but 
that  used  by  M.  while  carrying  on 
by  himself  the  business  of  banking 
prior  thereto  in  the  same  place  and 
under  the  same  name.  Lemon  v. 
Fox,  21  Kan.  152. 

C,  one  of  the  partners  of  the 
firm  of  A. ,  B.  and  C. ,  executed  the 
following  note:  "Dec.  7,  1835. 
One  day  after  date,  due  J.  Sithens 
267  dollars  and  87  cents,  for  work 
done  on  West  River  bridge  for  the 
company  of  A.,  B.  and  C.  By  me, 
C."  Held,  that  this  note  bound 
the  firm.  Caldwell  v.  Sithens,  5 
Blackf.  99. 

Where  two  persons,  by  virtue  of 


(e)  Clarke  v.  Blackstock,  Holt,  N.  P.  C.  474;  March  v.  Ward,  1  Peake, 
177  (ed.  3j. 

446 


CH.  I,  SEC.  V.]  LIABILITIES    OF   PARTNERS. 


187 


Promise  by  one  in  name  of  firm. —  3.  If  one  partner  prom- 
ises in  the  name  of  the  firm  to  pay  that  for  which  he,  and 
not  the  firm,  is  liable,  the  promise  binds  him  at  all  events. 
As  an  illustration  of  this,  reference  may  be  made  to  Shipton 
v.  Thornton.  (/)  There  the  defendant,  a  partner  in  the 
house  of  Thornton  &  West,  was  solely  liable  to  the  plaint- 
iff for  certain  freight,  and  he  gave  the  plaintiff  a  note  in 
this  form : 

I  hereby  engage  to  pay  the  amount  of  freight,  etc. 

I  am,  etc., 

R.  &  R.  Thornton  &  West. 
On  this  note  the  defendant  was  held  separately  liable. 

an  agreement,  become  partners  as 
to  third  persons  without  any  firm 
name,  and  one  of  the  parties  who 
transacted  the  business  gave  a  note 
signed  in  his  own  individual  name 
for  goods  purchased,  and  the  payee 
was  ignorant  of  the  relations  of  the 
parties,  held,  that  the  dormant 
partner  was  not  liable  on  the  note. 
Palmer  v.  Elliott,  1  Cliff.  63. 

Under  the  law  of  Virginia  an 
action  may  be  maintained  upon  a 
promissory  note  against  a  secret 
partner  who  did  not  sign  it ;  but  he 
is  not  liable  unless  the  money 
came  to  the  use  of  the  firm.  Bank 
of  Alexandria  v.  Mandeville,  1 
Cranch,  C.  Ct.  575. 

A  member  of  a  firm,  which  was 
well  known,  purchased  a  horse,  for 
which  he  gave  his  individual  note. 
Held,  that  the  partnership  was  not 
liable,  although  the  avails  of  the 
horse  when  sold  went  into  the  part- 
nership fund.  Holmes  v.  Burton, 
9  Vt.  252. 

A  note  given  to  one  partner  may 
be  evidence  of  a  settlement  with 
his  firm,  he  being  in  the  habit  of 
taking  in  his  own  name  notes  due 
the  firm.  Boffandick  v.  Raleigh, 
11  Ind.  136. 


A  declaration  which  states  that 
the  defendants  A.  and  B.  formed  a 
copartnership,  and  agreed  between 
themselves  that  A.  should  buy  cer- 
tain goods  for  the  firm  and  execute 
his  own  note  in  payment,  on  which 
they  should  be  jointly  liable,  where- 
upon A.  bought  the  goods;  that  in 
consideration  of  the  acceptance  of 
A.'s  note  in  payment,  and  the  deliv- 
ery of  the  goods  to  the  firm,  the 
defendants  promised  to  pay  the 
amount  of  the  note  when  it  fell 
due,  shows  a  good  consideration 
for  the  promise  of  B.,  and  that  it 
was  an  original  undertaking  and 
not  a  promise  to  pay  the  debt  of 
another.  Hotchkiss  v.  Ladd,  36 
Vt.  593. 

"Where  merchandise  Was  deliv- 
ered by  partners  in  payment  of  a 
note  signed  by  one  of  the  partners, 
but  given  for  a  partnership  trans- 
action, held,  that  the  vendors  could 
not  recover  the  value  of  the  mer- 
chandise of  the  vendees,  on  the 
ground  that  it  was  not  a  note  of  the 
partnership.  Owings  v.  Trotter,  1 
Bibb,  157. 

(/)  9  A.  &  E.  314.  See,  too,  Hud- 
son v.  Robinson,  4  M.  &  S.  475. 


447 


*188  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

Joint  and  several  notes. —  4.  One  partner  has  no  author- 
ity, as  such,  to  bind  himself  and  copartners  jointly  and  sev- 
erally, (g).  But  if  some  members  of  a  firm  make  a  joint 
and  severed  promissory  note  they  will  be  personally  liable, 
although  they  may  have  signed  only  on  behalf  of  themselves 
and  copartners;  and  persons  signing  notes  in  the  following 
forms  have  been  held  liable  on  them  as  makers, 
[*188]  *and  not  merely  incidentally  as  members  of  the  com- 
pany to  -which  they  belonged :  * 

We  jointly  and  severally  promise  to  pay,  etc.,  value  received,  for  and 
on  behalf  of  the  Wesleyan  Newspaper  Association. 

Parker  Story,         >   Directors.  (h) 
James  "Ware,  > 


We,  the  directors  of  the  Royal  Bank  of  Australia,  for  ourselves  and 
other  shareholders  of  this  company,  jointly  and  severally  promise  to 
pay,  etc.,  value  received  on  account  of  the  company. 

T.  W.  Sutherland, 

J.  Connell, 

M.  Boyd, 

A.  Duff, 


Directors,  (i) 


Midland  Counties  Building  Society. 

We  jointly  and  severally  promise  to  pay,  etc. 

W.  R.  Heath,  )   ^.      . 

>  Directors. 
S.  B.  Smith,  ) 

W.  D.  Fisher,  Secretary,  (fc) 

Promise  for  self  and  copartners. —  5.  If  a  partner  prom- 
ises for  himself  and  copartner  this  amounts  to  a  promise 

(g)  Maclae  v.  Sutherland,  3E.&  (h)  Healey  v.  Story,  3  Ex.  3,  in 

B.  1,  which  shows  that  a  joint  and  which  Story  and  Ware  were  sued 

several  promissory  note  is  valid  as  jointly. 

a  joint  note,  though  it  is  not  bind-  (0  Penkivil  v.  Connell,  5  Ex.  381, 

ing,  as  a  several  note,  on  any  per-  in  which  Connell  only  was  sued, 

son  who  does  not  sign  it.  (fc)  Bottomley  v.  Fisher,  1  H.  & 

•See    the     cases     collected     in  C.  211,  in  which  Fisher  only  was 

EwelL'g  Evans  on  Agency,  177,  186  sued. 
et  seq. 

448 


OH.  I,  SEC.  VI.]  LIABILITIES   OF   PARTNERS.  *189 

by  the  firm.  (I)  Accordingly  the  firm  has  been  held  liable 
on  notes  in  the  following  form : 

Sixty  days  after  sight  I  pay  A.  or  order  £200,  value  received. 
For  J.  Matthew, 
T.  Whitsmith, 
T.  Smithson, 

J.  Matthew,  (to) 

And,  contrary  to  an  older  decision,  (n)  the  firm  has  been 
held  liable  on  notes  in  the  following  form: 

*Leicester  and  Leicestershire  Bank.    [*189] 
I  promise  to  pay  the  bearer  on  demand  £5,  value  received. 

For  John  Clarke, 

Eichard  Mitchell, 
Joseph  Phillips, 
Thomas  Smith, 

Richard  Mitchell,  (o) 

Section  YI. —  Liability  of  Partnerships  in  Respect  of 
Contracts  Not  Binding  on  Them,  but  of  which  They 
Have  Had  the  Benefit. 

Effect  of  having  had  the  benefit  of  a  contract. —  It  is 

an  erroneous  but  popular  notion  that  if  a  firm  obtains  the 
benefit  of  a  contract  made  with  one  of  its  partners  it  must 
needs  be  bound  by  that  contract.  Now,  although  the  cir- 
cumstance that  the  firm  obtains  the  benefit  of  a  contract 
entered  into  by  one  of  its  members  tends  to  show  that  he 
entered  into  the  contract  as  the  agent  of  the  firm,  (p)  such 
circumstance  is  no  more  than  evidence  that  this  was  the 
case;  and  the  question  upon  which  the  liability  or  non- 

(l)  Smith  v.  Bailey,  11  Mod.  401 ;  signed  A.  B.,"  and  which  was  held 

Lane  v.  Williams,  2  Vern.  277  and  to  bind  A.  B.  separately. 

292 ;  Smith  v.  Jarves,  2  Lord  Ray-  (o)  Ex  parte  Buckley,  14  M.  & 

mond,  1484.  W.   469,    and   1  Ph.  562;  and  Ex 

(in)  Galway  v.  Mattew,  1  Camp,  parte  Clarke,  De  Gex,  153,  revers- 

4°3-  ing  Ex  parte  Christie,  3  M.  D.  & 

(n)  Hall  v.  Smith,  1  B.  &  C.  407,  D.  736. 

where  the  form  was  "I  promise  to  (p)  Per  Rolfe,  B.,  in  Beckham  v. 

Pay for  A.  B.,  C.  D.  and  E.  F.,  Drake,  9  M.  &  W.  99,  100. 

Vol.  1  —  29  449 


*190  EIGHTS   AND    OBLIGATIONS.  [BOOK   II. 

liability  of  the  firm  upon  a  contracts  depends  is  not,  Has 
the  firm  obtained  the  benefit  of  the  contract?  but,  Did  the 
firm,  by  one  of  its  partners  or  otherwise,  enter  into  the 
contract?  (q) 

A  leading  case  on  this  head  is  Emly  v.  Lye.  (r)  There  a 
partner  drew  bills  in  his  own  name  and  sent  them  to  an 
agent  of  the  firm  in  order  that  he  might  get  them  dis- 
counted. They  were  discounted,  and  the  money  obtained 
was  remitted  by  the  agent  and  was  paid  to  the  account  of 
the  firm.  It  was  held  that  the  firm  was  neither  liable  for 
the  amount  of  the  bills  on  the  bills  themselves,  nor  for 
their  proceeds  on  the  common  counts.  There  was  no  loan 
to  the  partnership;  no  contract  with  it;  and  no  liability  at- 
tached to  the  firm  by  the  fact  that  the  partner  who 
[*190]  alone  was  liable  had  applied  the  money  after  *he 
got  it  for  the  benefit  of  his  copartners  as  well  as  for 
the  benefit  of  himself. 

Money  borrowed  Iby  one  partner. —  Again,  in  Bevan  v. 
Lewis,  (s)  one  partner  borrowed  money  and  executed  war- 
rants of  attorney  to  confess  judgment.  The  money  which 
he  obtained  was  applied  by  him  for  the  benefit  of  the  part- 
nership, and  was  obtained  in  part  with  the  knowledge  of 
his  copartner  in  order  that  it  might  be  so  applied.  But  it 
was  held  that  the  partnership  was  not  liable  for  the  money, 
the  loan  having  been  clearly  made  to  the  one  partner,  against 
whom  alone  judgment  was  to  be  entered,  and  not  to  the 
firm  through  him.  So,  in  ordinary  cases,  when  one  part- 
ner borrows  money  without  the  authority  of  his  copartners, 
the  contract  of  loan  is  with  him  and  not  with  the  firm ; 
and  the  nature  of  that  contract  is  not  altered  by  his  appli- 
cation of  the  money.  The  lender  of  the  money  has,  there- 
fore,  no  right  to   repayment   by  the  firm,  although  the 

(q)  Per  Rolfe,  B.,  ubi  supra.  See,  fit  of  a  contract  does  not  show  con- 
too,  Kingsbridge  Flour  Mill  Co.  v.  clusively  that  the  firm  is  not  bound. 
The  Plymouth  Grinding  Co.  S  Ex.  Ex  parte  Bonbonus,  8  Ves.  544. 
718;  Ernest  v.  Nicholls,  6  H.  L.  C.  (r)  15  East,  7. 
423.     Similarly,  the  fact  that  one  (s)  1  Sim.  376. 
partner  only  has  obtained  the  bene- 

450 


CH.  I,  SEC.  VI.]  LIABILITIES    OF   PARTNERS.  *191 

money  may  have  been  applied  for  its  benefit,  (t)  unless  he 
can  bring  himself  within  the  equitable  doctrine  referred  to 
below. 

Goods  supplied  to  one  partner. —  The  same  rule  applies 
to  goods,  services  and  works  supplied  to  or  done  for  one 
partner,  either  on  his  own  account,  or,  if  for  the  firm, 
at  the  request  of  one  of  the  members  acting  beyond  the 
limits  of  his  apparent  as  well  as  of  his  real  authority. 
The  firm  does  not,  in  any  case  of  this  sort,  enter  into  any 
contract,  express  or  implied,  with  the  person  dealing  with 
the  partner  in  question,  and  does  not  incur  any  obligation 
towards  that  person  by  reason  of  the  circumstance  that  it 
gets  the  benefit  of  what  he  has  done,  (u)  The  principle  of 
these  decisions  governs  those  cases  in  which  one  partner,  in 
breach  of  trust,  but  without  the  knowledge  or  con- 
sent of  his  copartners,  ^applies  trust  money  over  [*191] 
which  he  has  control  as  a  trustee  to  the  purposes  of 
the  firm.  The  fact  that  the  firm  has  been  benefited  by  the 
money  in  question  does  not  necessarily  render  it  liable  to 
the  owners  of  the  money,  (a?) 

Equitable  doctrine  in  these  cases. —  Where,  however, 
money  borrowed  by  one  partner  in  the  name  of  the  firm, 
but  without  the  authority  of  his  copartners,  has  been  applied 
in  paying  off  debts  of  the  firm,  the  lender  is  entitled  in 
equity  to  repayment  b}'  the  firm  of  the  amount  which  he 
can  show  to  have  been  so  applied;  and  the  same  rule  ex- 

(f)  See  Smith  v.  Craven,  1  Cr.  &  2  Ex.    718 :  Lloyd  v.  Freshfield,  2 

J.  500 ;  Hawtayne  v.  Bourne,  7  M.  Car.  &  P.  325,  and  9  Dowl.  &  R.  19 ; 

&  W.  595 ;  Burmester  v.  Norris,  6  Galway  v.   Matthew,  10  East,  264 ; 

Ex.  796 ;  Ricketts  v.  Bennett,  4  C.  Kilgour  v.  Finlyson,  1  H.  Blacks. 

B.   686;  The  Worcester  Corn  Ex-  155;    Ex    parte  Wheatly,  Cooke's 

change  Co.  3  De  G.  M.  &  G.  180;  Bank.    Law,    534,   ed.    8;    Ball    v. 

Fisher  v.  Tayler,  2  Ha.  218.     In  all  Lanesborough,  5  Bro.   P.    C.  480; 

these  cases  the  firm  got  the  benefit  Ex  parte  Peele,  6   Ves.   603,  604 ; 

of  the  money  borrowed  and  yet  Ex  parte  Hartop,  12  id.  352. 

was  not  liable  to  repay  it.  (x)  Ex  parte  Apsey,  3  Bro.  C.  C. 

(u)  See,  in  addition  to  the  cases  265 ;  Ex  parte  Eteaton,  Buck,  386. 

already    cited,    Kingsbridge  Flour  gee  ante,  p.  160. 
Mill  Co.  v.  Plymouth  Grinding  Co. 

451 


*191 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


tends  to  money  bona  fide  borrowed  and  applied  for  any 
other  legitimate  purpose  of  the  firm,  (y)  This  doctrine  is 
founded  partly  on  the  right  of  the  lender  to  stand  in  equity 
in  the  place  of  those  creditors  of  the  firm  whose  claims 
have  been  paid  off  by  his  money,  and  partly  on  the  right 
of  the  borrowing  partner  to  be  indemnified  by  the  firm 
against  liabilities  bona  fide  incurred  by  him  for  the  legiti- 
mate purpose  of  relieving  the  firm  from  its  debts  or  of 
carrying  on  its  business.  (3)  The  equitable  doctrine  in. 
question  is  limited  in  its  application  to  cases  falling  under 
one  or  other  of  the  principles  above  indicated,  (a) 


(y)  The  leading  cases  on  this  sub- 
ject are  Ex  parte  Chippendale  (The 
German  Mining  Co.'s  Case),  4 
De  G.  M.  &  G.  19;  The  Cork  and 
Youghal  Eail.  Co.  L.  R.  4  Ch.  748; 
Blackburn  Building  Soc.  v.  Cun- 
liffe,  Brooks  &  Co.  22  Ch.  D.  61, 
and  9  App.  Ca.  857,  and  29  Ch.  D. 
902;  Baroness  Wenlock  v.  River 
Dee  Co.  19  Q.  B.  D.  155.  The  case 
of  infants  is  analogous :  an  infant 
is  liable  for  necessaries,  but  he 
was  not  liable  at  law  for  money 
lent,  though  applied  in  the  pur- 
chase of  necessaries.  Darby  v. 
Boucher,  1  Salk.  279.  But  other- 
wise in  equity.  Marlow  v.  Pitfield, 
1  P.  W.  558.  So,  a  husband  was 
not  at  law  liable  for  money  lent  to 
his  wife  to  enable  her  to  obtain 
necessaries,  and  applied  by  her  for 


that  purpose.  Knox  v.  Bushell,  3 
C.  B.  N.  S.  333.  But  see,  in  equity, 
Jenner  v.  Morris,  1  Dr.  &  Sm.  218, 
and  3  De  G.  F.  &  J.  45 ;  Deare  v. 
Soutten,  9  Eq.  151;  and  observe 
that  in  the  last  case  the  plaintiff 
had  no  ground  for  suing  in  equity 
except  his  inability  to  recover  at 
law.  See,  also,  Baroness  Wen- 
lock  v.  River  Dee  Co.  36  Ch.  D. 
674,  which  is  now  under  appeal. 

(2)  See  infra,  book  iii,  ch.  6,  §  3, 
p.  381  et  seq.;  also  post,  p.  193, 
note  (fc). 

(a)  See,  in  addition  to  the  case3 
cited  in  note  (y),  National  Perma- 
nent Benefit  Building  Soc.  5  Ch. 
309;  Magdalena  Steam  Nav.  Co. 
Johns.  690;  Athenaeum  Life  Ins. 
Soc.  v.  Pooley,  3  De  G.  &  J.  294. 


452 


^CHAPTER  II.  [*192] 

OF  THE  NATURE,  EXTENT  AND  DURATION  OF  THE  LIABIL- 
ITY OF  INDIVIDUAL  MEMBERS  OF  PARTNERSHIPS  TO 
CREDITORS. 

Nature  and  extent  of  a  partner's  liability. —  Having 
examined  in  the  preceding  pages  the  liabilities  of  a  firm 
for  the  acts  of  its  members,  it  is  proposed  in  the  present 
chapter  to  investigate  the  liability  of  the  individual  part- 
ners in  respect  of  such  obligations  as  upon  the  principles 
already  discussed  are  binding  on  them  all. 

Section  I. —  Nature  of  the  Liability. 
1.  As  regards  contracts. 

No  several  liability  on  contracts  binding  the  firm. —  An 

agent  who  contracts  for  a  known  principal  is  not  liable  to 
be  himself  sued  on  the  contract  into  which  he  has  avow- 
edly entered  only  as  agent.  Consequently,  a  partner  who 
enters  into  a  contract  on  behalf  of  his  firm  is  not  liable  on 
that  contract  except  as  one  of  the  firm;  in  other  words,  the 
contract  is  not  binding  on  him  separately,  but  only  on  him 
and  his  copartners  jointly,  (a) l    One  partner  may  render 

(a)  See  Ex  parte  Buckley,  14  M.  346 ;  Coleman  v.  Elmore,  81  Fed. 

&  W.  469;  Re  Clarke,  De  Gex,  153;  Rep.  391. 
Ex  parte  Wilson,  3  M.  D.  &  D.  57.        One    who   brings    suit    against 

1  Firm  debts  are  joint  and  not  partners  must  show  the  existence 
joint  and  several  obligations,  and  of  a  joint  contract  or  joint  promise, 
hence  are  not  secured  by  a  mort-  express  or  implied.  Sager  v.  Tup- 
gage  conditioned  for  the  payment  per,  38  Mich.  258. 
of  the  indebtedness  of  one  of  the  In  an  action  against  several  as 
partners.  First  National  Bank  v.  partners,  although  but  one  of  the 
Tarbox,  38  Hun  (N.  Y.),  57.  See,  defendants  be  brought  into  court, 
also,  Exchange  Bk.  v.  Ford,  7  Col.  if  he  appears  and  pleads  the  gen- 
814;    Mulhall  v.   Gillespie,  89  111.  eral    issue,   the    plaintiff    is    not 

453 


*192 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


himself  separately  liable  by  holding  himself  out  as  the  only 
member  of  the  firm ;  (J)  or  by  so  framing  the  contract  as 


entitled  to  recover,  unless  he  es- 
tablishes a  joint  liability  of  the 
defendants.  Halliday  v.  McDou- 
gal,  20  Wend.  81 ;  22  id.  264 ;  Bos- 
with  v.  West,  68  Ga.  825. 

Where,  in  an  action  on  an  ac- 
count against  a  partnership,  the 
plaintiff  dismissed  as  to  one  part- 
ner, it  was  held  to  be  in  effect  a 
dismissal  against  the  firm,  and  that 
the  court  had  no  jurisdiction  to 
render  judgment  against  the  re- 
maining partner  individually. 
Storm  v.  Roberts,  54  la.  677. 

Where  the  liability  of  copartners 
for  the  firm  indebtedness  is  con- 
sidered joint  and  several,  a  judg- 
ment may  be  rendered  against  any 
one  or  more  of  the  copartners 
without  the  joinder  of  the  others. 
Simpson  v.  Schulte,  21  Mo.  App. 
639. 

Where  two  persons  were  sued  as 
partners,  and,  both  having  been 
served  with  process  and  having 
appeared  in  the  suit,  judgment 
was  rendered  against  them  in  their 
firm  name,  held,  that  such  judg- 
ment was  joint  and  several,  and 
upon  an  execution  issued  upon  it 
the  officer  might  lawfully  seize  and 
sell  partnership  property  of  both 
and  the  individual  property  of 
either  defendant.  Stout  v.  Baker, 
82  Kan.  113. 

Where  an  action  is  brought  upon 
partnership  liability  against  a  firm 
alleged  to  consist  of  three  persons, 
and  upon  a  trial  it  appears  that  one 
of  them  is  not  a  partner,  but  that 
the  other  two  are  members  of  the 


firm,  upon  proof  of  the  alleged 
partnership  liability  judgment 
may  be  properly  entered  against 
the  firm  of  two  members.  Gen. 
St.  1878,  ch.  66,  sec.  266;  Miles  v 
Wann,  27  Minn.  56. 

A  personal  judgment  against  one 
partner  for  a  partnership  liability 
is  not  void  and  hence  cannot  be 
collaterally  attacked.  Wells  v. 
Clarkson,  5  Mont.  336. 

Where,  in  an  action  against  part- 
ners on  a  partnership  obligation, 
separate  judgments  are  rendered 
against  each  of  the  defendants  in- 
stead of  a  joint  judgment  against 
all,  this  is  an  irregularity  merely ; 
and  the  court  has  no  power  to  set 
aside  the  judgments  on  motion  un- 
less motion  is  made  within  one 
year  after  their  rendition.  Judd 
Linseed  Oil  Co.  v.  Hubbell,  76  N.  Y. 
543.  See,  also,  Marsh  v.  Mead,  57 
la.  535. 

In  Texas,  where  two  parties  are 
sued  jointly  for  a  debt  alleged  to 
be  due  upon  a  sale  of  goods,  upon 
proof  of  the  account  as  against  one 
of  the  defendants  judgment  may 
be  rendered  against  such  defendant 
alone.  Congdon  v.  Monroe,  51  Tex. 
540. 

Under  section  1134  of  the  code 
of  18S0,  which  makes  all  liabilities 
of  partners  joint  and  several,  an 
unsatisfied  judgment  against  one 
partner  is  not  a  bar  to  an  action 
against  the  other.  Hyman  v.  Stad- 
ler,  63  Miss.  362. 

Judgments  bind  the  partners  or 
joint  contractors  served,  and  the 


(6)  Bon  field  v.  Smith,  12  M.  &  W.  405 ;  De  Mautort  v.  Saunders,  1  B. 
&  Ad.  398. 


454 


CH.  II,  SEC.  I.]  LIABILITY    OF   MEMBERS. 


*192 


to  bind  himself  separately  from  his  copartners  as  well  as 
jointly  with  them ;  (c)  but  unless  there  are  some  special  co- 


partnership assets,  but  not  mem- 
bers who  are  not  served;  as  to 
their  individual  estate  they  stand 
as  though  no  judgment  had  been 
rendered  against  them.  Ells  v. 
Bone,  71  Ga.  466;  Farris  v.  Seis- 
field,  1  Tex.  App.  (Civ.)  149 ;  Printup 
v.  Turner,  65  Ga.  71 ;  Patten  v. 
Cunningham,  63  Tex.  666.  See, 
also,  Hensley  v.  Bagdad  Sash  Fac- 
tory Co.  1  Tex.  App.  (Civ.)  329; 
Jackson  v.  Litchfield,  18  Can.  L.  J. 
<N.  S.)  235;  Davidson  v.  Knox,  67 
Cal.  143;  Burnett  v.  Sullivan,  58 
Tex.  535;  Ladiga  Saw-mill  Co.  v. 
Smith,  78  Ala.  108;  Pinschower  v. 
Hanks,  18  Nev.  99. 

Where  a  judgment  is  against  the 
partnership,  and  the  execution  is 
against  not  only  the  partnership 
but  thei  ndividual  members,  not  as 
members  but  as  distinct  persons, 
the  variance  is  fatal.  Clayton  v. 
May,  68  Ga.  27.  See  post,  515  and 
note. 

Where  suit  was  brought  in  New 
Jersey  against  the  members  of  a 
firm,  one  of  whom  was  served,  and 
a  non  est  inventus  returned  as  to 
the  others,  and  judgment  was  en- 
tered under  the  statute  against  all 
the  copartners,  in  a  suit  on  such 
judgment  brought  in  Georgia  it 
was  held  binding  on  the  partner 
served.  Conley  v.  Chapman,  74 
Ga.  709 

In  an  Airfion  to  charge  a  partner 
with  the  amount  unpaid  on  a  judg- 
ment against  his  firm  on  service  of 
his  copartner  alone,  he  can  make 
the  same  defenses  which  he  might 


have  made  in  the  original  action  if 
the  summons  had  been  served  upon 
him  therein,  and  the  former  judg- 
ment is  not  conclusive  as  to  the 
amount.  Richardson  v.  Case,  3 
N.  Y.  Civ.  Proc.  295. 

A  judgment  entered  and  indexed 
in  the  name  of  a  firm,  and  not  in 
the  name  of  the  individuals  com- 
posing such  firm,  will  be  postponed 
to  the  claim  of  a  subsequent  lien 
creditor  without  notice,  whose 
judgment  is  properly  indexed  in 
the  names  of  the  several  partners 
composing  the  firm.  Hamilton's 
Appeal,  103  Pa.  St.  368 ;  S.  C.  14 
Weekly  Not.  Cas.  217;  40  Leg. 
Intel.  475. 

Upon  a  sci.  fa.  to  revive  a  judg- 
ment which  was  served  on  defend- 
ant and  on  the  voluntary  assignee 
for  the  benefit  of  creditors  of  a 
firm  of  which  the  defendant  was  a 
member  as  terre  tenant,  plaintiff 
was  held  entitled  to  a  judgment  of 
revival  without  prejudice  to  the 
subsequent  determination  of  the 
respective  rights  of  partnership  and 
individual  creditors.  Kepler  v. 
Erie  Savings  Bank,  101  Pa.  St.  602; 
S.  C.  13  Weekly  Not.  Cas.  21. 

A  partnership  between  four  was 
dissolved  by  the  death  of  one,  and 
letters  of  administration  on  his 
estate  were  taken  out  by  a  surviv- 
ing member.  The  survivors,  hav- 
ing formed  a  new  firm,  took  the 
stock,  and  each  gave  his  note  for 
one-third  of  said  stock,  at  an  ap- 
praised value,  payable  to  the  firm. 
Held,  that  the  three  were  charge- 


(c)  See  ante,   p.   179  et  seq.,  and    Higgins  v.  Senior,  8  M.  &  W.  834; 
Ex  parte  Harding,  12  Ch.  D.  557;    Ex  parte  Wilson,  3  M.  D.  &  D.  57. 

455 


*193 


EIGHTS   AND    OBLIGATIONS. 


[BOOK   II. 


cumstances  of  this  sort,  a  contract  which  is  binding 
[*193]  on  the  firm  is  binding  on  all  (d)  *the  partners  jointly 


able  jointly  for  the  whole  value  of 
the  stock.  Washburn  v.  Goodman, 
17  Pick.  519. 

A  suit  was  brought  against  two 
as  partners;  both  were  served  with 
process ;  both  appeared  and  pleaded 
jointly;  notice  to  produce  a  book 
containing  the  contract  on  which 
the  action  was  brought  was  given 
to  both,  and  it  was  produced.  The 
contract  was  in  the  name  of  the 
firm,  and  was  proved  to  be  in  the 
handwriting  of  one  of  the  defend- 
ants. Upon  the  trial  an  admission 
was  made  by  the  counsel  acting 
for  both  defendants  that  a  certain 
amount  of  labor  was  done  by 
plaintiff  for  defendants,  and  cer- 
tain payments  made  to  him.  Held, 
that  the  evidence  was  sufficient  to 
establish  a  joint  liability  on  the 
part  of  the  defendants.  Balliet  v. 
Fink,  28  Pa.  St.  266. 

In  an  action  against  A.  &  "W., 
former  partners,  on  an  alleged 
joint  indebtedness  for  goods  sold 
and  delivered,  A.'s  answer  denied 
the  sale  and  delivery,  but  admitted 
that  the  goods  were  left  with  the 
defendants  for  sale  on  commission, 
and  that  sales  of  the  same  were 
made  to  a  certain  amount,  for 
which  an  indebtedness  was  admit- 
ted ;  and  W.'s  answer  admitted  in 
part  the  sale  and  delivery  and  in- 
debtedness alleged.  The  plaintiffs 
in  reply  denied  the  statement  in 
A.'s  answer,  and  moved  for  judg- 
ment on  the  pleadings.  Held,  that 
the  motion  was  rightly  denied,  and 
judgment    of    dismissal    properly 


rendered.  Such  a  state  of  the 
pleadings  furnishes  no  basis  for  a 
several  judgment  against  either  of 
the  defendants.  Beatty  v.  Ambs,  11 
Minn.  331. 

If  a  partnership  and  an  individ- 
ual are  joint  makers  of  a  note, 
when  nothing  appears  to  the  con- 
trary, the  partnership  is  liable  for 
one-half  the  amount  of  the  note. 
Hosmer  v.  Burke,  26  Iowa,  353. 

The  liability  of  a  partner  is  to  be 
determined  by  the  law  of  the  place 
where  the  partnership  is  carried  on, 
and  not  where  the  debt  was  in- 
curred. Hastings  v.  Hopkinson,  28 
Vt.  108. 

In  some  of  the  states,  either  by 
statute  or  decisions  of  the  courts, 
partnership  debts  are  considered 
as  both  joint  and  several.  In  Mis- 
sissippi all  partnership  contracts 
are  declared  by  statute  to  be  joint 
and  several;  therefore,  in  a  suit 
against  one  partner,  counts  on  a 
firm  debt  for  which  he  is  severally 
liable  may  be  joined  with  counts 
on  an  individual  debt,  but  if  the 
creditor  treat  the  contract  as  joint, 
by  suing  all  the  partners,  he  must 
prove  a  joint  contract  as  alleged, 
and  cannot  amend  by  discontinu- 
ing as  to  part  of  the  defendants 
and  joining  a  count  on  a  contract 
by  one  only,  in  order  to  meet  the 
proof  which  is  of  such  a  contract. 
Miller  v.  Northern  Bank,  etc.  31 
Miss.  412. 

In  Strong  v.  Niles,  45  Conn.  52,  a 
firm  was  dissolved,  and  part  of  its 
members,  as  a  new  firm,  went  on 


(d)  Not  excluding  dormant  part- 
ners.    Beckham  v.  Drake,  9  M.  & 


W.  79;  Brett  v.  Beckwith,  3  Jur. 
N.  S.  31,  M.  R. 


456 


CH.  II,  SEC.  I.] 


LIABILITY    OF    MEMBERS. 


193 


and  on  none  of  them  severally.  There  is  no  difference 
in  this  respect  between  law  and  equity  (e)  except  that 
which  arises  from  the  equitable  jurisdiction  to  rectify  mis- 
takes, and  from  the  principles  adopted  by  courts  of  equity 
in  administering  the  estates  of  deceased  partners,  {f)  These 
principles  will  be  investigated  at  a  later  period  in  book  iv, 
chapter  3. 


with  the  business.  The  plaintiff, 
who  had  been  a  book-keeper  of  the 
old  firm,  kept  on  with  the  new,  and 
canned  a  balance  due  him  for  serv- 
ices from  the  old  firm  into  his  ac- 
count with  the  new;  and  his  ac- 
count thus  made  up  was  afterwards 
paid  by  the  new  firm,  they  not 
knowing  that  it  embraced  any  part 
of  the  old  account.  Held,  that  as 
the  members  of  the  new  firm  were 
personally  liable  for  the  debts  of 
the  old,  the  plaintiff  was  entitled  to 
retain  the  money  so  received. 

See,  also,  Griffin  v.  Samuel,  6  Mo. 
50;  Wilson  v.  Hone,  37  Miss.  477 
Neil   v.    Childs,  10   Ired.    L.   195 
Silverman    v.    Chase,   90    111.    37 
Mason  v.  Tiffany,  45  III.  392. 

The  rights  of  partnership  credit- 
ors are  not  affected  by  equities  be- 
tween the  partners.  Bartels  v. 
Creditors,  11  La.  Ann.  433. 

In  an  action  against  the  mem- 
bers of  an  unincorporated  associa- 
tion, sued  as  partners,  the  court 
will  not  delay  the  relief  to  which 
the  plaintiff  is  entitled  as  against 
all  the  defendants,  pending  an  in- 
quiry instituted  by  the  defendants 
to  ascertain  which  of  them,  as  be- 
tween themselves,  is  primarily 
liable  for  the  debt.  Manning  v. 
Gasharie,  27  Ind.  399. 

Where  H.  individually,  and  T. 
individually,  signed  an  agreement, 
whereby  they  agreed  to  account  to 
D.  for  the  proceeds  of  certain  bills 


of  lading,  which  were  simultane- 
ously delivered  by  D.  to  H.  for 
himself  and  T.,  they  being  part- 
ners, and  for  any  insurance  money 
which  should  be  received  as  such 
proceeds  until  certain  drafts  ac- 
cepted by  D.,  for  acccount  of  such 
partnership,  against  the  goods  cov- 
ered by  the  bills  of  lading,  should 
be  provided  for,  the  bills  of  lading 
having  been  held  by  D.  as  security 
for  such  acceptances,  and  the  goods 
having  been  insured  by  such  part- 
nership, in  the  name  of  H.,  and 
having  been  lost  at  sea,  held, 
that  T.  and  H.  were  liable,  the  two 
jointly,  and  each  of  them  individ- 
ually, to  fulfill  such  agreement; 
and,  T.  and  H.  having  become  in- 
solvent, and  assigned  their  partner- 
ship, as  well  as  their  individual, 
estates  for  the  benefit  of  the  cred- 
itors, that  D.  had  a  right,  at  his 
election,  to  come  in  under  such  as- 
signment, as  a  creditor  of  T.  and 
H.,  individually,  and  to  exhaust 
his  remedy  thereunder  against  the 
separate  estate  of  each  of  them, 
and  afterward  come  in  on  the  sur- 
plus of  the  joint  estate  of  the  two, 
after  the  payment  of  the  joint 
debts  of  the  two.  Drake  v.  Taylor, 
6  Blatch.  14. 

(e)  Kendall  v.  Hamilton,  4  App. 
Ca.  504,  and  3  C.  P.  D.  403. 

(/)  Ibid.,  where  the  whole  law  on 
this  subject  will  be  found  carefully 
examined. 


457 


*193 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


Partnership  debts  not  several  as  well  as  joint. —  It  has 

often  been  said  that  in  equity  partnership  debts  are  separate 
as  well  as  joint;1  but  this  proposition  is  inaccurate  and  mis- 
leading. It  is  true  that  a  creditor  of  a  partnership  can  ob- 
tain payment  of  his  debt  out  of  the  estate  of  a  deceased 
partner;  (g)  but  the  judgment  which  such  a  creditor  obtains 
is  quite  different  from  that  which  a  separate  creditor  is  en- 
titled to;  (h)  and  it  is  a  mistake  to  say  that  the  joint  cred- 
itor of  the  firm  is  also  in  equity  a  separate  creditor  of  the 
deceased  partner.  (*")  In  bankruptcy  the  joint  debts  of  a 
firm  are  never  treated  as  joint  and  several;  and  yet  in  bank- 
ruptcy equitable  as  well  as  legal  principles  are  always  recog- 
nized. 

Effect  of  judgment  against  some  partners. —  In  Kendall 
v.  Hamilton,  (k)  two  out  of  three  partners  were  sued  for  a 


iSee  Mason  v.  Tiffany,  45  111. 
392;  Silverman  v.  Chase,  90  id.  37. 

Every  partnership  debt  being  in 
equity  joint  and  several,  the  holder 
may,  in  case  of  the  death  of  a  part- 
ner, resort  in  the  first  instance  to 
the  surviving  partners  or  to  the  as- 
sets of  the  deceased  partner ;  and  a 
failure  to  proceed  against  the  sur- 
viving partners  until  their  insolv- 
ency is  no  bar  to  its  collection 
from  the  estate  of  the  deceased 
partner.  Doggett  v.  Dill,  108  111. 
560;  S.  C.  48  Am.  Rep.  565. 

(g)  See  the  next  note.  Hoare  v. 
Contencin,  1  Bro.  C.  C.  27,  shows 
that  this  was  not  always  the  case. 

(ft)  See  Re  Barnard,  32  Ch.  D. 
447:  Hills  v.  M'Rae,  9  Ha.  297;  Re 
Hodgson,  31  Ch.  D.  177 ;  Re  McCrae, 
25  id.  16,  and  post,  book  iv,  ch.  3. 

(i)  Except  in  partnership  cases 
tho  liability  in  equity  on  a  joint 
contract  is  the  same  as  at  law. 
Oth*  r  v.  Iveson,  3  Drew.  177;  Jones 
v.  Beach,  2  De  G.  M.  &  G.  886; 
Rawstone  v.  Parr,  3  Russ.  539. 


(k)  4  App.  Ca.  504,  and  3  C.  P.  D. 
403.  This  case  arose  after  the  Jud. 
Acts  came  into  operation. 

Kendall  v.  Hamilton,  4  App.  Ca. 
504,  decided  two  points,  viz. :  1, 
that  ordinary  partnership  debts  are 
not  joint  and  several;  2,  that  a 
judgment  by  a  joint  creditor  of  a 
firm  against  one  partner,  in  an  ac- 
tion brought  against  him  only,  dis- 
charges his  copartners,  although 
the  judgment  is  unsatisfied  and 
although  the  copartners  were  un- 
known to  the  creditor  when  he  re- 
covered judgment.  This  last  rule, 
although  now  settled  to  be  law, 
rests  on  technical  reasoning,  and  if 
not  carefully  limited  in  its  applica- 
tion will  lead  to  unexpected  and 
unjust  results.  In  Cambefort  v. 
Chapman,  19  Q.  B.  D.  229,  the  rule 
was,  however,  extended  very  con- 
siderably. In  that  case  the  facts 
were  as  follows :  Wilson  &  Chap- 
man carried  on  business  under  the 
name  of  Wilson  &  Co.,  and  became 
indebted  to  the  plaintiff  for  goods 


458 


CH.  II,  SEC.  I.]  LIABILITY    OF    MEMBERS.  *194 

partnership  debt,  and  judgment  was  recovered  against  them. 
Afterwards  the  plaintiffs,  having  discovered  that  the  defend- 
ant Hamilton  was  a  member  of  the  firm,  sued  him  for  the 
same  debt,  which  was  still  unsatisfied.     But  it  was  held  that 
the  action  could  not  be  maintained;  for  the  liability  of 
Hamilton  was  a  joint  liability  only,  and  the  judgment  ob- 
tained against  his  copartners  was  a  bar  to  another  action 
against  him.     This  case  would  have  presented  no  difficulty 
before  the  passing  of  the  Judicature  Acts;  but  it  was  con- 
tended that  Hamilton's  liability  was  in  equity  several  as 
well  as  joint,  and  that  since  the  passing  of  the  Judi- 
cature Acts  he  could  be  sued  "^notwithstanding  the  [*19:t] 
judgment  recovered  against  his  copartners.     This 
construction,  however,  was  decided  to   be  unsound,  and  it 
did  not  prevail.     Before  the  passing  of  the  Judicature  Acts 
the  court  of  chancery  would  have  had  no  jurisdiction  in 
such  a  case  as  Kendall  v.  Hamilton,  and  there  were  no  cir- 
cumstances importing  equitable  considerations  into  it. 

Effect  of  judgment  against  surviving  partners. —  It 
must  not,  however,  be  inferred  from  Kendall  v.  Hamilton 
that  if  a  creditor  of  a  firm  sues  the  surviving  partners  and 
recovers  judgment  against  them  he  cannot  obtain  payment 
of  his  demand  out  of  the  assets  of  a  deceased  member  of  the 
firm.  The  contrary  is  well  established  by  a  long  series  of 
cases  which  are  in  no  way  affected  by  Kendall  v.  Hamilton. 

sold  and  delivered.  The  plaintiff  Chapman  for  the  goods ;  but  it  was 
only  knew  Wilson:  Chapman  was  held  that  the  bill  having  been  given 
a  dormant  partner.  Wilson  &  for  the  goods,  and  not  as  a  col- 
Chapman  dissolved  partnership,  lateral  security  only  (as  to  which, 
but  the  plaintiff  was  ignorant  of  see  p.  256,  note  (c),  and  p.  704,  notes 
this.  After  the  dissolution  the  (d)  to  (h) ),  the  action  on  the  bill  was 
plaintiff  drew  a  bill  on  Wilson  &  in  substance  an  action  against  Wit- 
Co.,  and  Wilson  accepted  it  in  that  son  for  the  goods,  and  that  the 
name.  The  bill  was  given  for  the  judgment  against  him,  although 
partnership  debt,  and  was  dishon-  unsatisfied,  afforded  Chapman  a 
ored.  The  plaintiff  sued  Wilson  &  good  defense  to  the  action  against 
Co.  on  the  bill  and  obtained  judg-  him.  Observe  that  the  bill  did  not 
ment  against  Wilson  &  Co.,  but  bind  him,  nor  did  the  judgment, 
could  not  get  payment  from  Wil-  But  quaere  whether  Kendall  v. 
son.     The  plaintiff  afterwards  sued  Hamilton  applies  to  such  a  case? 

459 


*195  RIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

Equitable  doctrine  illustrated. —  It  has  long  been  held 
that  a  creditor  of  the  firm  is  himself  entitled  to  obtain  pay- 
ment from  the  estate  of  the  deceased,  even  although  he  may- 
have  taken  as  a  security  for  his  debt  a  bond  or  covenant 
binding  the  partners  jointly.  (I) 

Thus,  in  Bishop  v.  Church,  (m)  two  partners  borrowed 
2,000^.,  for  which  they  afterwards  gave  their  joint  bond. 
One  of  them  then  died,  and  the  other  became  bankrupt.  A 
bill  was  filed  by  the  creditor  for  payment  of  the  bond  out 
of  the  estate  of  the  deceased  partner;  and  it  was  held  that 
his  estate  continued  liable  notwithstanding  that  it  was  dis- 
charged at  law,  the  bond  being  joint  and  not  joint  and  sev- 
eral. In  this  case  it  was  also  held  that  the  bond  ought  to 
be  treated  as  joint  and  several  so  as  to  make  the  estate  of 
the  deceased  partner  liable  as  for  a  specialty  debt  and  not 
as  for  a  simple  contract  debt,  as  would  have  been  the  case 
without  the  bond,  (n) 

In  Beresford  v.  Browning,  (o)  four  partners  agreed  that 
on  the  death  of  any  of  them  the  survivors  should  not 
[*195]  be  bound  to  *pay  out  his  capital  at  once,  but  should 
pay  it  by  certain  instalments,  as  ascertained  at  the 
last  preceding  stock-taking.  The  agreement  did  not  pur- 
port to  bind  the  survivors  jointly  and  severally.  But  it 
was  held  that,  even  if  they  were  at  law  bound  only  jointly, 
they  were  liable  in  equity  severally  as  well  as  jointly;  and 
that  the  executor  of  the  partner  first  dying  was  entitled  to 
be  paid  the  amount  due  to  him  out  of  the  estate  of  a  sur- 

(l)  See,  in  addition  to  the  cases  ference    in    this    respect  between 
cited  in  the  next  few  notes,  Prim-  them  and  other  partnerships? 
rose  v.  Bromley,  1   Atk.  90;  Dar-  (m)  2  Ves.  S.  100  and  371.  Simp- 
went  v.  Walton,  2  Atk.  510 ;  Lane  son  v.  Vaughan,  2  Atk.  31,  is  a  very 
v.  Williams,  2  Vera.  293.    And  see  similar  case. 

Sleech's  Case,  1  Mer.  539;  Devaynes  (n)  The  following    cases  are   to 

v.  Noble,  2  R.   &  M.  495,  and  the  the  same  effect  as  Bishop  v.  Church, 

cases  there  commented  on;  Smith  viz.:  Simpson  v.  Vaughan,  2  Atk. 

v.  Smith,  3  Gift  263.     The    cases  31;  Thomas  v.  Frazer,  3  Ves.  399; 

only  relate  to  mercantile  partner-  Burn  v.  Burn,  id.  573 ;  Orr  v.  Chase, 

ships;  but  qucere  if  there  is  any  dif-  1  Mer.  729,  Appendix. 

(o)  20  Eq.  564,  and  1  Ch.  D.  30. 
460 


CH.  II,  SEC.  I.]  LIABILITY    OF   MEMBERS.  *196 

viving  partner,  who  had  himself  died,  and  was  not  restricted 
to  suing  the  ultimate  surviving  partner. 

Effect  of  judgment. —  Nor,  if  the  creditor  sues  the  sur- 
viving partners  and  obtains  judgment  against  them,  will  he 
be  therefore  precluded  from  proceeding  to  enforce  his  orig- 
inal claim  against  the  estate  of  the  deceased  partner,  (p) 
In  the  case  here  supposed  the  judgment  does  not  affect  his 
estate.  So,  if  the  creditor  of  the  firm  first  seeks  payment 
out  of  the  estate  of  a  deceased  partner,  he  is  not  precluded 
from  afterwards  suing  the  surviving  partner,  (q) 

Effect  of  rule  on  creditors  inter  se. —  The  doctrine  acted 
on  in  Bishop  v.  Church  and  other  cases  of  the  same  sort  is 
applied  not  only  for  the  benefit  of  creditors  against  the 
partners  and  their  representatives,  but  also  as  between 
competing  creditors.  This  was  settled  in  Burn  v.  Burn,  (r) 
In  that  case,  partners  being  indebted  to  a  large  amount, 
gave  to  their  creditor  a  joint  bond ;  one  of  the  partners 
died;  the  others  afterwards  became  insolvent;  and  a  bill 
was  filed  by  the  bond  creditor  for  payment  out  of  the  estate 
of  the  deceased  partner.  Two  questions  then  arose  between 
the  plaintiff  and  the  simple  contract  creditors  of  the  de- 
ceased partner,  viz. :  first,  whether  the  plaintiff  could  rank 
as  a  creditor  at  all  against  the  assets  of  the  deceased?  and, 
secondly,  whether,  if  he  could,  he  should  rank  as  a  specialty 
or  only  as  a  simple  contract  creditor?  The  court  decided 
both  questions  in  favor  of  the  plaintiff,  and  held  that  he 
was  entitled  to  rank  as  a  specialty  creditor,  although  the 
consequence  was  that,  after  satisfying  his  demand,  little  re- 
mained for  payment  of  the  other  creditors. 

*Cases  where  the  equitable  and  legal  liabilities  [*196] 
are  the  same. —  But  even  in  administering  the  es- 
tate of  a  deceased  partner  it  must  not  be  supposed  that 
every  joint  debt  contracted  by  the  firm  is  payable  out  of 
his  assets.     It  is  a  question  of  intention  on  the  part  of  the 

(p)  Liverpool  Borough  Bank  v.        (q)  Re  Hodgson,  31  Ch.  D.  177. 
Walker,  4  De  G.  &  J.  24;  Jacomb        (r)  3  Ves.  573.    And  seeSimms  v. 
v.  Harwood,  2  Ves.  Sen.  265.  Barry,  there  cited. 

461 


*196  EIGHTS   AND    OBLIGATIONS.  [BOOK   II. 

firm  and  on  the  part  of  those  with  whom  it  deals.  If, 
therefore,  partners  enter  into  a  contract  binding  themselves 
jointly  and  not  severalty,  and  if  such  contract  is  not  a  mere 
security  for  the  payment  of  a  debt,  or  for  the  performance 
of  a  joint  and  several  obligation,  and  if  it  has  not  been  made 
joint  in  form  by  mistake,  the  effect  of  the  contract  will  be 
in  equity  as  in  law  to  impose  a  joint  obligation  and  no 
other,  (s) 

A  leading  case  on  this  head  is  Sumner  v.  Powell,  (t) 
There  one  of  a  firm  of  partners  died,  the  firm  being  at  the 
time  of  his  death  liable  for  a  breach  of  trust  committed  by 
one  of  its  members.  A  new  partner  was  admitted  into  the 
firm,  and  a  deed  was  executed  between  the  executors  of  the 
deceased  partner  and  the  surviving  partners  and  the  new 
partner,  whereby,  in  consideration  of  certain  payments  by 
the  executors  and  of  a  release  by  them  of  all  demands,  the 
surviving  partners  and  the  new  partner  covenanted  jointly 
to  indemnify  the  executors  from  the  debts  and  liabilities  of 
the  old  firm.  A  suit  was  afterwards  instituted  in  respect 
of  the  breach  of  trust,  and  the  executors  were  ordered  to 
make  srood  the  same  out  of  the  assets  of  their  testator. 
The  executors  then  filed  a  bill  to  be  indemnified  out  of  the 
estate  of  the  new  partner,  and  contended  that  the  covenant 
into  Avhich  he  had  entered,  though  joint  in  form,  ought  to 
be  considered  as  joint  and  several.  But  it  was  held  other- 
wise, for  the  obligation  of  the  new  partner  to  indemnify  the 
plaintiffs  existed  only  by  virtue  of  his  covenant,  and  the 
extent  of  the  obligation  could  therefore  be  measured  only 
by  the  words  of  such  covenant. 

Again,  in  Clarke  v.  Bickers,  (u)  a  lease  was  made  to 
two  partners  jointly  of  lands  wanted  by  them  for  partner- 
ship purposes.      The  demise  and  lessees'  covenants  were  all 

'  Spp,  in  addition  to  the  cases    v.  Iveson,  3  Drew.  177;   Rawstone 
noticed  in  the  text,  Richardson  v.     v.  Parr,  3  Russ.  424,  539. 
Eorton,    6    Beav.    185;    Jones    v.        (t)  2  Mer.  30 ;  affirmed  on  appeal, 
Beach,  2  De  G.  M.  &  G.  886;  Other     T.  &  R.  423. 

(«)  14  Sim.  639. 
462 


CH.  II,  SEC.  I.]  LIABILITY   OF   MEMBERS.  *197 

joint.  *After  the  death  of  one  of  the  partners  his  [*197] 
executors  were  sued  in  equity  in  respect  of  vari- 
ous breaches  of  covenant,  and  it  was  contended  that  the 
covenants  ought  to  be  treated  as  joint  and  several.  But  it 
was  held  on  demurrer  that  no  equity  arose  to  the  lessor 
from  the  fact  that  the  lessees  were  copartners ;  the  lessor 
determined  for  himself  how  his  leases  should  be  granted. 
The  demurrer  was  consequently  allowed. 

The  same  doctrine  was  acted  on  and  even  carried  fur- 
ther in  Wilmer  v.  Currey.  (x)  In  that  case  three  partners 
dissolved  partnership,  one  of  them,  the  plaintiff,  retiring. 
By  a  deed  made  between  the  three  partners  the  plaintiff 
assigned  all  his  share  and  interest  to  the  other  two,  and 
they  jointly  covenanted  to  pay  the  debts  of  the  firm,  and 
to  indemnify  the  plaintiff  therefrom,  and  to  pay  the  plaint- 
iff certain  sums  of  money.  One  of  the  two  continuing 
partners  having  died  and  the  covenants  not  having  been 
performed,  the  plaintiff  filed  his  bill  against,the  surviving 
partner  and  the  executors  of  the  deceased  partner  in  order 
to  obtain  the  sums  remaining  due  to  him,  and  to  have  the 
unliquidated  partnership  debt  paid.  But  it  was  held  on 
demurrer  that  the  plaintiff  had  no  equity  against  the  es- 
tate of  the  deceased  partner ;  for  although  that  partner  was, 
irrespectively  of  the  deed,  liable  to  contribute  towards  pay- 
ment of  the  partnership  debts,  that  was  different  from  the 
obligation  which  arose  by  virtue  of  the  covenant  of  "which 
the  plaintiff  sought  the  benefit.  It  is,  however,  difficult  to 
reconcile  this  case  with  Beresford  v.  Browning,  {y) 

Joint  liability  in  cases  of  holding  out. —  A  creditor 
who  alleges  that  A.,  B.  and  C.  are  his  debtors  can,  it  is 
apprehended,  prove  his  case  by  showing  that  one  of  them 
contracted  on  behalf  of  all  three,  and  that  the  other  two 
are  estopped  from  denying  his  authority  to  do  so.  Cases 
in  which  persons  have  been  held  jointly  liable  on  this  prin- 
ts) 2  De  G.  &  Sm.  347.  ever,  thought  the  two  might  be 
(y)  The    court  of   appeal,    how-    distinguished.     See  1  Ch.  D.  30. 

463 


*198  EIGHTS   AND   OBLIGATIONS.  [BOOK   II. 

ciple  are  to  be  found  in  the  books,  (z)  The  case  of  Scarf 
v.  Jardine,  (a)  which  seems  at  first  sight  to  throw  some 
doubt  on  this  doctrine  is  really  not  opposed  to  it.     In  that 

case  S.  &  R.  carried  on  business  in  partnership  under 
[*198]  the  nanu>  of  R.  &  Co.     *S.  retired.     R.  continued 

the  busings  in  the  old  name  and  took  another  person 
into  partnership  with  him.  J.  was  a  customer  of  the  old 
firm;  he  had  no  notice  of  S.'s  retirement,  and  he  continued 
to  deal  with  and  became  a  creditor  of  the  new  firm.  J. 
then  was  made  acquainted  with  the  fact  that  S.  had  retired ; 
but  J.  nevertheless  sued  the  new  firm  for  their  debt  to  him, 
and  on  their  bankruptcy  he  proved  against  their  estate.  He 
then  sought  to  recover  the  same  debt  against  S. ;  but  it  was 
decided  that  S.  was  not  liable.  It  was  held  that  J.  had  the 
option  of  suing  the  new  firm  or  S.,  but  that  J.  could  not 
sue  the  new  firm  and  S.  jointly ;  and  that  having  elected  to 
sue  the  new  firm,  he  could  not  afterwards  sue  S.,  who  was 
not  in  fact  a  member  of  it.  The  importance  of  this  case 
turns  on  the  grounds  on  which  it  was  held  that  J.  could  not 
have  sued  S.  jointly  with  the  members  of  the  new  firm. 
The  reason  why  he  could  not  have  done  so  was  that  J.  did 
not  in  fact  contract  with  the  new  firm  upon  the  faith  that 
S.  was  a  member  of  it.  (b).  If  it  had  been  proved  that  J. 
had  so  contracted  he  could,  it  is  apprehended,  have  sued  S. 
and  the  other  members  of  the  new  firm,  and  have  proved 
S.  to  have  been  a  partner  by  estoppel. 

2.  As  regards  torts  and  frauds. 
Torts  create  joint  and  several  liabilities. —  For  torts 
imputable  to  a  firm  all  the  partners  are  liable  jointly  and 
severally,  (d)1    To  this  general  rule   an  exception  occurs 

(z)  Waugh  v.  Carver,  1  H.  Bl.  235,  (d)  Mitchell  v.  Tarbutt,  5  T.  R. 

and   other    cases  of    holding  out,  649;  1  Wms.  Saund.  291,/   and  g; 

ante,  p.  40  et  seq.  Com.  Dig.  Abatement,  F.  8. 

(a)  7  App.  Ca.  345.  l  See  Cooley  on  Torts,  133. 

See  7  App.  Ca.  350,  per  Lord  An  action  on  the  case  for  neg- 
Belborne,  and  357-8,  per  Lord  ligence  occasioning  the  loss  or  de- 
Blackburn,  struction     of   a    slave     hired    by 

464 


CH.  II,  SEC.  I.]  LIABILITY    OF    MEHERS.  *199 

where  an  action  ex  delicto  is  brought  against  several  persons 
in  respect  of  their  ownership  in  land,  for  then  they  are  lia- 
ble jointty,  and  not  jointly  and  severally,  (e) 
Distinction  between  torts  and  breaches  of  contract. — 

Breaches  of  trust  impose  joint  and  several  liabilities.  Al- 
though for  general  purposes  it  may  be  convenient  to  dis- 
tribute acts  and  forbearances  which  give  rise  to  obligations 
under  the  heads  breach  of  contract  and  tort,  it  would  not  be 
difficult  to  show  the  impossibility  of  always  distinguishing 
between  the  two.  {/)  And  yet  if  a  breach  of  a  con- 
tract binding  *on  the  firm  imposes  a  joint  liability  [*199] 
only  on  its  living  members  (as  to  wThich  see  ante, 
pp.  192,  193),  whilst  a  tort  imputable  to  the  firm  imposes  a 
joint  and  several  liabilit}7,  the  importance  of  being  able  accu- 
rately to  distinguish  between  a  breach  of  contract  and  a  tort 
becomes  apparent.  The  difficulty,  however,  of  doing  so  is 
increased  by  the  doctrine  that  there  are  cases  in  which  the 
same  breach  of  an  obligation  may  be  regarded  from  two  dif- 
ferent points  of  view;  and  may,  at  the  option  of  the  person 
injured,  be  made  the  foundation  either  of  an  action  ex  con- 
tractu or  of  an  action  ex  delicto,  (g)  Suppose,  for  example, 
that  property  is  intrusted  to  a  firm  of  bankers  for  the  pur- 
pose of  sale  and  investment,  and  that  some  member  of  the 

plaintiff  to  a  copartnership    may  and  is  necessarily  joint,  not  several, 

be  maintained  against  one  of  the  Harris  v.  Schultz,  40  Barb.  315. 

members  of  the  firm  without  join-  An  action  will  not  lie  against  two 

ing  the  other  partners.     So  if  the  defendants  jointly  and    severally 

negligence  be  that  of  an  agent  of  for  one  penalty  for  non-registra- 

the      copartnership.       White      v.  tion  of   partnership.      Bernard  v. 

Smith,  12  Rich.  595.  Gaudry,  4  Leg.  N.  (Montreal).  385. 

Where     partners    assign     prop-  (e)  See  1  Wms.    Saund.   291,   / 

erty  to  a  creditor  as  security  for  and  g. 

the  debt,  and  he  intrusts  such  prop-  (/)  See  Pollock  on  Torts,  ch.  13. 

erty  to  the  partners  to  sell,  as  his  (g)  See,  on  this  subject,  Brown  v. 

agents,  and  to  pay  over  the  pro-  Boorman,  11  CI.  &  Fin.  1,  and  the 

ceeds  to  him,  they  do  not  become  cases  there  referred  to.     See,  also, 

liable  upon  sale  of  the  property  as  Bryant  v.  Herbert,  3  C.  P.  D.  383 ; 

tortfeasors,  as  upon  an  unauthor-  Fleming  v.    Manchester,  Sheffield 

ized  disposal  thereof.  Their  liability  and  Lincolnshire  Rail.  Co.  4  Q.  B. 

rests  upon  contract,  not  upon  tort,  D.  81. 
Vol.  1  —  30                        465 


*200  EIGHTS   AND   OBLIGATIONS.  [BOOK    II. 

banking  firm  misapplies  the  property  so  intrusted.  This 
breach  of  duty  is  a  breach  of  the  contract  which  was 
tacitly,  if  not  expressly,  entered  into  by  the  bankers  when 
they  received  the  property.  But  the  misapplication  of  the 
property  is  a  wrong  independently  of  any  contract;  amount- 
ing in  effect  to  a  conversion  or  destruction  of  that  which 
belonged  to  the  customer.  In  equity  the  misapplication  of 
the  money  is  a  breach  of  trust  and  imposes  a  joint  and 
several  liability  on  all  the  partners;  on  the  ground  that  each 
partner  is  bound  to  see  to  the  proper  application  of  what  is 
intrusted  to  the  firm,  (h)  In  such  cases  as  these  the  several 
liability  of  each  partner  to  the  creditors  of  the  firm  is  not 
affected  by  the  circumstance  that  the  act  imposing  such 
liability  was  done  by  one  only  of  the  members  of  the  firm, 
without  the  knowledge  or  consent  and  in  fraud  of  the 
others.  If  the  act  in  question  imposes  a  liability  which 
upon  the  principles  of  agency  can  be  imputed  to  the  firm, 
each  member  thereof  is  in  equity  severally  liable  for  such 
act,  just  as  much  as  if  there  had  been  no  fraud  in  the  case ;  (i) 
and  it  is  well  established  in  equity  that  a  breach  of 
[*200]  trust  which  is  imputable  to  several  ^persons  im- 
poses upon  them  a  liability  which  is  both  joint  and 
several,  (k) 

The  effect  of  the  Judicature  Acts  on  this  subject  has  not 
yet  been  judicially  determined;  but  probably  breaches  of 
contract  which  are  also  breaches  of  trust  will  be  held  to 
impose  several  as  well  as  joint  liabilities,  both  at  law  and 
in  equity.     In  Ex  parte  Adamson,  (I)  a  partnership  debt 

(h)  See  Re  Oxford  Benefit  Build-  v.  Noble,  Sleech's  Case,  1  Mer.  563; 

ing  Soc.  35  Ch.  D.   502;  Ex  parte  Baring's  Case,  id.  614;  Brydges  v. 

Adamson,  8  Ch.  D.  807;  and  ante,  Branfill,    12  Sim.    3G9;  Wilson  v. 

p.  161,  note  (/ ).  Moore,  1   M.    &  K.   127  and  337. 

(i)  See  Ex  parte  Adamson,  8  Ch.  Compare,  however,  Parker  v.  Mc- 

D.  807 ;  Vulliamy  v.  Noble,  3  Mer.  Kenna,  10  Ch.  123,  and  Vyse  v. 

619;    Clayton's    Case,  1  Mer.  576;  Foster,  L.  R.  7  H.  L.  318,  as  to 

Warde's  Case,  id.  624.  liability  for  profits    arising  from 

(k)  Re  National  Funds  Assur.  Co.  breaches  of  trust. 
10  Ch.  D.  118.    See,  also,  the  cases        (t)  8  Ch.  D.  807,  per  James  and 

in  the  last  two  notes,  and  Devaynes  Baggallay,  L.  JJ.,  Lord  Bramwell 

466 


CH.  II,  SEC.  II.]  LIABILITY   OF   MEMBEES. 


*200 


contracted  by  fraud  was  held  to  be  joint  and  several,  and 
to  be  provable  in  bankruptcy  against  the  joint  estate  of 
the  firm  or  against  the  separate  estates  of  its  members,  at 
the  option  of  the  creditor. 

Section  II. —  Extent  of  Liability. 

Extent  of  partner's  liability  at  common  law. —  By  the 

common  law  of  this  country  every  member  of  an  ordinary 
partnership  is  liable  to  the  utmost  farthing  of  his  property 
for  the  debts  and  engagements  of  the  firm.  The  law,  ig- 
noring the  firm  as  anything  distinct  from  the  persons  com- 
posing it,  treats  the  debts  and  engagements  of  the  firm  as 
the  debts  and  engagements  of  the  partners,  and  holds  each 
partner  liable  for  them  accordingly.1     Moreover,  if  judg- 


dissenting.  See,  as  to  breaches  of 
trust,  Ex  parte  Sheppard,  19  Q.  B. 
D.  84 ;  and  ante,  note  (7t). 

1  Collins  v.  Charlestown  M.  F. 
Ins.  Co.  10  Gray,  155 ;  Medbury  v. 
Soper,  17  Kan.  369 ;  Judd,  etc.  Co. 
v.  Hubbell,  76  N.  Y.  543;  Nebraska 
R.  R.  Co.  v.  Colt,  8  Neb.  251.  Cases 
upon  this  point  might  easily  be 
multiplied. 

In  an  action  to  charge  several 
persons  as  joint  partners  in  a  stock 
speculation  in  whicb  tbe  plaintiffs 
were  employed  as  brokers,  and  in 
which  the  defense  was  that  each 
of  the  defendants  was,  by  special 
agreement,  liable  for  his  own  share 
only,  held,  that  it  was  competent 
for  the  plaintiffs  to  show  that  one 
of  the  defendants  had  a  separate 
stock  account  with  them.  Binney 
v.  Young,  5  Daly,  327. 

In  Louisiana  commercial  part- 
ners are  bound  in  solido  for  the 
debts  of  the  firm,  while  ordinary 
partners  are  liable  only  in  respect 
of  their  shares.  See  Villa  v.  Jones, 
17  La.  Ann.   9;   Moores  v.  Bates, 


13  id.  40  (a  partnership  in  a  con- 
tract for  the  building  of  railroads) ; 
Beauregard  v.  Case,  91  U.  S.  134. 

But  to  the  extent  of  their  shares 
of  the  partnership  debts  a  debt  con- 
tracted by  an  ordinary  partner, 
even  without  authority  of  the 
others,  binds  them  if  it  be  proved 
that  the  partnership  was  benefited 
by  the  transaction.  Beauregard  v. 
Case,  91  U.  S.  134;  Logan  v.  Cra- 
gin,  27  La.  Ann.  352;  Lallande  v. 
McRae,  16  id.  193. 

Each  is  bound  in  proportion  to 
the  number  of  partners,  without 
any  attention  to  the  proportion  of 
the  stock  or  profits  each  is  entitled 
to.  But  where  the  recourse  of  the 
creditor  is  had  on  account  of  the 
benefit  conferred  upon  the  partner- 
ship by  a  contract  not  its  own  the 
rule  is  different,  and  each  partner's 
share  is  to  be  fixed  in  proportion  to 
the  interest  which  he  has  in  the 
concern,  and  to  the  benefit  which 
he  has  in  consequence  derived. 
Lallande  v.  McRae,  supra. 

Where  the  evidence  shows  that 


467 


-200 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


merit  is  obtained  against  the  firm  for  a  debt  owing  by  it, 
the  judgment  creditor  is  under  no  obligation  to  levy  execu- 
tion against  the  property  of  the  firm  before  having  recourse 
to  the  separate  property  of  the  partners;  nor  is  he  under 
any  obligation  to  levy  execution  against  all  the  partners 
ratably,  but  he  may  select  any  one  or  more  of  them,  and 
lew  execution  upon  him  or  them  until  the  judgment  is  sat- 
isfied, leaving  all  questions  of  contribution  to  be  settled 
afterwards  between  the  partners  themselves,  (m) 


the  two  individual  signers  of  a 
merely  joint  note  were,  at  the  date 
of  the  note,  commercial  partners, 
and  that  the  consideration  of  the 
note  was  money  borrowed  for,  and 
used  by,  the  partnership,  each  of 
the  makers  will  be  liable  on  the 
note  in  solido.  Mitchell  v.  Dar- 
mond,  30  La.  Ann.  396. 

A  law  partnership  is  an  ordinary 
one,  and  the  partners  are  bound 
jointly,  and  not  in  solido.  Dyer  v. 
Drew,  14  La.  Arm.  657;  Jones  v. 
Caperton,  15  id.  475. 

A  partnership  for  doing  work  of 
construction  on  a  railroad  is  an  or- 
dinary partnership,  and  does  not 
impose  solidary  liability  on  the 
partners.  Hardeman  v.  Tabler,  36 
La.  Ann.  555. 

Where  a  suit  is  brought  against 


commercial  one,  a  judgment  ren- 
dered against  the  parties  in  so- 
lido will  not  be  disturbed  on  the 
ground  that  a  joint  judgment  was 
claimed  in  the  petition.  Taylor  v. 
Hancock,  14  La.  Ann.  693. 

The  liability  of  a  partner  to  a 
third  person  is  not  increased  by  the 
fact  that  an  individual  debt  of  his 
has  been  assumed  by  the  partner- 
ship of  which  he  is  a  member. 
Bogereau  v.  Gueringer,  14  La.  Ann. 
478. 

The  stockholders  of  a  corpora- 
tion do  not  become  liable  as  part- 
ners on  notes  given  by  the  treas- 
urer of  the  corporation  merely  be- 
cause, after  organizing  under  the 
act  of  incorporation,  no  corporate 
business  was  transacted,  or  be- 
cause   the    notes  were  given  for 


persons  bound  jointly  and  severally  debts  beyond  the  corporate  author- 
ity of  the  company.  Trowbridge 
v.  Scudder,  11  Cush.  83. 

Under  the  statute  making  the 
stockholders  of  an  incorporated  as- 
sociation, at  the  time  of  its  dissolu- 
tion, liable  for  the  debts  due  from 


according  to  law,  as  commercial 
partners,  a  judgment  rendered 
against  them  carries  solidarity 
with  it,  even  when  not  expressed  in 
it.  Bell  v.  Massey,  14  La.  Ann.  831. 
Planting    partners    are    bound 


jointly,  each  for  one-half  of  a  debt    the  company  to  the  amount  of  their 


contracted  by  them  for  the  benefit 
of  the  partnership.  Dupre  v.  Body, 
23  La.  Ann.  495. 

When  there  is  a  prayer  in  the  pe- 
tition for  general  relief,  and  the 
partnership  sued  is  alleged  to  be  a 


stock,  the  stockholders  will  be 
bound  to  pay  a  debt  which  was 
binding  upon  the  company.  Slee 
v.  Bloom,  20  Johns.  669. 

{m)  See  per  De  Grey,  C.  J.,  in 
Abbott  v.  Smith,  2  Wm.  Blacks. 


468 


CH.  II,  SEC.  II.]  LIABILITY    OF   MEMBERS. 


*201 


*  Attempts  to  limit  liability. —  Various  attempts  [*201] 
have  been  made  from  time  to  time  to  form  partner- 
ships without  exposing  their  members  to  ruin  in  the  event  of 
loss.1    But  the  only  effectual  method  of  accomplishing  this 


949,  and  Wooley  v.  Kelley,  1  B.  & 
C.  68;  Com.  Dig.  Execution,  H. 
See  further,  on  this  subject,  infra, 
ch.  3,  §  3. 

xThe  cases  upon  the  subject  of 
limited  partnership,  which  exists 
by  statute  in  most  of  the  United 
States,  may  properly  be  considered 
in  this  connection.  The  first  stat- 
ute upon  the  subject  in  this  coun- 
try was  enacted  in  the  state  of  New 
York  and  was  substantially  copied 
from  the  French  Code  of  Com- 
merce. See  3  Kent,  Com.  35.  The 
statute  of  New  York,  in  turn, 
has  served  as  the  basis  of  the  stat- 
utes upon  the  subject  in  the  other 
states.  See  the  nature,  origin  and 
history  of  limited  partnerships  ex- 
amined at  length  by  the  court  in 
Ames  v.  Downing,  1  Bradf.  321 ; 
Joacquin  v.  Buisson,  11  How.  Pr. 
385. 

No  partnership  attempted  to  be 
formed  under  these  statutes  with 
a  limited  liability  of  some  of  the 
partners  is  limited,  but  all  the 
partners  are  liable  as  general  part- 
ners, unless  the  statutes  upon  the 
subject  are  strictly,  or,  as  some 
cases  say,  substantially  complied 
with.  The  rule  is  the  same  in  the 
case  of  renewals.  Richardson  v. 
Hogg,  38  Penn.  St.  153;  Pierce  v. 
Bryant,  5  Allen,  91 ;  Haviland  V. 
Chace,  39  Barb.  283;  Holliday  v. 
Union  B.  &  P.  Co.  3  Colo.  342; 
Vandike  v.  Rossbram,  67  Penn.  St. 
330;  Henkel  v.  Heyman,  91  111.  96; 
Pfirman  ».  Henkel,  1  Bradw.  146; 
Bowen  v.   Argall,  24  Wend.  496; 


Smith  v.  Argall,  6  Hill,  479;  3  Den. 
435;  Andrews  v.  Schott,  10  Penn. 
St.  47;  Van  Ingen  v.  Whitman,  62 
N.  Y.  513;  Madison  County  Bank 
v.  Gould,  5  Hill,  309;  Haddock  v. 
Grinnell  Mfg.  Co.  109  Penn.  St. 
372 ;  S.  C.  16  Weekly  Not.  Cas.  96, 
549;  42  Leg.  Intel.  100,  426;  Pears 
v.  Barnes,  1  Atl.  Rep.  658;  Metro- 
politan Bank  v.  Gruber,  16  Phila. 
198;  S.  C.  40  Leg.  Intel.  465;  14 
Weekly  Not.  Cas.  12;  Maloney  v. 
Bruce,  94  Penn.  St.  249 ;  S.  C.  38 
Leg.  Intel.  435 ;  Conrow  v.  Graven- 
stine,  17  Weekly  Not.  Cas.  204; 
Smith  v.  Warden,  86  Mo.  382; 
Guillon  v.  Peterson,  89  Penn.  St. 
163.  See,  also,  Ulman  v.  Briggs, 
32  La.  Ann.  657;  Bement  v.  Brick 
Machine  Co.  12  Phil.  494. 

In  Carhart  v.  Killough,  1  Tex. 
App.  (Civ.),  it  is  said  that  a  mere 
formal  defect  in  complying  with 
the  statute  will  not  make  the  lim- 
ited partner  liable  as  a  general 
partner.  See,  also,  the  cases  above 
cited. 

M.  entered  a  firm  upon  the  un- 
derstanding that  he  was  to  be  a 
special  partner,  with  limited  liabil- 
ity. He  paid  a  specified  sum  tow- 
ard the  capital  stock,  upon  which 
he  was  to  receive  legal  interest  and 
one-fourth  of  the  profits.  The 
statute  in  relation  to  limited  part- 
nerships was  not  complied  with, 
but  M.'s  name  did  not  appear  in 
the  firm,  and  he  took  no  part  in  the 
management  of  the  business.  M. 
was  induced  to  enter  the  firm  by 
the  fraudulent  representations  of 


469 


'201 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


object  is  to  stipulate  with  each  creditor  that  he  shall  only 
be  paid  out  of  the  funds  of  the  partnership,  and  that  he 


his  partners,  and  -withdrew  as 
soon  as  he  discovered  the  fraud. 
Held,  that  M.  was  a  general  part- 
ner, and  as  such  was  liable  for  the 
contracts  of  the  firm  while  he  so 
remained.  Tournade  v.  Hagedorn, 
5  Thomp.  &  C.  288;  Tournade  v. 
Methfessel,  3  Hun,  144. 

Under  the  law  of  Pennsylvania 
the  omission  to  post  a  sign  in  a  con- 
spicuous place,  giving  the  names 
both  of  general  and  special  part- 
ners, is  a  fatal  defect.  Conrow  v. 
Gravenstine,  17  Weekly  Not.  Cas. 
204. 

A  special  partner  who,  by  failing 
to  comply  with  the  law  regulating 
limited  partnerships,  becomes  a 
general  partner  as  to  the  public, 
remains  a  special  one  as  to  his 
copartners.  Guillon  v.  Peterson, 
89  Penn.  St.  163. 

The  limited  partnership  act  of 
Pennsylvania  assimilates  the  com- 
pany to  a  corporation,  which  is 
held  strictly  to  its  charter.  Special 
privileges  are  conferred  upon  the 
company,  and  it  is  at  its  peril  that 
it  transcends  those  privileges.  In 
re  Gautier  Steel  Co.  18  Weekly  Not. 
Cas.  346;  Patterson  v.  Tidewater- 
Pipe  Co.  12  Weekly  Not.  Cas.  452, 
See,  however,  Lennig  v.  Penn. 
Morocco  Co.  16  Weekly  Not.  Cas. 
114. 

In  Greenwood  v.  The  Hampshire 
Ml  j.  Co.  41  Leg.  Intel.  14, the  court 
considered  a  limited  partnership  as 
a  partnership  with  a  limited  liabil- 
ity, and  that  it  was  its  duty  to 
apply  to  it  no  restrictions  not  ex- 
isting  as  to  other  partnerships  ex- 
ii.pt  by  Bpeoial  regulation  or  neces- 
-ii  y  implication. 


Special  partners  have  not  the 
custody  of,  nor  the  general  right 
to  inspect,  the  books  and  papers  of 
the  firm,  and  are  not  bound  by 
entries  therein.  Milne's  Appeal, 
17  Weekly  Not.  Cas.  559 ;  Patterson 
v.  Tidewater  Pipe  Co.  12  Weekly 
Not.  Cas.  452. 

As  to  what  amounts  to  a  suffi- 
cient compliance  with  the  law  of 
Louisiana  relative  to  partnership 
in  eommendam  to  protect  such  a 
partner  from  the  obligations  of  a 
general  partner,  see  Ulman  v. 
Briggs,  32  La.  Ann.  657. 

A  partner  in  eommendam  may 
have  with  the  firm  with  which  he 
is  thus  connected  all  the  business 
transactions  which  a  partner  could 
have,  without  thereby  taking  part 
in  the  affairs  of  said  firm  and  ren- 
dering himself  liable  for  its  debts. 
Rayne  v.  Terrell,  33  La.  Ann.  812. 

A  partner  in  eommendam,  con- 
sulting once  with  one  of  the  gen- 
eral partners  and  advising  third 
persons  that  the  firm  is  all  right, 
cannot  be  considered  as  having 
taken  an  active  part  in  the  affairs 
of  the  firm  and  cannot  be  held  re- 
sponsible for  its  debts.  Ulman  v. 
Briggs,  32  La.  Ann.  657. 

Under  the  Missouri  statute  a 
limited  partnership  is  deemed  to  be 
formed  only  when  the  statement, 
after  having  been  duly  recorded, 
shall  have  been  published  as  re- 
quired by  statute ;  while,  under  the 
statute  of  New  York  and  Massa- 
chusetts, the  formation  is  deemed 
complete  upon  the  statements  hav- 
ing been  duly  recorded.  Selden  v. 
Hall,  21  Mo.  App.  452. 

As  to   the    manner  of    making 
470 


CH.  II,  SEC.  II.]  LIABILITY   OF   MEMBERS. 


*201 


shall  not  be  entitled  to  require  the  individual  partners  to 
pay  more  than  a  certain  amount  of  those  funds.     Such  stip- 


publication  of  a  special  partner- 
ship, see  Manhattan  Co.  v.  Phillips, 
53  N.  Y.  Super.  Ct.  84. 

The  change  of  the  name  of  one  of 
the  newspapers  in  which  the  notice 
was  directed  to  be  published,  after 
the  publication  commenced,  does 
not  affect  the  validity  of  the  pub- 
lication. The  identity  of  the  paper 
is  not  lost  by  the  change  of  name. 
Metropolitan  Bank  v.  Sirret,  97  N. 
Y.  320;  S.  C.  15  Abb.  N.  Cas.  318. 

An  omission  to  state  in  the  notice 
published  all  the  details  of  the 
partnership  is  not  a  failure  to  com- 
ply with  the  provisions  of  section 
9  of  said  act,  requiring  publication 
of  the  terms  of  said  partnership,  if 
the  publication  contains  all  the 
facts  required  by  section  4  of  the 
act  to  constitute  a  partnership. 
Said  provision  is  satisfied  by  publi- 
cation of  the  terms  of  the  certifi- 
cate. Metropolitan  Bank  v.  Sirret, 
97  N.  Y.  320;  S.  C.  15  Abb.  N.  Cas. 
318. 

Where  a  special  partnership  was 
formed  under  the  statute,  and,  in 
the  advertisements  in  one  of  the 
two  newspapers  required  by  the 
statute,  the  sum  contributed  by 
the  special  partner  was,  by  mistake 
of  the  printer,  stated  at  $5,000,  in- 
stead of  $2,000,  which  latter  was 
the  true  sum,  the  partners  were 
all  held  liable  as  general  partners. 
Argal  v.  Smith,  3  Den.  435;  S.  C. 
6  Hill,  479. 

In  an  action  to  charge  special 
partners  as  indorsers,  it  appeared 
that  the  published  notice  stated 
that  the  partnership  would  com- 
mence November  16,  1837,  whereas 
the  certificate  filed  stated  October 


16,  1837.  Held,  that  unless  the 
error  of  the  publication  was  de- 
signed to  deceive,  or  the  indorse- 
ment made  before  November  16, 
1837,  the  special  partners  were  not 
liable.  Madison  County  Bank  v. 
Gould  5  Hill,  309. 

A  publication  of  the  terms  of  a 
limited  partnership  within  three 
days  after  the  registry  thereof  is 
a  compliance  with  the  statute. 
Bowen  v.  Argall,  24  Wend.  496. 

Where  any  alteration  is  made  in 
the  capital  or  shares  of  a  limited 
partnership,  and  the  partnership  is 
carried  on,  in  any  way,  before  the 
notice  has  been  published  four 
weeks,  the  special  partner  incurs 
all  the  liability  of  a  general  part- 
ner. Beers  v.  Reynolds,  11  N.  Y. 
97 ;  12  Barb.  288. 

Where  the  assumed  limited  part- 
nership carries  on  the  business  of 
commission  merchants  in  New 
York  county,  and  such  is  stated  to 
be  its  business  in  a  certificate  there 
filed,  and  it  is  also  engaged  in  the 
business  of  tanning  in  another 
county,  no  copy  of  said  certificate 
being  filed  in  said  county,  no  lim- 
ited partnership  is  formed  and  the 
parties  are  liable  as  general  part- 
ners. Loomis  v.  Hoyt,  52  N.  Y. 
Super.  Ct.  287. 

As  to  the  form  of  acknowledg- 
ment of  certificate  of  partnership, 
see  Fabian  v.  Callahan,  56  Cal.  159. 

Where  the  articles  of  copartner- 
ship describe  the  business  of  a 
special  partnership  as  a  general 
produce  and  commission  business, 
and  the  publication  stated  it  to  be 
a  general  commission  business, 
held,  that  a  certificate  stating  it  to 


471 


-201 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


ulations,  however,  are  never  made  in  practice  except  where 
the  partners  are  numerous;  and  in  modern  times  they  are 


be  a  general  commission  business, 
buying  and  selling  grain,  flour  and 
produce  on  commission,  described 
the  business  of  the  firm  with  rea- 
sonable certainty.  Manhattan  Co. 
v.  Phillips,  53  N.  Y.  Super.  Ct. 
84. 

Where  persons  forming  a  limited 
partnership  file  in  due  time  the 
prescribed  certificate,  and  the  clerk 
neglects  to  record  it,  such  persons 
are  not  liable  as  general  partners 
by  reason  of  the  clerk's  negligence. 
Manhattan  Co.  v.  Laimbeer,  15  N. 
E.  Rep.  (N.  Y.)  712;  S.  C.  53  N.  Y. 
Super.  Ct.  22;  1?  Abb.  N.  C.  123; 
11  Cent.  Eep.  329. 

The  statute  of  Illinois  requires 
the  certificate,  acknowledgment 
and  affidavit  to  be  filed  and  left  in 
the  office  of  the  clerk  of  the  county 
court,  and  not  merely  left  tempo- 
rarily for  record  and  then  with- 
drawn. If  taken  away  voluntarily, 
on  the  neglect  of  the  clerk  to  re- 
cord the  same,  no  limited  partner- 
ship will  be  formed.  And  even  if 
the  object  of  filing  such  papers  was 
temporary,  for  the  purpose  of  being 
recorded,  if  they  are  voluntarily 
taken  away  before  being  recorded, 
the  neglect  to  file  and  record  being 
attributable  to  the  clerk,  and  the 
partners  knowing  such  fact,  no 
limited  partnership  will  be  created. 
Henkel  v.  Heyman,  91  111.  96:  Pfir- 
man  v.  Henkel,  1  Bradw.  145. 

Where  the  certificate  of  the 
formation  of  a  limited  partnership 
described  the  general  partners  as  of 
"B. ,"  and  the  special  partner  as 
"  <>l"  J.  C,"  held,  that  this  was  a 
sufficient  statement  of  the  resi- 
dences of  the  parties   under    the 


statute.     Lachaise  v.  Marks,  4  E. 
D.  Smith,  610. 

As  to  the  unauthorized  use  of 
the  words  "  and  company  "  in  the 
firm  name  of  a  limited  partnership, 
under  the  acts  of  1836,  1865  and 
1868,  see  Metropolitan  Bank  v. 
Gruber,  40  Leg.  Intel.  465;  14 
Weekly  Not.  Cas.  12 ;  16  Phila.  198. 

The  statute  authorizing  the  crea- 
tion of  limited  partnerships  (1  R. 
S.  N.  Y.  764,  as  amended  by  Laws 
1862,  ch.  476)  does  not  require  that 
the  certificate  provided  for  in  the 
act  should  be  filed  cotempora- 
neously  with  its  execution  or  with 
the  formation  of  the  partnership, 
in  order  to  make  the  partnership  a 
limited  one  as  to  those  parties 
whose  claims  against  the  partner- 
ship accrue  after  the  certificate  is 
actually  filed.  Levy  v.  Lock,  5 
Daly,  46 ;  S.  C.  47  How.  Pr.  394. 

An  unrecorded  certificate  of  a 
limited  partnership  agreement,  ex- 
ecuted under  New  York  laws,  has 
no  tendency  to  prove  a  general 
partnership,  or  any  kind  of  part- 
nership whatsoever,  without  evi- 
dence aliunde.  Gray  v.  Gibson,  6 
Mich.  300. 

A  special  partnership  will,  in 
New  York,  become  a  general  part- 
nership, and  the  special  partners 
liable  as  general  partners,  if  the 
place  of  business  is  removed  from 
the  county  in  which  it  was  estab- 
lished, without  filing  a  new  certifi- 
cate in  the  clerk's  office  of  the 
county  to  which  it  has  been  re- 
moved. Riper  v.  Poppenhausen, 
43  N.  Y.  68. 

If,  after  the  expiration  of  the 
time  limited  for  the  duration  of  the 


472 


CH.  II,  SEC.  II.]  LIABILITY   OF   MEMBERS. 


*201 


practically   confined   to   insurance    and   other    companies 
formed  before  the  passing  of  the  Companies  Act,  1862. 


limited  partnership,  it  is  desired  to 
renew  the  limited  partnership, 
there  must  be  a  new  certificate, 
publication,  etc. ;  and  if  this  is 
oniitted,  the  partnership  will  be- 
come a  general  one.  Andrews  v. 
Schott,  10  Penn.  St.  53;  Lachaise 
v.  Marks,  4E.D  .Smith,  620;  Had- 
dock v.  Grinnell  Mfg.  Co.  109  Pa. 
St.  372.  See,  also,  Beers  v.  Rey- 
nolds, 12  Barb.  288;  S.  C.  11  N.  Y. 
97. 

During  any  period  intervening 
between  the  expiration  of  a  limited 
partnership  and  the  day  of  its  re- 
newal, such  partnership  is  general, 
and  the  special  partners  of  the  old 
firm  are  liable  for  all  debts  incurred 
during  that  period.  Haddock  v. 
Grinnell  Mfg.  Co.  109  Pa.  St.  372. 

An  interval  of  six  days  between 
the  expiration  of  the  original  arti- 
cles of  the  limited  partnership  and 
the  execution  and  recording  of 
articles  of  renewal  does  not  inval- 
idate renewal,  when  name,  mem- 
bers and  capital  remain  unchanged 
and  no  business  has  been  done 
meanwhile.  Hirsch  v.  Vanuxen, 
15  Weekly  Not.  Cas.  467. 

Under  section  11  of  the  New 
York  act  the  limited  partnership 
may  be  renewed  by  filing  and  re> 
cording  papers  containing  the  same 
statements  that  are  contained  in 
the  Original  papers.  Ropes  v.  Col- 
gate, 17  Abb.  N.  C.  136. 

If  the  renewal  certificate  and 
affidavit  are  in  proper  form  the 
penalty,  imposed  by  section  11,  of 
general  partnership  liability,  is  not 
incurred  by  the  falsity  of  the  state- 
ment therein.  So  held  where  the 
statement  that  the  capital  contrib- 


uted by  the  special  partner  re- 
mained wholly  unimpaired  was 
untrue.  Ropes  v.  Colgate,  17  Abb. 
N.  C.  136.     See  infra. 

An  existing  partnership  may  be 
changed  into  a  limited  one  under 
the  limited  partnership  act  (1  R.  S. 
763).  Metropolitan  Bank  v.  Sirret, 
97  N.  Y.  320;  S.  C.  15  Abb.  N.  Cas. 
318. 

Where  a  limited  partnership  fails 
to  record  in  the  manner  prescribed 
by  acts  of  the  assembly  an  agree- 
ment for  a  renewal  of  the  partner- 
ship, the  liability  of  the  special 
partner  becomes  general.  Guillon 
v .  Peterson,  7  Weekly  Not.  Cas.  268. 

If,  at  the  moment  a  limited  part- 
nership is  formed  by  the  act  of 
filing  the  certificate  required  by 
section  4  of  the  limited  partnership 
aGt,  all  the  statements  in  the  cer- 
tificate are  true,  there  is  both  a 
substantial  and  literal  compliance 
with  the  statute,  and  the  special 
partner  does  not  incur  the  liability 
of  a  general  partner.  It  is  imma- 
terial that,  at  the  date  of  the  cer- 
tificate and  at  the  time  it  was 
signed  by  one  partner,  the  special 
capital  had  not  been  paid  in  as 
therein  stated,  since  the  paper  in- 
strument does  not  become  the  cer- 
tificate referred  to  in  section  8  until 
it  is  a  completed  instrument,  made, 
acknowledged,  filed  and  recorded 
so  as  to  create  a  partnership.  Ropes 
v.  Colgate,  17  Abb.  N.  Cas.  136; 
Manhattans.  Colgate,  13  Daly,  544. 

An  affidavit  to  accompany  a  cer- 
tificate of  a  limited  partnership 
need  not  follow  the  exact  words  of 
the  statute.  If  it  clearly  estab- 
lishes the  facts    required  by  the 


473 


*201 


EIGHTS   AND   OBLIGATIONS. 


[book  n. 


The  cases  on  this  subject  will  be  found  collected  in  the 
volume  relating  to  companies,  (n)     The  statute  under  which 


statute  it  is  sufficient.  And  where 
the  affidavit  refers  to  the  certifi- 
cate it  may  be  explained  by  the 
statements  of  the  certificate.  John- 
son v.  McDonald,  2  Abb.  Pr.  290. 

Thus,  a  statement  in  an  affidavit 
that  the  special  partner  has  actually 
paid  in  "  his  proportion  of  the  cap- 
ital" is  equivalent  to  stating  that 
he  has  paid  it  in  cash.  Johnson  v. 
McDonald,  supra. 

If  the  matters  which  the  statute 
requires  to  be  contained  in  the  cer- 
tificate and  affidavit  to  be  made 
and  filed  in  order  to  create  a  lim- 
ited partnership  are  stated  therein 
untruly,  such  a  partnership  is  not 
formed,  and  he  who  sought  to  con- 
fine his  liability  to  that  of  a  special 
will  become  liable  as  a  general 
partner.  Durant  v.  Abendroth,  41 
N.  Y.  Superior  Ct.  53;  Maginn  v. 
Lawrence,  13  Jones  &  Sp.  235;  S. 
C.  45  N.  Y.  Super.  Ct  235. 

In  an  action  where  a  special  part- 
ner is  sought  to  be  held  liable  under 
the  provision  of  the  statute,  the 
affidavit,  and  other  papers  required 
by  the  statute,  are  presumptive 
evidence  of  the  formation  of  a 
limited  partnership;  but,  after  evi- 
dence has  been  given  tending  to 
falsify  the  affidavit,  it  cannot.  Oper- 
ate as  rebutting  proof.  Van  Ingen 
v.  Whitman,  62  N.  Y.  513. 

To  bring  the  special  partner 
within  the  provisions  of  the  statute 
of  New  York  (sec.  8)  making  all 
liable  as  general  partners  in  case  of 


any  false  statement  in  the  affidavit 
required  to  be  made  and  filed  (sec. 
7),  it  is  not  necessary  that  the  state- 
ment be  intentionally  false.  The 
object  of  the  statute  is  to  gi^e 
reasonable  security  to  those  likely 
to  deal  with  the  copartnership,  and 
this  is  thwarted  by  an  uninten- 
tional as  well  as  by  an  intentional 
untruth.  Van  Ingen  v.  Whitman, 
supra. 

Where  the  statute  requires  the 
special  partner's  capital  to  be  paid 
in  cash,  if  the  affidavit  that  the 
special  partners  have  paid  in  cash 
their  amount  of  the  capital  is  false 
they  will  become  liable  as  general 
partners.  Haviland  v.  Chace,  39 
Barb.  283. 

The  statute  of  Missouri  requires 
that  the  amount  contributed  by 
each  special  partner  must  be  in 
cash,  but  such  contribution  need 
not  be  actually  made  prior  to  the 
formation  of  the  partnership.  The 
Missouri  statute  differs  in  this  re- 
spect from  the  statute  of  New 
York  and  Massachusetts.  Selden 
v.  Hall,  21  Mo.  App.  452. 

Where  the  payment  of  the  con- 
tribution by  the  special  partner  is 
made  subsequent  to  the  making  of 
the  statement,  but  prior  to  the 
formation  of  the  partnership,  and 
the  averment  of  the  statement  is 
that  the  contribution  had,  at  the 
time  of  its  making,  been  paid, 
the  statement  is  not  false  within 
the  meaning  of  section  3404,  and, 


(n)  The  leading  cases  on  this  sub- 
ject are  Halket  v.  Merchant  Trad- 
ers' Loan  Assoc.  13  Q.  B.  960; 
Hassell  v.  Same,  4  Ex.  525 ;  Hallett 


v.  Dowdall,  18  Q.  B.  2;  Durham's 
Case,  4  K.  &  J.  517 ;  Re  Athenaeum 
Soc.  Johns.  80,  and  3  De  G.  &  J. 
660. 


474 


CH.  II,  SEC.  II.]  LIABILITY    OF   MEMBERS. 


*201 


a  person  may  share  profits  without  incurring  the  liability 
of  a  partner  has  been  already  alluded  to.  (p) 


although  not  literally  true,  is  true 
in  every  substantial  respect.  Sel- 
den  v.  Hall,  21  Mo.  App.  452. 

A  special  partner's  payment  in 
whole  or  in  part  of  his  amount  of 
the  capital,  in  goods,  is  not  a  com- 
pliance with  the  statute  requiring 
such  payment  to  be  in  cash.  Hav- 
iland  v.  Chace,  39  Barb.  283 ;  Rich- 
ardson v.  Hogg,  88  Penn.  St.  153; 
Van  Ingen  v.  Whitman,  62  N.  Y. 
513;  Re  Merrill,  12  Blatch.  221; 
S.  C.  13  Nat.  Bank.  Reg.  91. 

Nor  is  a  delivery  to  the  firm  of 
promissory  notes,  which  are  re- 
ceived and  treated  as  cash,  such 
payment.  Pierce  v.  Bryant,  5  Al- 
len, 91. 

The  words  "an  actual  cash  pay- 
ment as  capital "  by  a  special  part- 
ner, in  Massachusetts  General  Stat- 
utes, chapter  55,  section  2,  to  ex- 
empt him  from  liability  for  the 
firm  debts,  does  not  apply  to  his 
merely  authorizing  the  firm,  at  a 
future  time,  to  use  United  States 
bonds  by  him  deposited  in  a  bank, 
without  notice  to  the  bank  of  such 
authority,  even  after  the  recording 
of  the  certificate  required  by  sec- 
tion 3,  and  such  appropriation  of 
the  bonds.  Haggerty  v.  Foster,  103 
Mass.  17. 

Giving  post-dated  checks  for  the 
special  partner's  share  of  the  capi- 
tal does  not  warrant  the  affidavit 
required  by  the  statute,  that  the 
sum  has  been  paid  in  cash,  but  the 
special  partner  is  liable  as  general 
partner.  So,  although  the  checks 
were  promptly  paid  at  the  outset 
of  the  firm  business.      Durant  v. 


Abendroth,  69  N.  Y.  148;  S.  C.  41 
N.  Y.  Super.  Ct.  53. 

So  the  uncertified  checks  of  the 
special  partners  upon  a  bank  in 
which,  at  the  date  of  the  checks, 
they  have  not  money  sufficient  to 
meet  and  pay  their  checks,  cannot 
be  deemed  cash,  although  before 
the  checks  were  presented  they  had 
arranged  or  provided  funds  to  pay 
the  same  and  they  were  paid.  Ma- 
ginn  v.  Lawrence,  45  N.  Y.  Super. 
Ct.  235.  To  the  same  effect,  see 
McGinnis  v.  Flynn,  23  Blatch.  465 ; 
McGinnis  v.  Farrelly,  27  id.  33; 
Durant  v.  Abendroth,  97  N.  Y. 
132;  Hennesey  v.  Farrelly,  13  Daly, 
468. 

In  the  case  of  Durant  v.  Abend- 
roth, 97  N.  Y  132,  it  was  held  that, 
notwithstanding  such  a  misstate- 
ment, the  partnership  was  in  form 
a  limited  partnership  and  subject 
to  all  the  rules  applicable  to  such 
partnership. 

The  payment  by  a  certified  check 
on  a  bank  in  good  standing,  which 
the  bank  actually  pays,  is  a  good 
mode  of  payment  under  the  law  of 
limited  partnership  ;  and  the  mere 
fact  that  a  special  partner  has  paid 
his  contribution  by  such  a  check 
does  not  make  him  a  general  part- 
ner. Lineweaver  v.  Slagle,  64  Md. 
465.  See  McGinnis  v.  Farrelly,  27 
Fed.  Rep.  33. 

The  affidavit  that  the  special  capi- 
tal of  a  limited  partnership  has  been 
actually  and  in  good  faith  paid  in, 
and  in  cash,  is  false,  and  all  the 
parties  are  liable  as  general  part- 
ners where  checks  for  the  amount 


(o)  28  and  29  Vict.  ch.  86,  ante,  book  i,  ch.  1,  §  2. 

475 


-201 


EIGHTS   AND   OBLIGATIONS. 


[book  n. 


Section  III. —  Dubation  of  Liability. 

In  a  preceding  chapter  it  was  shown  that  every  member 
of  an  ordinary  partnership  is  the  general  agent  of  the  firm 


of  the  capital  are  drawn  by  special 
partners  and  deposited  to  the  credit 
of  the  new  firm,  which  thereupon 
drew  and  delivered  its  checks  for  a 
like  amount  in  favor  of  said  special 
partners,  it  further  appearing  that 
these  checks  were  given  to  pay- 
moneys  due  them  from  a  former 
partnership  which  the  same  parties 
had  endeavored  to  form,  but  failed 
because  of  the  failure  to  make  and 
file  affidavit  of  payment  of  special 
capital.  Loomis  v.  Hoyt,  52  N.  Y. 
Super.  Ct.  287. 

Where  payment  of  his  contribu- 
tion was  made  by  the  special  part- 
ner in  money,  which  was  deposited 
in  the  bank  to  the  credit  of  the  new 
firm,  and  immediately  thereafter, 
without  the  knowledge  or  consent 
of  the  special  partner,  by  check  in 
the  name  of  the  new  firm  paid  to 
the  old  firm,  held,  that  the  special 
partner  was  not  liable  as  a  general 
partner.  Manhattan  Co.  v.  Phillips, 
53  N.  Y.  Super.  Ct.  84. 

While  a  special  partner,  who  is  a 
member  of  a  firm  engaged  in  carry- 
ing on  the  same  business  intended 
to  be  conducted  by  the  limited 
partnership,  may  not  put  in  his 
stock  in  the  old  concern  upon  a 
valuation  as  his  contribution  to  the 
capital  in  the  new  firm,  if  he  has 
paid  in  his  share  in  cash,  the  new 
firm  is  not  prohibited  from  pur- 
chasing  in  good  faith  the  stock  of 
the  old  firm,  or  from  paying  for  it 
out  of  the  capital  so  contributed, 
although  it  may  happen  that  the 
Ial  partner  is  entitled  to  receive 


the  whole  of  the  purchase  money, 
and  so  is  placed  substantially  in  the 
same  position  as  if  originally  he 
had  put  in  the  stock  as  capital  in- 
stead of  money.  And  this  is  so  al- 
though there  was  an  expectation 
on  the  part  of  the  special  partner 
and  the  other  members  of  the  old 
firm,  at  the  time  of  the  formation 
of  the  limited  partnership,  that  it 
should  purchase  with  the  money  so 
contributed  the  stock  of  the  old 
firm.  It  seems,  however,  that  this 
expectation  must  not  amount  to  an 
agreement  by  which  the  limited 
partnership  obligates  itself  to  pur- 
chase the  stock  of  the  old  firm. 
The  question  of  the  good  faith  of 
such  purchase  is  for  the  jury.  Met- 
ropolitan Bank  v.  Sirret,  97  N.  Y. 
320;  S.  C.  15  Abb.  N.  Cas.  318,  334. 
See,  also,  Ropes  v.  Colgate,  17  Abb. 
N.  C.  136. 

An  increase  in  the  amount  of 
capital  contributed  by  a  special 
partner  at  the  expiration  of  the 
term  of  a  special  partnership  and 
its  renewal  for  a  new  term,  in  con- 
templation of  law  creates  a  new 
partnership  and  not  a  renewal  or 
continuance  of  the  old  one.  And 
the  right  of  the  special  partner  to 
hold  the  position  of -the  special  part- 
ner in  the  new  partnership  is  in  no- 
wise aided  or  affected  by  the  fact 
that  he  was  such  in  the  old  one. 
The  capital  to  be  contributed  by 
the  special  partner  on  the  forma- 
tion of  the  new  partnership  must 
be  contributed  in  cash,  and  when 
contributed  in  the  shape  of  debt? 


476 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS. 


"201 


for  the  purpose  of  carrying  on  its  business  in  the  ordinary 
way.     In  the  present  section  it  is  proposed  to  ascertain  the 

a  special  partner  without  becoming 
one.  Bulkley  v.  Marks,  15  Abb. 
Pr.  454. 


and  accounts  due  the  firm,  and  not 
collected  until  some  time  after  the 
new  firm  has  been  in  operation, 
this  cannot  be  regarded  as  an  equiv- 
alent for  the  cash  which  the  law 
requires;  and  the  statement  in  the 
certificate  and  affidavit  of  the  con- 
tribution of  a  certain  sum,  when  so 
made,  is,  in  legal  contemplation,  a 
false  statement,  and  upon  the  fail- 
ure of  the  firm  such  special  partner 
is  liable  to  the  creditors  of  the  new 
firm  as  a  general  partner.  Line- 
weaver  v.  Slagle,  64  Md.  465. 

The  affidavit  of  a  general  partner 
on  a  renewal,  that  a  sum  stated  to 
have  been  paid  by  the  special  part- 
ner in  former  articles  has  been  so 
contributed  and  remains  in  the 
common  stock,  without  stating  in 
what  condition  it  thus  remains,  is 
insufficient.  So  far  as  the  special 
capital  is  concerned,  it  must  ap- 
pear, in  order  to  obtain  benefit  of 
an  act  by  renewal  of  the  original 
agreement,  that  the  capital  is  in 
the  same  condition  as  when  the 
partnership  was  originally  formed, 
unimpaired  and  available  for  cred- 
itors. These  facts  must  appear  in 
the  affidavit  of  the  general  partner. 
Haddock  v.  Grinnell  Mfg.  Co.  109 
P;i  St.  ,,872;  16  Weekly  Not.  Cas. 
549 ;  affirming  S.  C.  16  id.  96;  42  Leg. 
Intel.  100,  426.  See,  also,  Ropes  v. 
Colgate,  17  Abb.  N.  C.  136;  Eliot 
v.  Himrod,  108  Pa.  St.  569;  S.  C.  16 
Weekly  Not.  Cas.  189;  15  id.  77;  42 
Leg.  Intel.  352. 

It  is  not  a  sufficient  payment  when 
a  part  of  the  sum  to  be  contributed 
by  the  special  partner  has  been  paid 
by  another  person  with  the  inten- 
tion of  securing  the  advantages  of 


No  matter  how  the  special  part- 
ner has  acquired  the  money  he  con- 
tributes, if  it  is  his  property,  and  he 
pays  it  in  under  the  forms  pre- 
scribed by  the  statute,  and  leaves 
it  absolutely  to  the  risks  of  the 
business,  the  law  requiring  it  to  be 
paid  in  good  faith  in  cash  is  satis- 
fied. Laurence  v.  Merrifield,  42 
N.  Y.  Super.  Ct.  36. 

In  Colorado  the  statute  does  not 
require  that  the  capital  should  be 
paid  in  cash,  but  when  it  is  paid 
in  property  it  should  be  so  stated 
and  its  cash  value  given.  Holli- 
day  v.  Union  B.  &  P.  Co.  3  Colo. 
342. 

Where  property  has  not  been 
contributed,  scheduled  and  valued 
as  the  act  of  Pennsylvania  of  1876 
directs,  there  is  no  payment  of  the 
capital.  The  general  description 
of  the  extent  of  the  property,  or  a 
lumping  valuation,  is  not  such  a 
schedule  as  the  act  requires.  Ma- 
loney  v.  Bruce,  94  Pa.  St.  249 ;  S.  C. 
38  Leg.  Intel.  435. 

A  statement  in  the  certificate  for 
a  limited  partnership  that  one  of 
the  stockholders  contributed  in  full 
of  his  subscription  the  right  of  way 
and  privilege,  etc.,  whereas,  as  a 
matter  of  fact,  no  right  of  way  had 
been  obtained,  but  he  was  under 
contract  with  the  association  to  se- 
cure it  and  to  pay  therefor  himself, 
is  not  a  compliance  with  the  stat- 
ute, and  the  stockholders  are  liable 
individually  as  general  partners  to 
any  one  deceived  thereby.  Appeal 
of  Hite  Nat.  Gas  Co.  12  Atl.  Rep. 


477 


*201 


RIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


duration  of  such  agency,  or,  in  other  words,  when  it  begins 
and  when  it  ends.     The  mode  whereby  a  partner  becomes 


(Pa.  St.)  267;  S.  C.  10  Cent.  Rep. 
805. 

Connecticut  General  Statutes, 
title  49,  section  8,  —  relating  to 
limited  partnerships,  and  provid- 
ing that  all  advancements  to  the 
capital  stock  by  special  partners 
shall  be  in  cash,  and  shall  not  be 
withdrawn  during  the  period  of 
the  partnership,  "nor  shall  any- 
special  partner,"  etc.,  "be  consid- 
ered a  creditor  or  allowed  to  claim 
as  a  creditor  in  case  of  the  insolv- 
ency or  bankruptcy  of  the  partner- 
ship,"—  relates  to  funds  furnished 
by  the  special  partner  as  capital 
stock,  and  not  to  independent  debts 
contracted  with  him  as  an  individ- 
ual in  good  faith  and  in  the  course 
of  business.  Capp  v.  Lacey,  35 
Conn.  463. 

Where  a  partnership  was  formed 
between  B.  and  C,  wherein  it 
was  stipulated  that  the  partnership 
should  be  special ;  that  C.  should  be 
the  special  partner,  and  should  con- 
tribute a  certain  sum  "  as  capital  to 
the  common  stock  for  carrying  on 
the  business,"  which  was  to  be  con- 
ducted in  the  name  of  B.  &  Co. ; 
and  the  sum  was  paid  in  and  in- 
vested in  goods,  and  the  goods  were 
sold  and  other  goods  purchased  in 
their  place  with  the  proceeds  of 
their  sales,  held,  that,  whether  the 
partnership  was  special  or  general, 
the  goods  became  firm  property, 
the  firm  becoming  debtor  to  the 
partner  advancing  the  capital  to 
the  amount  advanced.  Bradbury 
v.  Smith,  21  Me.  117. 

Under  the  provisions  of  the  Penn- 
sylvania limited  partnership  act  of 
1836,   where   the  general   partner 


misappropriates  the  contribution  of 
a  special  partner,  the  latter  is  not 
liable  as  a  general  partner  for  the 
debts  of  the  partnership,  where  he 
is  not  privy  to  the  misappropria- 
tions. Seibert  v.  Bakewell,  87  Pa. 
St.  506. 

A  limited  partnership  was  formed 
between  three,  one  as  special  part- 
ner. The  certificate  was  published 
and  sworn  to  by  one  of  the  general 
partners,  the  amount  contributed 
by  the  special  partner  being  therein 
set  forth  and  stated  to  have  been 
paid  in.  The  firm  soon  became  in- 
solvent, and  the  general  partners 
made  an  assignment  to  the  plaint- 
iffs in  trust  for  the  benefit  of  all 
the  firm  creditors.  The  plaintiffs 
brought  their  bill  in  equity  to  com- 
pel the  special  partner  to  pay  in  the 
amount  of  his  capital,  to  be  used  in 
the  payment  of  partnership  debts, 
and  the  bill  was  sustained.  Robin- 
son v.  Mcintosh,  3E.  D.  Smith,  221. 

The  special  contribution,  under 
the  act  of  1836,  is  a  fund  for  the 
payment  of  partnership  debts, 
which  cannot  be  withdrawn  or  di- 
verted either  directly  or  indirectly 
to  the  detriment  of  firm  creditors. 
Coffin's  Appeal,  106  Pa.  St.  280; 
S.  C.  15  Weekly  Not.  Cas.  52;  id. 
191;  14  id.  140;  40  Leg.  Intel.  434; 
41  id.  356. 

Therefore,  a  confession  of  judg- 
ment by  the  general  partners  in 
favor  of  individual  creditors  of  the 
special  partners  who  have  loaned 
money  to  him,  to  be  contributed  as 
special  capital,  is  void  as  against 
partnership  creditors.  Coffin's  Ap- 
peal, supra. 

A  provision    in   the   certificate 


478 


OH.  II,  SEC.  III.]  LIABILITY   OF   MEMBEES. 


*201 


discharged  from  liabilities  incurred  by  him  will  then  be 
considered,  and  thus  the  liabilities  of  incomino-  and  outo-oino- 
partners  to  creditors  will  be  determined. 

general  partners  purchasing  with 
it  real  estate  and  taking  a  convey- 
ance of  it  to  all  the  partners,  gen- 
eral and  special,  is  in  violation  of 
the  statute,  the  consequence  of 
which  is  that  the  special  partner 
shall  be  deemed  as  general  partner. 
Ward  v.  Newell,  42  Barb.  485. 

Where  there  is  an  agreement  for 
a  special  partnership  between  mem- 
bers of  a  firm,  but  the  statute  on 
the  subject  has  not  been  substan- 
tially complied  with,  the  knowl- 
edge, by  creditors,  of  the  existence 
of  the  special  partnership  agree- 
ment, at  the  time  the  contracts 
were  made,  does  not  discharge  the 
special  partner  from  his  general 
liability;  and  an  allegation,  in  an 
affidavit  of  defense,  of  such  knowl- 
edge in  the  creditors,  and  that  they 
trusted  to  the  credit  of  the  firm 
and  of  the  general  partners,  and 
not  to  the  special  partner,  does  not 
amount  to  an  averment  of  a  special 
contract  which  will  discharge  the 
special  partner  from  a  general  lia- 
bility to  such  creditors.  Andrews 
v.  Schott,  10  Pa.  St.  47. 

See,  however,  Hastings  v.  Hop- 
kinson,  28  Vt.  108;  Ensign  v. 
Wands,  1  John.  Cas.  171. 

Special  partners  are  general  part- 
ners, except  as  to  those  points 
wherein  their  liability  is  expressly 
limited  by  the  statute.  Hayes  v. 
Bement,  3  Sandf.  397 ;  Lachaise  v. 
Marks,  4  E.  D.  Smith,  610.  See, 
also,  Hog  v.  Ellis,  8  How.  Pr.  473. 

A  statute  respecting  limited  part- 
nerships does  not  apply  to  a  part- 
nership which  is  general,  so  far  as 
the  liabilities  of  the  partners  to 


authorizing  the  special  partner 
to  draw  interest  upon  his  capital 
monthly  is  not  a  violation  of  the 
provision  of  section  15  of  the  New 
York  act,  which  permits  the  special 
partner  "  annually  "  to  receive  law- 
ful interest.  Metropolitan  Bank  v. 
Sirret,  97  N.  Y.  320;  S.  C.  15  Abb. 
N.  Cas.  318. 

If  a  special  partner  withdraws 
his  capital  in  part,  upon  the  subse- 
quent insolvency  of  the  firm  he  is 
liable  to  creditors  for  such  amount 
and  interest.  La  Chomette  v. 
Thomas,  1  La.  Ann.  120;  Bulkley 
v.  Marks,  15  Abb.  Pr.  454.  See, 
also,  Beers  v.  Reynolds,  12  Barb. 
288;  S.  C.  11  N.  Y.  97;  Lachaise  v. 
Marks,  4  E.  D.  Smith,  610. 

In  Bell  v.  Merrifield,  28  Hun 
(N.  Y),  219,  it  was  held  that  a  spe- 
cial partner  who,  in  violation  of 
statute,  withdraws  his  capital  or 
any  profits  from  the  firm,  thereby 
reducing  its  original  capital,  may, 
in  New  York,  not  only  be  treated  as 
a  general  partner,  but  also  com- 
pelled to  account  for  such  moneys 
as  the  trustee  for  the  benefit  of  the 
firm  creditors. 

Where  no  time  is  stipulated  in 
the  contract  of  partnership  for  the 
payment  of  the  amount  to  be  con- 
tributed by  a  partner  in  commen- 
dam,  the  latter  will  be  responsible 
to  the  creditors  of  the  partnership 
for  interest  on  the  amount  unpaid 
from  judicial  demand  only.  De  Li- 
zardi  v.  Gossett,  1  La.  Ann.  138. 

Arguendo,  the  court  say  that  the 
withdrawal  by  a  special  partner  of 
a  part  of  the  capital  which  he  had 
contributed,  and  together  with  the 


479 


*201 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


1.  Commencement  of  Liability. 

Commencement  of  agency —  Liability  of  partners  who 
defer  the  execution  of  articles. —  The  doctrine  that  each, 
partner  has  implied  authority  to  do  whatever  is  necessary 


third  persons  were  concerned,  and 
limited  only  in  respect  to  the 
nature  and  scope  of  the  business  to 
be  carried  on.  Taylor  v.  Webster, 
39  N.  J.  L.  102.  See,  also,  Jackson 
v.  Alexander,  8  Tex.  109. 

A  special  partner  in  a  firm  in 
Cuba,  who  has  complied  with  the 
laws  of  Spain  relating  to  special 
partnerships,  so  far  as  to  protect 
himself  from  partnership  liability 
in  Cuba,  is  exempt  from  liability, 
as  a  general  partner,  in  transac- 
tions of  the  firm  in  Cuba  with 
citizens  of  the  state  of  New  York. 
The  transaction  is  governed  by  the 
laws  of  Spain.  King  v.  Sarria,  14 
N.  Y.  Supreme  Ct.  167 ;  S.  C.  69 
N.  Y.  24. 

Where  goods  were  ordered  from 
New  York  for  a  firm  in  Cuba, 
partly  by  letter  and  partly  by  a 
general  partner  personally  in  New 
York,  held,  that  the  contract  must 
be  considered  as  made  in  New 
York;  but,  the  special  partner  re- 
maining in  Cuba,  his  authority  to 
bind  the  firm  depended  upon  the 
laws  of  Cuba.  Barrows  v.  Downs, 
9  R.  I.  146. 

See,  also,  King  v.  Sawin,  14  N.  Y. 
S.  C.  167. 

The  same  principle  of  law  that 
protects  a  general  partnership 
against  liability  upon  contracts  by 
individual  partners,  out  of  the 
scope  of  the  partnership  business, 
protects  the  capital  of  special  part- 
ners in  a  limited  partnership 
against  liability  upon  like  contracts 


by    general    partners.      Taylor    v. 
Rasch,  11  Bankr.  Reg.  91. 

All  persons  dealing  with  a  lim- 
ited partnership  are  chai'geable 
with  notice  of  the  scope  of  the 
partnership  business,  as  specified 
in  the  articles  of  copartnership, 
when  the  articles  have  been  duly 
filed  and  published  as  required  by 
law.     Taylor  v.  Rasch,  supra. 

No  departure  by  general  part- 
ners, no  matter  how  common  or 
long  continued,  if  not  consented 
to,  or  known  and  acquiesced  in,  by 
the  special  partners,  can  have  the 
effect  to  change  or  enlarge  the 
scope  of  the  partnership  business 
as  specified  in  the  articles  of  co- 
partnership. Taylor  v.  Rasch, 
supra. 

Where  the  chairman  of  the  board 
of  managers  [of  a  limited  partner- 
ship sold  to  plaintiff  certain  goods 
at  a  price  for  which  the  board  of 
managers  had  a  short  time  before 
refused  to  sell,  held,  that  the  sale 
was  not  binding  upon  the  partner- 
ship unless  it  was  shown  that  the 
chairman  had  expressed  or  implied 
authority  to  make  it.  Pittsburg 
Melting  Co.  v.  Reese,  12  Atl.  Rep. 
(Pa.  St.)  362 ;  S.  C.  10  Cent.  Rep.  914. 

A  limited  partnership  cannot 
loan  its  credit  to  one  of  its  mem- 
bers. Liggett's  Appeal,  111  Pa.  St. 
291. 

The  limited  partnership  act  (1 
R.  S.  763,  sec.  1  et  seq.)  does  not 
prohibit  a  limited  partnership  from 
buying  goods  for  its  business  from 


480 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS. 


•201 


to  carry  on  the  partnership  business  in  the  usual  way  is 
based  upon  the  ground  that  the  ordinary  business  of  a 


the  special  partner;  nor  are  such 
purchases,  when  fairly  conducted, 
inconsistent  with  the  purposes  or 
objects  of  such  a  partnership.  Met- 
ropolitan Bank  v.  Sirret,  97  N.  Y. 
320;  S.  C.  15  Abb.  N.  Cas.  318. 

Where  the  articles  of  an  associa- 
tion of  a  limited  partnership,  under 
the  act  of  1874,  provide  that  part 
of  the  business  shall  be  the  refin- 
ing of  oil,  and  for  that  purpose  the 
association  may  hold  and  own  such 
real  and  personal  property  as  may 
be  necessary  for  the  purpose,  the 
managers  may  purchase  the  stock 
of  an  oil-refining  company,  by  the 
control  of  which  the  business  of 
refining  is  to  be  carried  on.  Pat- 
terson v.  Tidewater  Pipe  Co.  12 
Weekly  Not.  Cas.  452. 

General  partners  in  a  limited 
partnership,  under  the  act  of  March 
21,  1836,  cannot,  without  consider- 
ation, lawfully  assume  a  debt  cre- 
ated by  the  special  partner  in  pro- 
curing the  money  which  he  paid 
into  the  firm  as  his  special  con- 
tribution. Coffin's  Appeal,  106  Pa. 
St.  280;  S.  C.  41  Leg.  Intel.  356. 

An  affidavit  of  defense  to  a  ne- 
gotiable promissory  note,  in  the 
name  of  a  limited  partnership, 
stating  that  the  note  was  not  given 
for  any  purpose  within  the  scope 
of  the  partnership  business,  but 
was  given  by  one  partner  without 
the  knowledge  and  consent  of  his 
co-members  and  in  fraud  of  the 
company,  is  sufficient  to  warrant 
the  court  in  refusing  to  enter  judg- 
ment for  the  plaintiff  for  want  of 
a  sufficient  affidavit  of  defense. 
Lerch  Hardware  Co.  v.  Bank  of 
Columbia,  109  Pa.   St.  240;  S.  C. 


16  Weekly  N.  Cas.  184;  5  Atl.  Rep. 
778.  ' 

A.,  B.  and  C.  were  in  partner- 
ship. C  who  was  a  special  part- 
ner, by  a  failure  to  comply  with 
the  law  regulating  limited  partner- 
ships became  a  general  partner  as 
to  the  public,  but  remained  a  spe- 
cial one  as  to  his  partners.  B., 
who  was  the  executor  of  an  estate, 
loaned  certain  of  its  securities  to 
the  firm,  and  they  were  converted 
to  the  firm's  use.  There  was  evi- 
dence that  C.  knew  of  at  least  one 
loan  made  by  B.  to  the  firm.  Held, 
that  although  there  was  no  evi- 
dence to  show  that  C.  participated 
in  or  knew  of  the  fraudulent  con- 
version, he  was  liable  as  a  general 
partner  to  the  estate.  (xuillon  v. 
Peterson,  89  Pa.  St.  163. 

When  one  partner  in  a  limited 
partnership  affixes  the  name  of  the 
firm  to  a  promissory  note  during 
the  existence  of  the  partnership 
the  partners  are  prima  facie  liable 
thereon ;  and  if  any  member  thereof 
seeks  to  avoid  his  liability  the  bur- 
den of  proof  lies  upon  him  to  make 
out  his  defense.  Jenison  v.  Deal- 
ing, 41  Ala.  283:  Holmes  v.  Porter, 
39  Me.  157. 

If  one,  carrying  on  a  limited 
partnership  in  his  individual  name, 
borrow  money,  representing  it  to 
be  for  the  use  of  the  partnership, 
the  dormant  partners  are  liable 
without  proof  that  the  money  went 
to  the  use  of  the  partnership. 
Otherwise  if  he  borrow  without 
such  representation.  Etheridge  v. 
Binney,  9  Pick.  272. 

To  charge  a  limited  partnership 
with  the  payment  of  articles  nofe- 


Vol.  1  —  31 


481 


*202 


EIGHTS    AND    OBLIGATIONS. 


[boox  n. 


firm  cannot  be  carried  on  either  to  the  advantage 
[*202]  *of  its  members  or  with  safety  to  the  public  unless 


within  the  scope  of  the  business 
of  the  firm  it  must  be  proved  that 
they  were  furnished  for  the  benefit 
of  the  firm,  or  that  they  assented 
to  the  purchase.  Goode  v.  Lin- 
ecuni,  2  Miss.  281. 

Where  one  who  has  given  credit 
to  a  partnership  which  he  believes 
to  be  a  limited  partnership,  and 
which  is  known  to  the  public  as 
such,  afterwards  seeks  to  charge 
all  the  partners  as  general  partners, 
the  burden  of  proof  is  upon  him  to 
show  a  general  partnership.  Whill- 
din  v.  Bullock,  4  Weekly  Not.  Cas. 
234. 

In  Darrow  v.  Bruff,  36  How.  Pr. 
479,  it  was  held  that  a  general  as- 
signment for  the  benefit  of  cred- 
itors of  a  limited  partnership, 
executed  and  acknowledged  by  the 
resident  partner  in  person,  for  him- 
self, for  the  firm,  and  as  the  at- 
torney in  fact  of  the  non-resident 
partners,  is  sufficiently  executed. 
Non-resident  members  of  a  firm 
are  not  necessarily  iucluded  in  the 
statutory  requirement  of  a  per- 
sonal execution  and  acknowledg- 
ment by  each  of  the  assignors. 
Darrow  v.  Bruff,  36  How.  Pr.  479. 

In  Singer  v.  Kelly,  44  Penn.  St. 
145,  it  was  held  that  the  special 
partner  cannot  be  affected  by  any 
assignments  of  the  assets  of  the 
firm,  if  he  had  not  assented  thereto ; 
and  where  there  is  no  offer  to  prove 
that  assent,  but  only  that  the  gen- 
eral partners  had  made  them,  it  is 
properly  rejected.  Singer  v.  Kelly, 
44  Pa.  St.  145. 

See  further  as  to  the  power  of 
limited  partners  or  general  or 
special    partners  to  make  an   as- 


signment for  the  benefit  of  credit- 
ors with  or  without  preferences, 
George  v.  Grant,  97  N.  Y.  262 ;  S. 
C.  20  Hun,  372;  28  Hun,  69: 
Schwartz  v.  Soutter,  5  Cent.  Rep. 
620. 

See,  also,  Almon  v.  Hamilton, 
100  N.  Y.  527;  S.  C.  82  id.  291; 
ante,  Assignments. 

As  to  the  power  of  an  insolvent 
special  partner,  his  firm  being  also 
insolvent,  to  secure,  by  mortgage 
upon  his  individual  property,  a 
loan  to  him.  see  George  v.  Grant, 
97  N.  Y.  262;  S.  C.  20  Hun,  372; 
28  id.  69. 

A  special  partner  who  is  a  party 
to  a  transfer  of  all  the  assets  of 
his  firm  to  one  creditor  for  the 
benefit  of  the  creditors  of  the  firm 
becomes  liable  to  such  creditors  as 
a  general  partner  under  the  gen- 
eral statutes,  chapter  55,  section  7. 
Farnsworth  v.  Boardman,  131  Mass. 
115. 

A  special  partner  will  be  hel  1 
liable  as  a  general  partner  for  pur- 
chases made  under  his  representa- 
tions that  such  is  his  interest. 
Barrows  v.  Downs,  9  R.  I.  146. 

So  if  his  name  is  used  in  con- 
tracting with  his  consent.  Madi- 
son County  Bank  v.  Gould,  5  Hill, 
309;  Jonau  v.  Blanchard,  2  Rob. 
(La.)  513. 

If  a  special  partner  buys  out  the 
entire  firm  property  during  the  ex- 
istence of  a  limited  partnership, 
and  continues  the  business  in  his 
own  name  and  for  his  own  account, 
he  interferes  with  the  firm  busi- 
ness, contrary  to  the  provisions  of 
section  17  of  the  act  relating  to 
limited  partnerships  (1  N.  Y.  R.  S. 


482 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


:-202 


such  a  doctrine  is  recognized, 
ship   is,   therefore,  evidently 

764);  and  renders  himself  liable 
as  a  general  partner  from  the  very 
commencement  of  the  partner- 
ship. First  Nat.  Bank  v.  Whitney, 
4  Lans.  34. 

By  written  articles  of  agreement 
three  persons  entered  into  a  special 
partnership,  to  continue  for  a  cer- 
tain limited  period;  one  was  a 
special  partner,  the  others  were 
general  partners,  and  the  business 
was  to  be  conducted  in  the  joint 
names  of  the  general  partners.  In 
a  short  time  afterwards,  and  be- 
fore the  limited  period,  a  second 
agreement  was  entered  into  be- 
tween them,  by  which  it  was 
agreed  that  one  of  the  general 
partners  should  sell  out  to  the 
special  partner,  and  should  with- 
draw from  all  active  participation 
in  the  business,  and  that  the  special 
should  become  a  general  partner, 
but  that  the  partnership  should  not 
be  dissolved  until  certain  notes 
given  by  the  firm  should  be  paid  ; 
and  that  in  the  meantime  the  part- 
ner who  sold  out  should  allow  his 
name  to  be  used  as  one  of  the  firm 
for  business  purposes,  purchasing 
goods,  etc.,  and  giving  notes  there- 
for, and  the  business  was  con- 
tinued without  any  change  in  the 
name  of  the  firm.  Goods  were 
purchased  and  notes  were  given 
therefor  by  the  two  remaining  part- 
ners in  the  original  name  of  the 
firm,  before  the  expiration  of  the 
time  limited  for  the  continuance 
of  the  original  partnership,  and 
before  the  payment  of  all  the  notes 
mentioned  in  the  second  agree- 
ment, Held,  that  the  second  agree- 
ment made  all  three  of  the  parties 


The  existence  of  a  partner- 
presupposed;    and    although 

partners  as  to  third  persons  until 
the  notes  alluded  to  therein  should 
be  paid ;  and  that  all  three  parties 
were  liable  on  the  notes  thus  given 
for  goods  purchased  by  the  new 
firm.  Buckley  v.  Dingman,  11 
Barb.  289. 

The  receipt  of  a  dividend  under 
an  order  on  an  accounting  in  pro- 
ceedings on  an  assignment  for  the 
benefit  of  the  creditors  of  the  firm, 
as  a  limited  partnership,  and  an  ap- 
pearance in  said  proceedings,  does 
not  estop  the  creditor  from  suing 
for  the  balance  of  his  claim  against 
all  the  partners,  including  a  special 
partner.  Benedict  t'.  Hutchinson, 
53  N.  Y.  Super.  Ct.  486. 

Where  a  creditor  has  assigned 
his  claims  against  a  firm  to  a 
special  partner  therein,  without 
knowledge  that  the  latter  has  ren- 
dered himself  liable  as  a  general 
partner,  he  cannot  thereafter  en- 
force such  liability  against  the 
special  partner.  Allison  v.  Abend- 
roth,  38  Hun,  586. 

The  interest  of  a  partner  in  a 
limited  partnership  is  not  subject 
to  attachment.  Wetherald  v. 
Shupe,  15  Weekly  Not.  Gas.  366. 

Where  a  limited  partnership 
makes  a  division  of  its  profits  and 
gives  its  note  to  a  partner  for  his 
share  thereof,  he  agreeing  to  repay 
the  same  at  maturity,  such  profits 
belong  to  such  partner,  and  his 
agreement  to  repay  the  same  is 
without  consideration.  Liggett's 
Appeal,  111  Pa.  St.  291. 

A  provision  in  the  articles  that 
the  special  partner  should  bear  a 
proportionate  share  of  the  losses 
is  not  a  violation  of  the  New  York 


483 


:-202 


EIGHTS    AND    OBLIGATIONS. 


[iJOOK    II. 


persons  negotiating  for  a  partnership,  or  about  to  become 
partners,    man   be   the  agents   of   each   other   before   the- 


may 

act.  Metropolitan  Bank  v.  Sir  ret, 
97  N.  Y.  320 ;  S.  C.  15  Abb.  N.  Cas. 
318. 

A  bona  fide  compromise  of  a 
suit  to  compel  the  settlement  of  a 
partnership,  and  the  special  part- 
ner's receipt  of  what  he  may  be- 
lieve due  him,  does  not  make  him 
a  general  partner  of  an  expired 
partnership.  Puseyu.  Dusenbury, 
75  Pa.  St.  437. 

Special  partners  are  postponed  in 
their  claims  upon  the  partnership 
assets  until  every  other  partner- 
ship creditor  is  paid;  and  those 
who  advance  money  to  the  special 
partner  for  the  purpose  of  such 
contribution  are  in  no  better  po- 
sition than  the  special  partners 
themselves.  Coffin's  Appeal,  106 
Pa.  St.  280;  15  Weekly  Not.  Cas. 
52;  S.  C.  15  id.  191;  14  id.  140;  40 
Leg.  Intel.  434.  See,  also,  Jaffe  v. 
Krum,  88  Mo.  669;  Dunning's  Ap- 
peal, 44  Pa.  St.  150;  White  v.  Hack- 
ett,  20  N.  Y.  17S. 

A  special  partner  may  make  a 
loan  to  the  firm  without  becoming 
necessarily  liable  as  a  general  part- 
ner. Walkenshaw  v.  Perzel,  4 
Robt.  426 ;  32  How.  Pr.  233. 

A  special  partner  in  a  limited 
partnership,  under  the  statute  of 
New  Jersey,  cannot  recover  against 
the  general  partners  on  a  note 
given  by  them  to  him  for  good  con- 
sideration, if  the  partnership  is  in- 
solvent. Ward  v.  Newell,  42  Barb. 
482 ;  28  How.  Pr.  102. 

Where  a  limited  partnership  be- 
comes insolvent,  and  the  special 
partner  therein  is  a  general  part- 
ner in  another  firm  to  which  the 
limited    partnership    is    indebted, 


the  debt  due  such  firm  is  to  be 
placed  on  the  same  footing  with, 
and  is  not  to  be  postponed  to,  the 
claims  of  other  creditors  of  said 
limited  partnership  in  the  distribu- 
tion of  its  assets.  Hayes  v.  Hcyer, 
35  N.  Y.  326. 

If  A.,  being  a  special  partner  in 
a  firm ,  takes  a  deed  of  trust  from 
such  firm,  being  then  insolvent,  to 
secure  a  debt  to  a  firm  of  which 
he  is  a  member,  he  thereby,  in 
Pennsylvania,  renders  himself  lia- 
ble as  a  general  partner.  McAr- 
thur  v.  Chase,  13  Gratt.  683. 

Where  a  limited  partnership,  of 
which  A.  was  a  special  partner, 
conveyed  all  its  property  in  trust 
to  pay  a  debt  to  a  firm  of  whicli 
A.  was  a  member,  at  a  time  when 
the  partnership  was  insolvent,  the 
deed  was  held  void  as  to  the  other 
creditors  of  the  firm.  Confessions 
of  judgments  in  favor  of  some 
creditors,  under  similar  circum- 
stances, are  void  as  to  the  other 
creditors.  McArthur  v.  Chase,  13 
Gratt.  683. 

A.  was  a  special  partner  in  one 
firm,  and  a  general  partner  in  an- 
other firm.  The  latter  firm  was  a 
large  creditor  of  the  former,  and 
among  the  debts  was  a  note  made 
by  a  member  of  the  formar  firm, 
and  indorsed  by  the  latter  firm,  on 
which  a  judgment  was  obtained, 
which  was  unsatisfied,  except  a 
small  dividend  declared  by  the 
assignee  of  the  former  firm,  which 
had  failed.  Held,  on  a  bill  by  the 
former  firm  to  postpone  the  debts 
of  the  latter,  that  those  debts 
ought  not  to  be  postponed  under 
the  statute  of  New  York  regulat- 


484 


Cn.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*202 


partnership  commences,  such  agency,  if  relied  on,  must  be 
established  in  the  ordinary  way,  and  is  not  to  be  inferred 


ing  limited  partnerships.  If  the 
same  person  is  a  general  partner 
in  two  firms,  his  interest  in  one 
can  be  reached  by  the  creditors  of 
the  other  by  calling  it  to  an  account, 
and  by  the  same  rule  the  solvent 
firm  can  recover  its  debt  from  the 
insolvent  firm.  Hayes  v.  Bement, 
3  Sandf.  394. 

Under  the  statute  of  Missouri 
the  assets  of  a  limited  partnership 
are  a  trust  fund  in  a  sense  in  which 
those  of  an  ordinary  partnership 
are  not ;  and  a  court  of  chancery 
may  distribute  such  fund  equi- 
tably among  the  creditors  at  the 
suit  of  a  contract  creditor  who  has 
not  reduced  his  claim  to  judgment. 
Batchelder  v.  Altheiner,  10  Mo. 
App.  181. 

Whenever  the  assets  of  a  limited 
partnership  are  distributed  among 
its  creditors,  a  firm  which  has 
among  its  members  a  special  part- 
uer  in  the  other  firm  is  entitled  to 
a  ratable  proportion ;  but  the  share 
of  said  special  partner,  having  been 
ascertained  by  a  commissioner,  will 
be  retained  and  applied  to  satisfy 
the  creditors  of  the  limited  partner- 
ship. McArthur  v.  Chase,  13  Gratt. 
G83. 

On  the  insolvency  of  a  limited 
partnership  the  partnership  prop- 
erty becomes  a  trust  for  the  benefit 
of  the  creditors ;  and  if  the  partners 
neglect  to  place  it  in  the  hands  of 
a  trustee  for  immediate  distribution 
among  all  the  creditors  ratably, 
any  creditor  may  file  a  bill,  on  be- 
half of  himself  and  all  other  cred- 
itors, for  distribution  of  the  part- 
nership funds,  without  first  obtain- 
ing judgment  at  law.     Innes  v. 


Lansing,  7  Paige,  583.  See,  also, 
Jackson  v.  Sheldon,  9  Abb.  Pr.  127; 
Whitewright  v.  Stimpson,  2  Barb. 
379. 

Until  an  order  is  made  for  the 
appointment  of  a  receiver  the 
property  of  an  insolvent  limited 
partnership  is  liable  to  the  execu- 
tion of  a  creditor  recovering  judg- 
ment otherwise  than  by  confession, 
and  he  may  thus  obtain  a  prefer- 
ence. Van  Alstyne  v.  Cook,  25  N. 
Y.  489. 

Pending  an  action  by  a  single 
creditor  of  an  insolvent  limited 
partnership  to  charge  the  special 
partner  as  a  general  partner,  where 
such  special  partner  denies  his  lia- 
bility, and  the  question  can  only  be 
determined  after  a  protracted  litiga- 
tion, an  order  for  an  injunction 
and  the  appointment  of  a  receiver 
of  the  assets  of  the  firm,  during  the 
litigation,  and  for  the  benefit  of 
such  creditor  alone,  will  not  be 
granted.  Lachaise  v.  Marks,  4  E. 
D.  Smith,  612,  note  (a). 

A  court  of  equity  will  enjoin 
parties  who  have  not  a  prima  facie 
title  from  acting  or  claiming  to  act 
as  managers  of  a  partnership  asso- 
ciation organized  under  the  act  of 
June  2,  1874.  Tidewater  Pipe  Co. 
v.  Satterfield,  12  Weekly  Not.  Cas. 
457. 

It  is  not  the  duty  of  the  special 
partner  to  care  for  or  to  collect  the 
assets  of  the  firm  after  failure. 
Singer  v.  Kelly,  44  Pa.  St.  145. 

A  mortgage  given  by  an  insolv- 
ent special  partner,  who  by  his  acts 
had  become  liable  as  a  general 
partner,  and  who  executed  the 
mortgage  with  intent  to  give  the 


485 


■202 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


from  the  mere  fact  that  the  persons  in  question  were  en- 
gaged in  the  attainment  of  some  common  end,  or  that  they 

drove  is  started.  Bently  v.  White, 
3  B.  Mon.  263. 

So,  in  Illinois,  if  A.  enter  into  a 
limited  partnership  with  three 
other  parties  for  a  specified  object, 
advancing  all  the  capital,  with  the 
accomplishment  of  that  object  it 
ceases  to  be  partnership  property, 
and  if  then  deposited  with  one  of 
the  partners  to  the  use  of  A.  he 
may  recover  it  of  such  partner. 
Myers  v.  Winn,  16  111.  185. 

In  New  York  a  limited  partner- 
ship cannot  be  dissolved  by  the  act 
of  the  parties  until  four  weeks 
after  publication  of  the  notice  of 
dissolution.  Bnlkley  v.  Marks,  15 
Abb.  Pr.  454;  Buckley  v.  Lord,  21 
How.  Pr.  455. 

The  dissolution  of  a  limited  part- 
nership, by  filing  notice  with  tho 
county  clerk,  and  publication  for 
four  weeks,  under  1  Revised  Stat- 
utes, 767,  section  24,  is  not  opera- 
tive until  the  performance  of  both 
those  acts.  Fanshawe  v.  Lane,  16 
Abb.  Pr.  71. 

In  Haggerty  v.  Taylor,  10  Paige, 
201,  it  was  held  that  the  publica- 
tion of  notice,  at  the  commence- 
ment of  a  limited  partnership, 
under  the  statute,  stating  the  dura- 
tion of  the  partnership,  is  suffi- 
cient to  prevent  the  general  part- 
ners from  charging  the  firm  with 
new  debts  after  the  expiration  of 
the  partnership. 

The  certificate  of  the  dissolution 
of  a  limited  partnership,  where  one 
is  required,  must  comply  with  the 
statute,  or  such  partnership  will 
continue.     Re  Terry,  5  Biss.  110. 

Under  New  York  Revised  Stat- 
utes, 767,  section  24,  requiring  no- 


mortgagees  therein  (who  were  in- 
dividual creditors  of  the  mort- 
gagor) a  preference  over  firm  cred- 
itors, is  void.  George  v.  Grant,  20 
Hun,  372. 

Where  the  rules  of  a  limited 
partnership  prescribed  a  particular 
form  for  the  transfer  of  stock,  and 
provided  that  no  change  of  owner- 
ship could  be  accomplished  in  any 
other  mode,  and  an  owner  of  stock 
assigned  it  for  a  valuable  consider- 
ation, not  in  the  prescribed  mode, 
but  by  an  instrument  in  writing,  in- 
cluding an  irre vocable  power  of 
attorney,  held,  that  the  rule  was 
for  the  benefit  of  the  company,  and 
that  the  assignment  passed  the  title 
of  tbe  assignee  as  against  the  as- 
signor and  therefore  against  his  at- 
taching creditors.  Tidewater  Pipe 
Co.  v.  Kitchenman,  108  Pa.  St.  630; 
S.  C.  16  Weekly  Not.  Cas.  101 ;  42 
Legal  Intel.  374. 

Limited  partnerships  formed 
under  the  statute  are  governed,  and 
the  mutual  rights,  duties  and  lia- 
bilities of  the  partners  are  regu- 
lated, by  the  common  law,  in  every 
respect  not  taken  out  of  the  general 
rule  by  the  statute.  The  death  of 
the  special  partner  within  the  pe- 
riod fixed  for  the  duration  of  the 
agreement  dissolves  it.  Ames 
v.  Downing,  1  Bradf.  321 :  Jac- 
quin  v.  Buisson,  11  How.  Pr.  385. 
See,  also,  Jaffe  v.  Krum.  88  Mo. 
069. 

A  limited  partnership  may,  in 
Kentucky,  be  formed  to  buy  for  a 
single  adventure,  as  a  drove  of  cat- 
tle, which  done,  the  power  of  one 
partner  to  bind  the  other  by  addi- 
tional  purchases  ceases  when  the 


486 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*202 


have  subsequently  become  partners.  This  is  shown  by  the 
cases  already  referred  to,  when  the  difference  between  part- 
nerships and  inchoate  partnerships  was  being  discussed. 


tice  of  dissolution  of  any  limited 
partnership,  previous  to  the  time 
specified  in  the  certificate  of  its 
formation,  to  be  published  "  once 
in  each  week,  for  four  weeks,"  the 
day  of  the  week  which  is  taken  for 
the  first  publication  must  be  taken 
for  each  of  the  subsequent  publica- 
tions. Re  King,  5  Ben.  453;  7 
Bankr.  Reg.  279. 


vidual  rights  growing  out  of  the 
partnership.  Qucere,  whether  the 
use  or  omission  of  the  special  part- 
ner's name  in  any  action  is  not  a 
mere  matter  of  choice.  Spalding 
v.  Black,  22  Kan.  55. 

As  to  the  manner  of  bringing 
actions  against  a  limited  partner- 
ship, and  as  to  whether  a  special 
partner  is  a  necessary  party  to  legal 


As  to  the  proceedings  to  vacate  a    proceedings  against  the  firm,  see, 


decree  of  dissolution  of  limited 
partnership  association  under  the 
act  of  June  2,  1874,  see  In  re 
Gautier  Steel  Co.  18  Weekly  Not. 
Cas.  346. 

Actions  by  or  against  the  firm 
must  be  brought  by  or  against  the 
general  partners,  unless  the  special 
partners  are,  by  reason  of  non- 
compliance with  the  statute,  also 
liable  as  general  partners,  in  which 
case  they  also  may  be  joined.  Law- 
rence v.  Batchellor,  131  Mass.  504 ; 
Schulten  v.  Lord,  4  E.  D.  Smith, 
206;  Artisan's  Bank  v.  Treadwell, 
34  Barb.  553.  See,  also,  Wetherell 
v.  McClosky,  28  W.  Va.  195. 

Section  19,  chapter  74,  General 
Statutes  of  Kansas,  provides  that 
"  actions  respecting  the  business  of 
such  partnership  may  be  prose- 
cuted by  and  against  the  general 
partners  only,  in  the  same  manner 
as  if  there  were  no  special  part- 
ners." This  limitation  on  the  use 
of  the  name  of  a  special  partner 
in  actions  by  and  against  a  limited 
partnership  extends  onty  to  actions 
respecting  the  business  of  the  part- 
nership, and  does  not  include  ac- 
tions inter  sese,  or  against  third 
parties,  brought  to   enforce   indi- 


further,  Durant  v.  Abendroth,  97 
N.  Y.  132:  McCahan  v.  Gensemer, 
3  Luzerne  L.  Reg.  40 ;  Spalding  v. 
Black,  22  Kan.  55. 

Where,  from  non-compliance 
with  the  statute,  a  special  partner 
has  become  liable  as  a  general 
partner  in  an  action  against  the 
firm  upon  a  partnership  debt,  it  is 
not  necessary  for  the  plaintiff  to 
allege  in  his  complaint  the  attempt 
to  form  a  limited  partnership,  and 
the  defects  which  render  the  special 
partner  liable ;  it  is  sufficient  to 
charge  him  as  a  general  partner, 
and  upon  the  trial  to  show  that  as 
to  creditors  he  is  6uch.  Sharp  v. 
Hutchinson,  100  N.  Y.  533;  S.  C. 
49  N.  Y.  Super.  Ct.  50 ;  Brown  v. 
Benner  Go.  18  Weekly  Not.  Gas. 
114.  See,  also,  Loomis  v.  Hoyt,  52 
N.  Y.  Super.  Ct.  287. 

A  decree  at  the  instance  of  a 
creditor  of  the  firm  against  a 
special  partner,  ordering  him  to  pay 
a  certain  sum  into  court  to  be  ap- 
plied to  the  payment  of  claims  that 
should  be  established  against  it, 
cannot  be  made  the  foundation  for 
an  action  at  law  at  the  instance  of 
the  creditor  to  compel  him  to  do  so. 
Corbin  v.  Graves,  27  Fed.  Rep.  644. 


487 


*202 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Almost  all  those  cases,  in  fact,  arose  in  consequence  of  at- 
tempts made  to  fasten  liability  on  the  defendants  by  reason 
of  some  act  done  by  other  persons  alleged  to  be  their  part- 
ners; and  each  of  those  cases  in  which  the  plaintiff  failed 
is  an  authority  for  the  proposition  that  so  long  as  there  is 
no  partnership  there  is  no  implied  authority  similar  to  that 
which  exists  after  a  partnership  is  formed,  (p)  But  al- 
though this  is  undoubted  law,  still  if  persons  agree  to  be- 
come partners  as  from  a  future  day,  upon  terms  to  bo 
embodied  in  a  deed  to  be  executed  on  that  day,  and  the 
deed  is  not  then  executed,  but  they  nevertheless  commence 
their  business  as  partners,  they  will  all  be  liable  for  the  acts 
of  each,  whether  those  acts  occurred  before  or  after  the  ex- 
ecution of  the  deed,  (q) l  For  the  question  in  such  a  case 
is  not,  When  was  the  deed  executed?  but  rather  this,  When 
did  the  partners  commence  to  carry  on  business  as  such? 
The  agency  begins  from  that  time,  whether  they  choose  to 
execute  any  partnership  deed  or  not. 


(p)  See  the  cases  ante,  pp.  19  et 
seq.  and  43  et  seq. ;  and  especially 
Edmundson  v.  Thompson,  2  Fos.  & 
Fin.  564 ;  Gabriel  v.  Evill,  9  M.  & 
W.  297. 

(q)  Battley  v.  Lewis,  1  Man.  & 
Gr.  155. 

1  Notes  given  in  the  name  of  a 
partnership  to  commence  at  a  fut- 
ure day,  and  for  goods  to  form  the 
stock  in  trade  of  such  partnership, 
and  received  upon  the  credit  of  an 
individual  intending  to  become  a 
member  of  such  partnership,  are 
collectible  against  such  member, 
even  though  the  partnership  never 
was  actually  formed.  Stiles  v. 
Meyer,  64  Barb.  77;  S.  C.  7  Lans. 
190.  Thus,  upon  the  representation 
of  one  of  the  partners  that  M.  was 
taken  into  the  firm  of  J.  L.  B.  & 
Co.  at  a  certain  day,  in  which  rep- 
resentations M.  joined,  the  plaint- 


iffs sold  and  delivered  goods  for 
the  new  firm,  to  be  paid  for  after 
the  day  named ;  the  new  firm  was 
not  formed,  and  notice  of  this  fact 
was  not  given  to  the  plaintiffs, 
who,  after  the  day,  took  the  note  of 
J.  L.  B.  &  Co.  for  the  goods.  Held, 
that  M.  was  jointly  liable  with  the 
partners  for  the  goods.  Bliss  v. 
Swartz,  7  Lans.  187. 

A.  and  B.  entered  into  partner- 
ship, and  agreed  that  the  partner- 
ship should  have  relation  back  to  a 
time  specified,  and  that  the  firm 
should  be  responsible  for  the  debts 
contracted  for  goods  by  A.  in  the 
intermediate  time.  Held,  that  the 
firm  was  liable  for  money  appro- 
priated to  that  purpose  by  A.  dur- 
ing the  time  mentioned,  which  he 
held  as  treasurer  of  the  county. 
Hutchinson  v.  Smith,  7  Paige,  28. 


488 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEiLBEES. 


*203 


Where  there  is  an  agreement  for  a  partnership,  and  there 
is  nothing-  to  lead  to  the  conclusion  that  the  partnership  was 
intended  to  commence  at  any  other  time,  it  will  be  held  to 
commence  from  the  date  of  the  agreement,  (r) 

Firm  not  liable  for  what  a  partner  does  before  he  joins 
it. —  The  agency  of  each  partner  commencing  with  the  part- 
nership, and  not  before,  it  follows  that  the  firm  is  not 
liable  for  '-what  may  be  done  by  any  partner  before  [*203] 
he  becomes  a  member  thereof.  So  that  if  several 
persons  agree  to  become  partners,  and  to  contribute  each  a 
certain  quantity  of  money  or  goods  for  the  joint  benefit  of  all, 
each  one  is  solely  responsible  to  those  who  may  have  sup- 
plied him  with  the  money  or  goods  agreed  to  be  contrib- 
uted by  him ;  (s)  and  the  fact  that  the  money  or  goods  so 
supplied  have  been  brought  in  by  him  as  agreed  will  not 
render  the  firm  liable,  (t) l 


(r)  See  Williams  v.  Jones,  5B.  & 
C.  108. 

(s)  See  Greenslade  v.  Dower,  7  B. 
&  C.  635 ;  Dickinson  v.  Valpy,  10 
B.  &  C.  141-2;  Fisher  v.  Taylor,  2 
Hare,  229,  230 ;  and  the  cases  in 
the  next  note. 

(t)  Heap  v.  Dobson,  15  C.  B.  N. 
S.  460 ;  Smith  v.  Craven,  1  Cr.  &  J. 
500. 

1  See  Brooke  v.  Evans,  5  Watts, 
196;  Baxter  v.  Plunkett,  4  Houst. 
450. 

By  the  formation  of  a  partner- 
ship the  firm  does  not  become  liable 
for  the  individual  contracts  of  one 
of  its  members  or  to  pay  his  debts. 
Even  if  the  firm  promises  to  fulfill 
such  contracts,  there  must  be  shown 
a  new  consideration  to  support  the 
promise,  and  the  individual  mem- 
ber must  be  released.  If,  after 
the  formation  of  the  partnership, 
two  of  its  members  expressly  cov- 
enant with  the  third  member  to 
perform  his  contract,  made  before 


its  formation  with  a  third  party, 
the  latter  can  maintain  no  action 
for  a  breach  of  such  contract 
against  the  firm,  or  the  two  part- 
ners so  covenanting,  for  the  reason 
that  the  plaintiff  is  no  party  to 
such  covenant.  Goodenowu.  Jones, 
75  111.  48.  See,  however,  Colt  v. 
Wilder,  1  Edw.  484. 

Appellee  H.  bought  cattle  of  ap- 
pellant, but  they  were  not  delivered 
until  after  the  formation  of  a  part- 
nership between  appellees  H.  and 
D.  There  was  some  conflict  in  evi- 
dence as  to  whether  the  cattle  were 
sold  to  the  firm,  or  to  H.  alone,  but 
it  appeared  that  they  were  taken 
by  the  firm,  killed,  sold,  and  the 
money  went  into  the  firm  account 
for  its  benefit.  Held,  that  the  cattle 
remaining  with  appellant  until 
taken  by  the  firm,  unless  the  jury 
should  believe  that  it  was  the  in- 
tention of  the  parties  that  the  title 
should  pass  to  H.  at  the  time  the 
contract  was    made,  the    title  re- 


489 


*203  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

Upon  this  principle,  apparently,  it  was  held,  in  Wilson  v. 
Whitehead,  (u)  that  the  author  and  publisher  of  a  work- 
were  not  liable  for  the  paper  supplied  for  it;  the  paper  hav- 
ing- been  ordered  by  and  supplied  to  the  printer,  who  was 
to  share  the  profits  of  the  work.  The  agreement  between 
the  parties  was  that  one  should  be  the  publisher  and  make 
and  receive  general  payments;  that  another  should  be  ed- 
itor; and  that  the  third  should  print  and  find  the  paper 
for  the  work,  charging  it,  however,  to  the  account  of  the 
three  at  cost  price.  The  profits  were  to  be  equally  di- 
vided amongst  the  three.  It  was  therefore  urged  that  all 
were  liable  for  the  paper  supplied;  but  it  was  held  that 
they  were  not;  for  the  printer  was  not  authorized  to  buy 
the  paper  except  on  his  own  account,  and  when  he  had 
bought  it  he  might  have  used  it  for  some  other  book.  The 
case  was  likened  to  that  of  coach  proprietors,  where  each 
horses  the  coach  for  one  or  more  stages,  and  each  agrees  to 
bring  into  the  concern  the  work  and  labor  of  his  horses,  and 
none  of  the  others  has  any  interest  in  them,  though  all  share 
the  profits.  (%) 

The  propriety  of  the  decision  in  this  case  has  been 
doubted,  (y)  and  it  is  not  easily  reconcilable  with  a  similar 

mained  with  appellant  until  they  It  was  error  to  refuse  the  admis- 

were  received  by  the  firm,  and  the  sion  in  evidence  of  the  partnership 

firm  receiving  them  would  be  liable  books,  so  that  the  jury  might  see 

therefor.     If  the  title  had  passed  to  whether  H.    ever  received    credit 

H.,  and  the  cattle  still  remained  by  the  cattle  by  the  firm,  and  also 

with  appellant  unpaid  for,  it  was  show  the  state  of  the  account  of  D. 

competent  for  H.  and  appellant  to  and  H.  with   the  firm.     Smith  v. 

annul  such  purchase,  and  for  H.  to  Hood,  supra. 

receive  the  cattle  on  the  partner-  (u)  10    M.   &   W.  573.     See    the 

ship  account,  he  being  a  member  observations  of  Wightman,  J.,  on 

of  the  firm,  and  having  authority  this  case,  in  Kilshaw  v.  Jukes,  3  B. 

to  make  such  purchase ;  and  if  H.  &  Sm.  847. 

and  D.  received  the  cattle  from  ap-  (x)   Barton   v.  Hanson,  2  Taunt, 

pellnnt,  and  the  firm  did  not  receive  49,  which  shows  that  in  such  a  case 

them  from  H.,  then  they  would  be  each  is  alone  liable  for  hay,  etc., 

liable,  no  matter  what  contract  ex-  supplied  to  his  own  horses, 

isted   between    H.  and  appellant.  (y)  See  per  Wightman,  J.,  in  3 

Smith  v.  Hood,  4  Brad.  360.  Best  &  Sm.  871. 

490 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *204 

case  decided  at  nisi  prius.  (3)  But  the  writer  submits  that 
upon  principle  Wilson  v.  Whitehead  is  perfectly  cor- 
rect; for  *the  publisher  had  no  real  authority  to  [*204] 
buy  the  paper  on  the  author's  credit,  and  no  author- 
ity so  to  do  ought  to  be  implied  in  favor  of  a  person  who 
knew  nothing  of  the  author  or  of  any  partnership  or  quasi- 
partnership  existing  between  him  and  the  publisher,  (a) 

The  two  well-known  cases  of  Saville  v.  Robertson  (b)  and 
Gouthwaite  v.  Duckworth  (c)  further  illustrate  the  principle 
now  in  question.  These  cases  closely  resemble  each  other 
in  many  respects;  for  in  each  there  was  an  agreement  for  a 
joint  adventure  in  goods;  in  each  an  attempt  was  made  to 
compel  a  person  who  did  not  order  the  goods  to  pay  for 
them,  on  the  grounds  that  he  was  in  partnership  with  the 
person  who  did  order  them,  and  that  they  were  supplied 
and  used  for  the  joint  adventure;  and  in  each  the  defense 
was  that  the  goods  were  ordered  before  any  partnership 
commenced,  so  that  the  defendant  was  not  liable  for  the 
purchase  made  by  his  copartner.  In  Saville  v.  Robertson  the 
defense  was  proved,  and  prevailed,  whilst  in  Gouthwaite  v. 
Duckworth  the  defendant  was  compelled  to  pay.  In  order 
to  explain  the  apparent  conflict  between  the  two  cases  it  is 
necessary  to  state  shortly  the  material  facts  in  each. 

In  Saville  v.  Robertson,  id)  several  persons  agreed  to  share 
the  profit  and  loss  of  an  adventure  in  goods  of  a  kind  to  be 
fixed  by  a  majority;  but  no  one  was  to  have  any  share  or 
proportion  in  the  adventure  except  to  the  amount  of  the 
goods  ordered  and  shipped  by  himself;  and  no  adventurer 
was  to  be  answerable  for  anything  ordered  or  shipped  by 
any  co-adventurer.  One  of  the  adventurers  having  ordered 
goods  and  not  paid  for  them,  it  was  contended  that  his  co- 
adventurers  were  liable  for  them  on  the  ground  that  he 

(z)  Gardiner  v.  Childs,  8  Car.  &        (c)  12  East,  421. 

P.  345.  (d)  4  T.  R.  720.     See,  also,  Hut- 

Co)  See  Kilshaw  v.  Jukes,  3  Best    ton  v.  Bullock,  L.  R.  8  Q.  B.  331, 

ft  Sm.  847,  and  ante,  p.  31.  and  9  id.  572;  Kilshaw  v.  Jukes,  3 

(b)  4  T.  R.  720.  Best  &  Sm.  847. 

491 


*205  EIGHTS   AND    OBLIGATIONS.  [BOOK    II. 

and  they  were  partners.  But  the  court  held  that  no  part- 
nership commenced  until  the  goods  were  on  board;  each 
partner  was  to  bring  in  his  share  only,  and  his  copartners 
were  not  liable  to  persons  who  supplied  him  with  the  means 

which  enabled  him  to  bring  in  such  share. 
[*205]  *In  Gouthwaite  v.  Duckworth,  (e)  Browne  and  Pow- 
ell, who  were  in  partnership,  were  indebted  to  Duck- 
worth, and  it  was  agreed  that  all  three  should  join  in  an 
adventure  in  the  purchase  and  sale  of  goods;  that  the  goods 
should  be  bought,  paid  for,  and  shipped  by  Browne  and 
Powell,  and  that  the  proceeds  of  the  sale  should  be  remitted 
to  Duckworth,  who  should  deduct  thereout  the  amount  of 
his  debt,  and  then  share  the  profit  of  the  adventure  with 
Browne  and  Powell.  It  was  also  agreed  that  in  the  event 
of  a  loss  Duckworth  should  share  it.  In  consequence  of 
this  agreement  Browne  bought  goods  for  the  adventure  on 
credit,  and  it  was  held  that  all  the  three,  viz.,  Browne,  Pow- 
ell and  Duckworth,  were  liable  to  pay  for  them;  for  the 
goods  were  bought  in  pursuance  of  the  agreement  for  the 
adventure,  and  although  it  was  never  intended  that  Duck- 
worth should  pay  for  the  goods,  yet  it  was  thought  that  the 
adventure  commenced  with  the  purchase  of  the  goods,  and 
that  Duckworth  was  therefore  liable. 

There  is  considerable  difficulty  in  supporting  this  decision 
if  rested  on  the  ground  of  partnership  and  implied  agency 
resulting  therefrom;  for  it  is  not  easy  to  see  how  any  part- 
nership existed  prior  to  the  purchase  of  the  goods.  But  if 
rested  on  the  ground  of  agency,  independently  of  partner- 
ship, there  is  not  the  same  difficulty.  For  although  the 
goods  were  to  be  paid  for  by  Browne  and  Powell,  that 
might  be  regarded  as  nothing  more  than  a  stipulation  to 
take  effect  as  between  them  and  Duckworth;  it  did  not 
necessarily  exclude  the  inference  that,  as  Browne  and  Powell 

(e)  12  East,  421.  Kilshaw  v.  Jukes,    accordance  with  Saville  v.  Robert- 
3  B.  &  Sm.  847,  was  certainly  very    son.     See  ante,  p.  31. 
like  this  case,  but  was  decided  in 

492 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *206 

were  to  buy  for  the  adventure,  they  were  at  liberty  to  pro- 
cure the  goods  on  the  credit  of  all  concerned,  (f) 

Liability  of  incoming  partner. —  As  the  firm  is  not  liable 
for  what  is  done  by  its  members  before  the  partnership  be- 
tween them  commences,  so,  upon  the  very  same  principle,  a 
person  who  is  admitted  as  a  partner  into  an  existing  firm 
does  not  by  his  entry  become  liable  to  the  creditors  of  the 
firm  for  anything  done  before  he  became  a  partner. 
Each  partner  is,  it  is  true,  the  agent  of  the  firm ;  *but,  [*206] 
as  before  pointed  out,  the  firm  is  not  distinguishable 
from  the  persons  from  time  to  time  composing  it;  and  when 
a  new  member  is  admitted  he  becomes  one  of  the  firm  for 
the  future,  but  not  as  from  the  past,  and  his  present  con- 
nection with  the  firm  is  no  evidence  that  he  ever  expressly 
or  impliedly  authorized  what  may  have  been  clone  prior  to 
his  admission.  It  may  perhaps  be  said  that  his  entry 
amounts  to  a  ratification  by  him  of  what  his  now  partners 
may  have  done  before  he  joined  them,  (g)  But  it  must  be 
borne  in  mind  that  no  person  can  be  rendered  liable  for  the 
act  of  another  on  the  ground  that  he  has  ratified,  confirmed 
or  adopted  it,  unless,  at  the  time  the  act  was  done,  it  was 
done  on  his  behalf,  (h) l  Therefore,  in  Young  v.  Hunter,  (*) 
where  Hunter  &  Co.  had  ordered  goods  of  the  plaintiff  for 
sale  in  the  Baltic,  and  afterwards  it  was  agreed  between 
Hunter  &  Co.  and  Hoffham  &  Co.  that  the  latter  should 
join  in  the  adventure,  and  share  the  profit  and  loss,  it  was 
held  to  be  clear  that  Hoffham  &  Co.  were  not  liable  to  the 
plaintiff  to  pay  for  the  goods. 

So,  in  Ejo  parte  Jackson,  (j)  a  person  who  was  indebted 
by  bond  for  money  borrowed  to  carry  on  a  trade  took  two 
other  persons  ostensibly  into  partnership.  After  two  years 
a  joint  commission  of  bankruptcy  issued  against  the  three ; 

(/)  See  Young  v.  Hunter,  4  i  See  Ewell's  Evans  on  Agency, 
Taunt.  522,  judgment  of  Gibbs,  J.       *54  and  note. 

(g)  See  Horsley  v.  Bell,  1  Bro.  C.        (i)  4  Taunt.  582. 
C.  101,  note,  per  Gould,  J.  (j)  1  Ves.  Jr.  131. 

(h)  Wilson  v.   Tumman,  6  Man. 
&  Gr.  236. 

493 


"x"207  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

and  it  was  hold  that  the  bond  debt  was  not  provable  as  a 
partnership  debt  against  the  joint  estate,  but  remained  what 
it  was  originally  —  the  separate  debt  of  the  obligor. 

Application  of  principle  to  promoters  of  companies. — 
Again,  in  Beale  v.  Ifouls,  (h)  the  members  of  a  provisional 
committee  of  a  company  entered  into  a  special  agreement 
with  the  plaintiff  for  the  manufacture  of  a  steam  carriage. 
Afterwards,  but  before  the  contract  was  completed,  the  de- 
fendant Mollis  became  a  member  of  the  committee,  and 
interested  himself  in  the  completion  of  the  carriage.  Sev- 
eral alterations  and  payments  on  account  were  also  made 
whilst  he  was  a  member,  and  with  his  knowledge.     The 

carriage  was  completed,  but  the  committee  then  re- 
[*207]  fused  to  take  it  or  to  pay  for  it.     In  *an  action 

brought  against  Mouls  and  the  other  members  of 
the  committee  it  was  held  that  Mouls  was  not  liable.  He 
was  not  liable  on  the  special  contract,  for  he  was  no  party 
thereto  by  himself  or  any  agent;  and  he  could  not  be  made 
liable  on  any  implied  contract,  for  the  existence  of  a  special 
agreement  excluded  any  implied  contract  relative  to  the 
same  subject-matter.  It  follows  from  the  principles  on 
which  this  case  was  determined,  that  if  the  carriage  had 
been  accepted  by  the  committee  Mouls  would  not  have  been 
liable  to  pay  for  it.  The  delivery  and  acceptance  in  such  a 
case  would  have  been  in  pursuance  of  the  contract  to  which 
ex  hypothesi  he  was  no  party;  and  no  liability  could  attach 
to  him  by  virtue  of  any  implied  contract  to  pay  that  which 
became  payable  by  virtue  of  an  express  contract  made  with 
other  people.  It  has,  indeed,  been  expressly  decided,  that, 
if  several  members  of  a  committee  order  goods  and  then  a 
new  member  joins  the  committee,  he  is  not  liable  to  pay  for 
the  goods  though  they  are  delivered  after  he  joined  it.  (I) 

(fr)  10  Q.  B.  976.  See,  too,  Brem-  921;  Whitehead  v.  Barron,  2  Moo. 
ner  r.  Charnberlayne,  2  Car.  &  &  Rob.  248.  In  Beech  v.  Eyre.  5 
Kir.  569;  Kerridge  v.  Hesse,  9  C.  Man.  &  Gr.  415,  the  goods  were 
&  P-  20'J.  both  ordered   and  supplied    at    a 

(/)  Newton  v.  Belcher,   12  Q.  B.     time  when  there  was  evidence  to 

494 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *208 

New  contract. —  Cases,  however,  of  this  kind  must  not  be 

confounded  with  those  in  which  a  new  though  tacit  con- 
es 

tract  is  made  alter  the  introduction  of  a  new  partner. 
Dyke  v.  Brewer  (m)  illustrates  the  distinction  alluded  to. 
In  that  case  the  plaintiff  agreed  with  A.  to  supply  him  with 
bricks  at  so  much  per  thousand,  and  the  plaintiff  began  to 
supply  them  accordingly.  B.  then  entered  into  partnership 
with  A.,  and  the  plaintiff  continued  to  supply  bricks  as  be- 
fore. It  was  held  that  both  A.  and  B.  were  liable  to  pay, 
at  the  rate  agreed  upon,  for  the  bricks  supplied  to  both 
after  the  partnership  commenced.  The  ground  of  this  de- 
cision was  that,  as  A.  had  not  ordered  any  definite  number 
of  bricks,  each  delivery  and  acceptance  raised  a  new  tacit 
promise  to  pay  on  the  old  terms;  although  if  all  the  bricks 
delivered  had  been  ordered  by  A.  in  the  first  instance  he 
alone  would  have  been  liable  to  pay  for  them,  (n) 

"Incoming  partner  taking  debts  on  himself. —  If  [*208] 
an  incoming  partner  chooses  to  make  himself  liable 
for  the  debts  incurred  by  the  firm  prior  to  his  admission 
therein  there  is  nothing  to  prevent  his  so  doing.  But  it 
must  be  borne  in  mind  that  even  if  an  incoming  partner 
agrees  with  his  copartners  that  the  debts  of  the  old  shall  be 
taken  by  the  new  firm,  this,  although  valid  and  binding  be- 
tween the  partners,  is,  as  regards  strangers,  res  inter  alios 
acta,  and  does  not  confer  upon  them  any  right  to  fix  the  old 
debts  on  the  new  partner,  (o) l     In  order  to  render  an  in- 

show  that  the  defendant  was  one  coming  partner  and  the  copartners, 

of  the  committee.  that  the  former  shall  share  the  lia- 

(m)  2  Car.  &  Kir.  828.  bility  for  the  debts  of  the  concern, 

(n)  Helsby  v.   Mears,    5  B.  &  C.  does  not  entitle  the  creditors  to  sue 

504,  is  another  case  turning  on  the  him.     To  warrant  this  there  must 

same  principle  as  is  explained  by  be  some  agreement  between  him 

Lord  Denman  in  Beale  v.  Mouls,  10  and  the  creditors,  and  it  must  be 

Q.  B.  976.  founded   on   a  sufficient  consider- 

(o)  See  per  Parke,  J.,  in  Vere  v.  ation.     Morehead  v.  Wriston,  73  N. 

Ashby,  10  B.  &  C.  208;  Ex  parte  C.  398;  Pleiffer  v.  Hunt,  75  Ga.  513; 

Peele,  6  Ves.  602;  Ex  parte  Will-  Morris  v.  Marqueze,  74  id.  86;  Peters 

iams,  Buck,  13.  v.  McWilliams,  78  Va.  567;  Para- 

1  An  agreement  between  an  in-  dise  v.  Gerson,  32  La.  Ann.  532 ; 

495 


*20S 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


coming  partner  liable  to  the  creditors  of  the  old  firm  there 
must  be  some  agreement,  express  or  tacit,  to  that  effect 


Edick  v.  Green.  38  Hun,  202;  Hei- 
denheinier  r.  Franklin,  1  Tex.  App. 
(Civ.)  481;  Hatchett  v.  Blanton,  72 
Ala.  423;  Bracken  v.  Dillon,  64  Ga. 
243;  Ayres  v.  Gallup,  44  Mich.  13; 
Miller  v.  Stone,  34  N.  W.  Rep. 
(Wis.)  907;  Serviss  v.  McDonnell,  9 
Cent.  Rep.  (N.  Y.)  841 ;  S.  C.  14  N. 
East.   Rep.   314;  Butler  v.  Henry, 

48  Ark.  551 :  Ringo  v.  Wing,  5  So. 
West.  Rep.  787 ;  First  Nat.  Bk.  v. 
Newton,  14  Pac.  Rep.  (Colo.)  428. 
See,  also,  McLinden  v.  Wentworth, 
51  Wis.  170;  Citizens'  Bk.  v.  Hine, 

49  Conn.  236 ;  Farnsvvorth  v.  Board- 
man,  131  Mass.  115;  Re  Furness, 
15  Phila.  430;  S.  C.  39  Leg.  Intel. 
83;  Keller  v.  West,  39  Hun,  348; 
also,  x>ost.  See,  however,  Colt  v. 
Wilder,  1  Edw.  484;  Poole  v.  Hin- 
trager,  60  la.  180;  Arnold  v. 
Nichols,  64  N.  Y.  117;  McCracken 
v.  Milhous,  7  Bradw.  169. 

I.  bought  the  interest  of  H.  in 
the  firm  of  H.  &  W.,  and  with  W. 
gave  H.  a  bond  of  indemnity 
against  all  debts  of  the  old  firm, 
covenanting  to  pay  them:  held, 
that  the  creditors  of  the  old  firm 
had  no  right  of  action  against  the 
new  firm  upon  the  bond,  for  want 
of  privity  thereto.  Hicks  v.  Wyatt, 
23  Ark.  55. 

A.  and  B.  having  been  partners, 
C.  purchased  the  interest  of  A.  in 
the  firm,  agreeing  to  pay  one  half 
of  the  partnership  debts  of  A.  and 
B.,  and  B.  and  C.  then  formed  a 
partnership.  Afterwards,  differ- 
ences having  arisen  between  A.  on 
the  other  part,  and  B.  and  C.  on 
the  other  part,  they  submitted  the 
differences  to  arbitration,  and  an 
award  was  made  setting  forth, infer 


alia,  that  C.  had  purchased  from 
A.  an  undivided  one-half  of  the 
property,  etc.,  of  the  firm  of  A. 
and  B.,  and  had  engaged  in  the 
purchase  to  pay  half  of  the  debts 
of  said  firm,  etc.  Held,  that  the 
partnership  debts  of  A.  and  B.  did 
not  become  debts  of  the  firm  of  B. 
and  C.  by  the  terms  of  the  award. 
Hyer  v.  Norton,  26  Ind.  269. 

F.,  by  an  agreement  in  writing, 
purchased  the  interest  of  S.  in  the 
firm  of  S.  &  O.,  and  bound  him- 
self "  to  assume  all  the  debts  and 
liabilities  of  said  S.  in  the  late 
firm,  and  to  save  him  harmless 
on  account  of  all  debts  whatever 
of  said  firm."  Held,  that  a  creditor 
of  the  firm  was  entitled  to  be  sub- 
stituted to  a  personal  judgment 
against  F.,  on  his  agreement  in 
favor  of  S.,  the  latter  assenting 
thereto.  Francis  v.  Smith,  1  Duv. 
121. 

See  next  note  infra. 

As  to  whether  such  agreements 
are  within  the  statute  of  frauds 
there  is  some  difference  of  opinion. 
In  Poole  v.  Hintrager,  60  la.  180,  it 
was  held  an  incoming  partner  may, 
in  consideration  of  the  property 
acquired  by  the  purchase  of  an  in- 
terest in  the  firm,  bind  himself  to 
pay  the  firm  debts,  and  that  such 
agreement  is  not  within  the  statute 
of  frauds,  and  may  be  enforced  by 
the  creditors  of  the  firm  though 
total  strangers  to  the  agreement. 

So,,  where  one  firm  purchased 
the  assets  of  another  and  verbally 
agreed  to  pay  the  debts  out  of  the 
purchase  money,  it  was  held  that 
the  creditor,  being  beneficially  in- 
terested in  the  contract,  can  main- 


490 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*208 


entered  into  between  him  and  the  creditors,  and  founded  on 
some  sufficient  consideration.1     If  there  be  any  such  agree- 


tain  an  action  in  his  own  name, 
and  that  such  contract  is  not  within 
the  statute  of  frauds.  Wynn  v. 
Wood,  10  Weekly  Not.  Cas.  345. 

In  Paradise  v.  Gei-son,  32  La. 
Ann.  532,  on  the  other  hand,  it  was 
held  that  verbal  evidence  is  not 
admissible  to  prove  that  the  new 
partnership  has  promised  to  pay  a 
debt  of  the  former,  which  is  clearly 
a  third  party. 

See  post. 

One  G.  held  a  lease  from  plaint- 
iff of  a  store  in  which  he  was 
doing  business:  the  unexpired  term 
was  over  two  years.  He  entered  into 
a  copartnership  agreement  with 
defendant  for  the  term  of  one  year 
and  one  month.  In  the  prelimi- 
nary negotiations  it  was  agreed  by 
parol  that,  in  consideration  that 
G.  should  put  the  lease  into  the 
partnership,  the  rent  for  the  whole 
unexpired  term  should  be  regarded 
as  a  partnership  liability,  and  as 
one  of  the  debts  created  on  account 
of  the  firm.  By  the  written  agree- 
ment it  was  stipulated  that  each 
partner  should  be  equally  liable  for 
all  "  debts  and  liabilities  suffered 
or  created  by  or  on  account  of " 
the  firm  business.  No  mention 
was  made  in  this  agreement  of  the 
lease.  The  firm  continued  busi- 
ness for  about  eight  months,  and 
then  dissolved,  and  soon  there- 
after the  business  was  assigned  to 


another,  who  went  into  possession. 
In  an  action  to  recover  an  instal- 
ment of  rent  accruing  more  than 
a  year  after  the  formation  of  the 
partnership,  held  (Reynolds  and 
Johnson,  CO.,  dissenting),  that 
defendant  was  not  liable:  that  he 
was  not  liable  as  assignee  of  the 
lease,  for  the  reason  that  such 
liability,  if  it  ever  existed,  con- 
tinued so  long  only  as  the  privity 
of  estate  continued,  and  ceased 
upon  the  transfer  and  surrender 
of  possession ;  that  the  rent  could 
not  be  made  a  firm  debt  by  parol 
agreement,  as  such  a  term  could 
not  be  created  or  assigned  by  parol 
(2  R.  S.  135,  §  8),  and  that  the 
agreement  to  pay  the  rent  for  the 
whole  time  was  void,  and  by  its 
terms  it  could  not  be  performed 
within  a  year  (2  R.  S.  136,  §  2). 
Durand  v.  Curtis,  57  N.  Y.  7. 

Where  A.  rents  and  takes  pos- 
session of  a  warehouse,  and  after- 
wards associates  himself  in  busi- 
ness with  B.  and  C,  the  two  latter 
do  not  become  jointly  liable  with 
A.  for  the  rent  by  occupying  the 
building  with  him  for  partnership 
purposes.  Pierce  v.  Alspaugh,  83 
N.  C.  258.  See,  ho%vever,  Wilgus 
v.  Lewis,  8  Mo.  App.  336. 

An  incoming  partner  who,  upon 
a  sufficient  consideration,  expressly 
or  by  implication  adopts,  while 
executory,    a  contract  previously 


1  There  is  no  presumption  that 
one  who  becomes  a  member  of  an 
existing  firm  assumes  liability  for 
previous  debts  or  contracts  of  the 
firm.  Fuller  v.  Rowe,  56  Barb. 
344.     But,  on  the  contrary,  the  pre- 


sumption of  law  is  that  an  incom- 
ing partner  is  not  liable  for  debts 
of  the  firm  contracted  before  he 
entered.  Kountz  v.  Holthouse,  85 
Pa.  St.  235.  And  as  a  general  rule 
a  new  partner  is  not  bound  for  the 


Vol.  I  —  ; 


497 


f208 


EIGHTS    AND    OBLIGATIONS. 


[book  n. 


ment  the  incoming  partner  will  be  bound  by  it,  but  his  lia- 
bilities in  respect  of  the  old  debts  will  attach  by  virtue  of 


made  by  the  other  partner,  which 
contract  is  treated  by  both  con- 
tracting parties  as  one  made  with 
the  firm,  will  be  liable  the  same  as 
if  the  contract  had  been  made  in 
the  first  instance  with  the  new 
firm.  Lucas  v.  Coulter,  104  Ind.  81. 

Where  the  bailee  of  grain  stored 
for  the  owner,  upon  entering  into 
partnership  with  others  in  the  grain 
business,  receives  credit  for  the 
grain  so  stored  with  him  as  so 
much  capital,  the  firm  will  sustain 
the  same  relation  with  the  bailor 
as  the  original  bailee,  and  on  a 
sale  thereof  by  the  firm  all  its 
members  will  be  liable  to  the  bailor 
for  the  proceeds.  Rankin  v.  Shep- 
hardson,  89  111.  445. 

Where  a  broker  who  is  liable  for 
the  sale  of  his  principal's  bond 
subsequently  forms  a  copartner- 
ship with  his  employees  under 
agreement  that  the  broker  shall 
contribute  to  the  firm  all  the  assets 
in  his  former  business,  and  such 
firm  subsequently  renders  to  the 
principal  a  statement  of  such 
transaction  admitting  a  liability 
thereon  less  than  that  claimed  by 


the  principal,  but  admit  in  their 
answer  that  they  assumed  the  sum 
therein  named  as  a  part  of  the 
liabilities  of  the  original  business, 
they  thereby  adopt  the  whole  trans- 
action as  their  own  and  are  liable 
for  the  whole  amount  due  the 
principal.  Bate  v.  McDowell,  49 
N.  Y.  Super.  Ct.  106.  See,  also, 
Anderson  v.  Freeman,  75  Ga.  93. 

An  incoming  partner's  interest 
in  a  crop  to  be  raised  by  the  firm 
upon  which  an  equitable  lien  had 
been  created  prior  to  his  accession 
to  the  firm  will  be  subject  to  such 
lien.     Mayer  v.  Taylor,  69  Ala.  403. 

A  judgment  creditor  of  one  part- 
ner has  a  lien  on  the  partnership 
property  prior  to  the  members  of 
a  new  firm  to  whom  the  partner- 
ship property  is  conveyed  under  an 
agreement  that  they  shall  pay  off 
the  debts  of  the  old  firm.  Dill  v. 
Voss,  94  Ind.  590. 

An  agreement  with  an  incoming 
partner  to  assume  with  the  remain- 
ing partner  debts  of  the  old  firm 
will,  of  course,  be  vitiated  by 
fraud.  Morris  v.  Marqueze,  74  Ga. 
86. 


debts  of  the  firm  contracted  before 
he  became  a  member.  Babcock  v. 
Stewart,  58  Pa.  St.  179;  Deere  v. 
Plant,  42  Mo.  60 ;  Harp  v.  Tomlin- 
son,  2  Vt.  103;  Adkins  v.  Arthur, 
33  Tex.  431 ;  Atwood  v.  Lockhart, 
4  McLean,  350. 

Where,  however,  a  wife  becomes 
a  copartner  in  the  place  of  her  de- 
ceased husband,  the  presumption 
will  be  indulged  that  she  becomes 
liable  lor  his  partnership  debts, 
and  a  mortgage  executed  therefor 


is  sustained  by  a  good  considera- 
tion. Preusser  v.  Henshaw,  49 
Iowa,  41. 

The  cases  generally  lay  down 
the  rule  that  an  incoming  partner 
does  not  become  liable  for  ante- 
cedent debts  of  the  firm  without 
an  express  undertaking  to  that 
effect  upon  a  sufficient  considera- 
tion. Meador  v.  Hughes,  14  Bush, 
652;  Wright  v.  Brosseau,  73  111. 
381 ;  Parmalee  v.  Wiggenhorn,  6 
Neb.  322;  Fagan  v.  Long,  30  Mo. 


498 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*208 


the  new  agreement  and  not  by  reason  of  his  having  become 
a  partner. 


222;  Stenburgu.  Callanan,  14  Iowa, 
251.    See  ante. 

While,  however,  an  incoming 
partner  is  not  liable  for  the  prior 
debts  of  the  firm,  without  a  special 
promise,  yet  very  slight  testimony 
will  be  sufficient  to  prove  an  as- 
sumption by  him  of  those  debts. 
Cross  v.  Burlington  Nat.  Bank,  17 
Kan.  336.  See,  also,  Wheat  v. 
Hamilton,  53  Ind.  256. 

In  Shoemaker  Piano  Co.  v.  Ber- 
nard, 2  Lea  (Tenn.),  358,  the  rule  is 
more  correctly  laid  own,  that,  in 
order  to  hold  an  incoming  partner 
bound  for  the  pre-existing  debts  of 
a  firm,  he  must  become  liable  for 
such  debts  by  either  expressly  as- 
suming them  upon  proper  con- 
sideration, or  by  otherwise  dealing 
with  the  creditor  in  such  a  manner 
as  to  create  an  implied  obligation 
and  duty  to  pay  the  same  in  com- 
mon with  the  old  firm.  And  in 
either  aspect  of  the  rule  the  assent 
of  the  party  to  be  charged  and  the 
consent  of  the  creditor  to  accept 
the  new  liability  are  necessary  to 
the  new  partner's  liability.  See, 
also,  Fagan  v.  Long,  30  Mo.  222. 

In  other  words,  an  incoming 
partner  will  not  be  liable  to  a  firm 
creditor  for  an  old  debt  of  the  firm, 
unless  there  is  a  novation  of  the 
debt  by  a  new  promise  by  the  en- 
tire new  firm  upon  a  valid  consid- 
eration, and  a  discharge  of  the 
old  firm  upon  the  old  debt  Sten- 
burg  v.  Callanan,  14  Iowa,  251. 

As  to  what  amounts  to  a  nova- 
tion between  the  creditors  of  one 
partner  and  a  new  firm  formed 
upon  the  withdrawal  of  such  part- 
ner, see  York  v.  Orton,  65  Wis.  6. 


499 


See,  also,  generally,  Shafer's  Ap- 
peal, 99  Pa.  St.  246;  Simonds  v. 
Pierce,  51  Vt.  467 ;  White  v.  Thiel- 
ens,  106  Pa.  St.  173;  Parsons  v. 
Tillman,  95  Ind.  452. 

There  must  be  the  concurrent 
consent  of  three  parties  —  the  cred- 
itors, the  old  firm  and  the  new. 
Spaunhorst  v.  Link,  46  Mo.  197. 

In  Updike  v.  Doyle,  7  E.  I.  446, 
the  rule  is  stated  tbat  the  assump- 
tion by  incoming  partners  of  pre- 
existing debts  of  the  concern  may, 
both  at  law  and  in  equity,  either 
be  proved  by  their  express  cove- 
nant or  contract,  or  be  inferred 
from  the  terms  of  it,  or  from  the 
treatment  of  such  debts  by  the 
firm,  to  the  knowledge  of  the  in- 
coming partners,  as  the  debts  of 
the  new  firm. 

If  the  drawee  of  a  draft  given 
in  payment  for  goods,  before  its 
acceptance,  forms  a  partnership 
with  others,  and  the  partners  agree 
that  the  goods  shall  be  used  in  the 
partnership  business,  and  be  paid 
for  by  the  firm,  and  the  partner 
who  is  the  drawee  accepts  the 
draft  for  the  firm,  the  acceptance 
is  binding  on  the  paitner.  Mark- 
ham  v.  Hazen,  48  Ga.  570. 

A  partner  who  on  a  dissolution 
buys  his  copartner's  interest,  tak- 
ing the  assets,  is  bound,  though  not 
so  originally,  for  a  debt  which, 
from  entries  in  the  books  made 
the  basis  of  their  settlement,  it  ap- 
pears was  assumed  by  the  firm. 
The  settlement  ratifies  the  unau- 
thorized assumption.  Hopkins  v. 
Johnson,  2  La.  Ann.  842. 

Where  a  party  purchases  an  in- 
terest in  a  commercial  house,  enti- 


*208 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Evidence  of  agreement  to  do  so. —  An  agreement  by  an 
incoming  partner  to  make  himself  liable  to  creditors  for 


tling  him  "to  an  equal  undivided 
one-third  interest  and  ownership, 
and  to  all  stock  of  merchandise, 
bills  receivable,  and  debts  in  book 
accounts  on  hand,  due  or  owing  to 
the  firm  on  a  given  day  (over  and 
above  the  payment  of  the  liabilities 
of  said  firm),"  he  is  responsible  for 
the  debts  of  the  house  existing  at 
the  time  of  purchase.  Hughes  v. 
Waldo,  14  La.  Ann.  348. 

"Where  a  retiring  partner  sold  his 
interest  in  the  firm  to  A.,  who  un- 
dertook to  be  responsible  for  the 
firm's  debts  to  the  extent  of  the 
vendor's  liability,  and  he  became  a 
member  of  the  firm,  and  the  new 
firm  did  pay  some  of  the  old  firm's 
debts,  and  the  assets  which  the  re- 
tiring partner  left  were  sufficient  to 
pay  all  the  firm's  debts,  held,  in  a 
suit  by  the  retiring  partner  to  com- 
pel an  application  of  the  firm's  as- 
sets to  the  payment  of  the  old 
firm's  debts,  that  the  undertaking 
b}r  the  new  firm  to  pay  the  old 
firm's  debts  would  be  implied; 
but,  as  no  fraud  was,  proved, 
that  the  complainant  was  only 
entitled  to  be  repaid  that  which 
he  had  been  compelled  to  pay  as 
partner.  Peyton  v.  Lewis,  12  B. 
Mon.  356. 

A.,  being  a  member  of  a  firm, 
and  having  contributed  to  the 
stock  of  the  company  less  than  he 
had  agreed  on  forming  the  partner- 
ship, sold  out  his  interest  to  B., 
with  the  assent  of  the  other  part- 
ners, and  was  released  by  them 
from  all  liability  to  pay  any  of 
"the  debts  due  by,  or  demands 
which  might  be  brought  against, 
said  establishment."  Held,  thatB., 


succeeding  to  the  interest  of  A., 
took  upon  himself  the  liability  of 
A.  to  contribute  to  the  other  mem- 
bers of  the  firm.  Conwell  v.  San- 
didge,  5  Dana,  210. 

Two  consignees  became  partners 
for  the  transaction  of  commission 
business,  and,  circumstances  tend- 
ing to  show  that  they  turned  their 
separate  consignments  into  com- 
mon stock,  both  were  held  liable 
for  the  proceeds.  Dix  v.  Otis,  5 
Pick.  38. 

"Where  a  party  stores  grain  in  the 
cribs  of  one  buying  grain  for  him- 
self, but  which  grate  is  simply 
taken  for  storage  and  not  mixed 
with  other  grain  of  the  bailee,  and 
the  bailee  afterwards,  upon  enter- 
ing into  partnership  with  others  in 
the  business,  receives  credit  for  the 
grain  so  stored  with  him  as  so 
much  capital,  the  title  to  the  corn 
will  not  pass  to  them  as  in  the  case 
of  a  purchase  from  a  warehouse- 
man when  the  corn  is  commingled 
with  other  grain,  but  the  firm  will 
sustain  the  same  relation  to  the 
bailor  as  the  original  bailee,  and  on 
a  sale  of  such  corn  by  the  firm  all 
its  members  will  be  liable  to  the 
bailor  for  the  proceeds.  Rankin  v. 
Shephardson,  89  111.  445. 

A  copartner  cannot  make  an  in- 
coming partner  liable  for  the  pre- 
existing debts  by  giving  the  note 
of  the  new  firm  therefor.  Fagan 
v.  Long,  supra. 

A  commercial  partnership  is  not 
liable  on  the  obligations  contracted 
by  one  of  the  partners  previous  to 
the  formation  of  the  partnership, 
notwithstanding  the  fact  that  the 
partnership  was  to  continue   the 


500 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS. 


*208 


debts  owing  to  them  before  he  joined  the  firm  may  be,  and 
in  practice  generally  is,  established  by  indirect  evidence. 


same  business  in  which  the  obliga- 
tions were  contracted  and  that 
specified  portions  thereof  were  as- 
sumed by  the  individual  members. 
Mosseau  v.  Thebens,  19  La.  Ann. 
516. 

Where,  however,  in  an  action  on 
a  promissory  note  given  in  the 
name  of  a  firm  by  one  of  its  mem- 
bers to  the  plaintiff,  the  consider- 
ation of  which  was  in  part  goods 
sold  to  a  former  firm,  composed  of 
different  members,  although  carry- 
ing on  the  same  business,  there 
was  evidence  that,  at  an  interview 
lasting  an  hour,  at  which  the 
plaintiff's  account  was  presented 
and  examined  and  the  note  signed 
therefor,  J.  S.,  a  member  of  both 
firms,  was  present,  although  he 
did  not  join  in  the  conversation 
and  had  no  charge  of  the  financial 
business  of  the  firms ;  and  that  the 
account  was  made  out  to  the  new 
firm,  although  many  of  the  items 
were  due  from  the  old  firm ;  but 
there  was  no  evidence  of  any  in- 
tentional deception  on  the  part  of 
the  plaintiff,  it  was  held  that  the 
evidence  justified  the  jury  in  find- 
ing an  assent  by  J.  S.  to  the  giving 
of  the  note.  Shaw  v.  McGregory, 
105  Mass.  96. 

A.  agreed  in  writing  to  deliver 
two  thousand  cords  of  wood,  at  a 
specified  price  per  cord,  to  the 
plaintiff.  Afterwards  he  formed 
a  copartnership  with  B.  and  C.  in 
the  lumber  and  wood  business, 
and,  through  the  firm,  he  delivered 
a  part  of  the  wood,  the  firm  taking 
the  pay  in  their  name  and  remit- 
ting the  same  to  A.,  after  deduct- 


ing commissions.  Held,  in  a  suit 
by  the  plaintiff  against  the  firm  for 
failing  to  deliver  the  balance  of  the 
wood,  that  B.  &  C.  were  not  liable. 
Goodenow  v.  Jones,  75  111.  48. 

A  contract  between  two  firms  to 
pack  pork  on  joint  account  did  not 
have  the  effect  of  consolidating  the 
two  firms  or  of  making  either 
liable  for  the  antecedent  debts  of 
the  other.  Meader  v.  Hughes,  14 
Bush,  652. 

The  assignment  of  its  assets  for 
the  benefit  of  its  creditors,  made 
by  a  defunct  partnership  to  an  in- 
dividual member  of  a  new  partner- 
ship succeeding  to  the  former 
business  of  the  old  concern,  will 
not  make  the  new  partnership 
liable  to  the  defunct  partnership 
for  the  value  of  any  of  its  assets, 
and  therefore  not  amenable  to  a 
garnishment  at  the  suit  of  any 
creditor  of  the  defunct  concern. 
Bancker  v.  Harrington,  30  La.  Ann. 
136. 

Where  the  purchaser  of  a  lot  of 
mules  upon  credit,  which  were  to 
be  delivered  to  him  at  a  future 
time,  before  their  delivery  formed 
a  partnership  with  another  person, 
with  the  agreement  that  the  mules 
were  to  be  put  into  the  joint  stock 
and  sold  on  joint  account,  and  they 
were  so  sold,  held,  that  the  surety 
on  the  notes  given  by  the  purchaser 
for  the  mules,  who  had  been  com- 
pelled to  pay  the  notes,  could  not 
hold  the  partner  liable  as  a  joint 
purchaser.  Duncan  v.  Lewis,  1 
Duv.  183. 

Where  a  partnership  between  at- 
torneys was  dissolved  after  a  suit 


501 


:"208 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


The  courts,  it  has  been  said,  lean  in  favor  of  such  an  agree- 
ment, and  are  ready  to  infer  it  from  slight  circumstances,  (p)1 
and  they  seem  formerly  to  have  inferred  it  whenever  the 
incoming  partner  agreed  with  the  other  partners  to  treat 
such  debts  as  those  of  the  new  firm.  (//)  But  this  cer- 
tainly is  not  enough,  for  the  agreement  to  be  proved  is  an 
agreement  with  the  creditor;  and  of  such  an  agreement 


begun,  and  a  new  partnership 
formed  by  one  of  the  former  part- 
ners and  a  new  partner,  whicii  in 
turn  was  dissolved  before  the 
money  in  the  suit  was  collected,  an 
action  for  detaining  the  amount 
collected  cannot  be  maintained 
against  the  new  partner,  the  other 
alone  having  been  attorney  of  rec- 
ord in  that  suit.  Ayrault  v.  Chani- 
berlin,  26  Barb.  83. 

Where  debts  of  an  old  firm  are 
charged  to  the  new  firm  on  its 
books,  the  rule  that  entries  on  the 
books  of  a  firm  shall  bind  the  firm 
has  no  application  to  the  liability 
of  the  new  partner  for  debts  of  the 
old  firm  so  charged,  unless  lie  had 
access  to  the  books  and  was  thereby 
enabled  to  know  what  had  been 
done.  In  such  case  his  consent  to 
be  bound  will  be  implied  if  he  fail 
to  object  at  the  time  when  he  first 
has  notice  of  such  entries.  Shoe- 
maker Piano  Co.  v.  Bernax-d,  2 
Lea  (Tenn.),  358. 

Goods  were  purchased  by  one 
person  for  whicb  a  promissory  note 
was  given.  Afterwards  he  entered 
into  partnership  with  another,  and 
by  consent  of  both  partners  and  of 
the  holder  of  the  note  the  words 
"  and  company  "  were  added  to  the 
signature  of  the  maker,  to  make 
the  note  stand  against  the  firm. 
Held,  that  the  note  was  binding  on 


the  partnership.     Crum  v.  Abbott, 
2  McLean,  233. 

A  new  firm,  though  composed 
entirely  of  a  portion  of  the  mem- 
bers of  a  former  firm  which  is  dis- 
solved, cannot  be  sued  jointly  in 
their  partnership  name  for  the  debt 
of  the  old  firm.  Shorter  v.  High- 
tower,  48  Ala.  526. 

(p)  Ex  parte  Jackson,  1  Ves.  Jr. 
131 ;  Ex  parte  Peele,  6  Ves.  602. 
See,  also,  Rolfe  v.  Flower,  L.  R.  1 
P.  C.  27. 

1  As  to  what  evidence  is  compe- 
tent to  show  that  a  new  firm  has 
by  promissory  note  assumed  the 
debts  of  a  prior  firm,  see  Kaiser  v. 
Fendrick,  98  Pa.  St.  528. 

When  the  dissolution  of  an  old 
firm  has  occurred  and  a  new  firm 
has  agreed  to  assume  the  liabilities 
of  the  old,  but  slight  circumstances 
are  required  to  justify  finding  an 
intention  on  the  part  of  a  creditor 
of  the  old  firm  who  has  notice  of 
the  dissolution  and  of  such  agree- 
ment to  accept  the  liability  of  the 
new  firm  in  place  of  that  of  the 
old.  Facts  in  this  case  held  to  show 
such  an  intention  on  the  part  of 
the  creditor  of  the  old  firm.  Reg. 
ester  v.  Dodge,  61  How.  Pr 
107;  S.  C.  19  Blatch.  79;  6  Fed. 
Rep.  6. 

(q)  See  Cooke's  Bank.  Law,  534 
(8th  ed.),  citing  Ex  parte  Bingham 


502 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *209 

an  arrangement  between  the  partners  is  of  itself  no  evi- 
dence, (r) 

As  an  instance  where  an  incoming  partner  made  himself 
liable  for  debts  contracted  by  the  firm  before  he  joined  it, 
reference  may  be  made  to  Ex  parte  Whitmore.  (s)  In 
that  *case  Warwick  and  Clagett  became  partners.  [*209J 
Warwick,  who  had  had  dealings  with  merchants  in 
America,  informed  them  that  he  had  taken  Clagett  into 
partnership,  and  requested  them  to  make  up  their  accounts 
and  transfer  any  balance  due  to  or  from  him  (Warwick)  to 
the  new  firm.  These  instructions  were  repeated  and  con- 
firmed by  Warwick  and  Clagett,  and  were  acted  on.  A  debt 
owing  from  Warwick  was  placed  to  the  debit  of  the  new  firm, 
and  a  bill  was  drawn  on  the  firm  for  the  amount  of  the 
debt,  and  was  accepted,  but  was  dishonored.  On  the  bank- 
ruptcy of  the  firm  it  was  held  that  the  debt  in  question  had 
become  the  joint  debt  of  Warwick  and  Clagett,  and  not 
only  so,  but  that  the  joint  liability  of  the  two  had  been  ac- 
cepted in  lieu  of  the  sole  liability  of  Warwick. 

Bills  by  old  partners  for  old  debts  a  fraud  on  new  part- 
ner—  Account  stated  in  respect  of  old  debt. —  Before 
leaving  this  subject  it  may  be  as  well  to  observe  that,  as 
an  incoming  partner  does  not,  by  the  fact  of  entering  the 
firm,  take  upon  himself  the  then  existing  liabilities  thereof, 
if,  after  he  has  joined  the  firm,  his  copartners  give  a  bill 
or  note  in  their  and  his  name  for  a  debt  contracted  by 
them  alone,  this  is  prima  facie  a  fraud  upon  him,  and  con- 
sequently he  will  not  be  liable  to  a  holder  with  notice,  (t) 
For  similiar  reasons  an  incoming  partner  will  not,  it  is 
apprehended,  be  liable  to  pay  a  debt  contracted  before  he 
became  a  partner,  merely  because  his  copartner  has  after- 

and  Re  Staples;  Ex  parte  Clowes,  2        (s)  3  Deac.  365.     See,  also,  Rolfe 
Bro.  C.  C.  595.  v.  Flower,  L.  E.  1  P.  C.  27,  which 

(r)  Ex  parte  Peele,   6  Ves.  602 ;    was  a  stronger  case. 
Ex  parte  Parker,  2  M.  D.  &  D.  511.        (t)  See  Shirreff  v.  Wilks,  1  East, 
See,  also,  Ex  parte  Freeman,  Buck,     48,  ante,  p.  173. 
471;  Ex  parte  Fry,  1  Gl.  &  J.  96; 
Ex  parte  Williams,  Buck,  13. 

503 


*210  EIGHTS   AND   OBLIGATIONS.  [BOOK    II. 

wards  stated  an  account  with  the  creditor,  and  thereby 
admitted  that  the  debt  in  question  is  due  from  the  firm,  (u) 
But,  as  will  be  seen  hereafter,  an  incoming  partner,  unless 
he  takes  care,  may  find  himself  liable  to  pay  the  balance  of 
an  open  running  account,  commencing  before  he  joined  the 
firm  and  continued  afterwards,  although  payments  have 
been  made  since  he  joined  the  firm  sufficient  to  liquidate 
that  part  of  the  account  for  which  he  is  directly  respon- 
sible, (a?) 

[*210]  *2.  Termination  of   Liability. 

When  a  partner's  liability  ends. —  Before  examining  the 
circumstances  which  put  an  end  to  a  partner's  liability  to 
creditors  of  the  firm,  it  is  necessary  to  draw  attention  to 
the  distinction  between  a  partner's  liability  for  what  may 
be  done  after  his  copartners  have  ceased  to  be  his  agents, 
and  his  liability  for  what  may  have  been  done  whilst  their 
agency  continued.  It  is  obvious  that  there  may  be  many 
circumstances  which  have  no  effect  upon  a  liability  already 
accrued,  but  which,  nevertheless,  may  prevent  any  liability 
for  what  is  not  yet  done  from  arising ;  and  in  order  to  de- 
termine with  accuracy  the  events  which  put  an  end  to  a  part- 
ner's liability  to  creditors,  it  is  necessary  to  distinguish  his 
liability  for  the  future  from  his  liability  for  the  past. 

A.  Termination  of  liability  as  to  future  acts. 

A  partner's  agency  ends  by  notice. —  The  agency  of  each 
partner  in  an  ordinary  firm,  and  his  consequent  power  to 
bind  the  firm,  i.  e.,  himself  and  his  copartners,  may  be  de- 
termined by  notice  at  any  time  during  the  continuance 
of  the  partnership;  (y)  for  his  power  to  act  for  the  firm  is 

(u)  See,   as  to  accounts   stated,  Jur.    N.    S.    559,    noticed    infra, 

French  v.  French,  2  Man.   &  Gr.  under  the  of  Appropriation  of  Pay- 

644,  and  Lemere  v.  Elliott,  6  EL  &  ments. 

N.  656.  (y)  See  Vice  v.  Fleming,  1  Y.  & 

(x)  See  Beale   v.  Caddick,  2  H.  J.  227 ;  Willis  v.   Dyson,  1   Stark. 

&  N.  326,    and  Scott  v.  Beale,  6  164;  Rooth  v.  Quin,  7  Price,  193; 

504 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *211 

not  a  right  attaching  to  him  as  partner  independently  of 
the  will  of  his  copartners;  and  although  any  stipulations 
amongst  the  partners  themselves  will  not  affect  non-part- 
ners who  have  not  notice  of  them,  yet  if  any  person  has 
notice  that  one  member  of  the  firm  is  not  authorized  to  act 
for  it,  that  person  cannot  hold  the  firm  liable  for  anything 
done  in  the  teeth  of  such  notice,  (s)  * 

With  one  or  two  exceptions,  which  will  be  mentioned 
presently,  the  agency  of  each  partner,  and  his  consequent 
power  to  bind  his  copartners,  can  only  be  effectually  deter- 
mined by  giving  notice  of  its  revocation.  The  authority 
imputed  to  each  partner  must  continue  until  some  event 
happens  to  put  an  end  to  it,  and  this  event  ought  to  be  as 
generally  known  as  that  which  conferred  the  au- 
thority upon  *him.  The  same  reason  which  leads  [*211] 
to  the  imputation  of  the  power  to  act  for  the  firm 
at  all  demands  that  such  power  shall  be  imputed  so  long 
as  it  can  be  exercised  and  is  not  known  to  have  been  deter- 
mined, (a) 

To  this  principle  there  are  exceptions  which  may  be  con- 
veniently disposed  of  before  the  principle  itself  and  its 
application  are  discussed. 

Effect  of  death. —  1.  When  a  partner  dies.2  Notice  of 
death  is  not  requisite  to  prevent  liability  from  attaching  to 

Galway  v.  Mathew,  1   Camp.  402,  (a)  As  to  the  liability  of  an  out- 

and  10  East,  264.  going  partner  for  the  acts  of  his 

(z)  This  subject  has  been  already  late  partners  and   a  new  partner, 

discussed.     See  ante,  p.  170  et  seq.  see  Scarf  v.   Jardine,  7  App.  Ca. 

1  When  property  was  bailed  to  a  345,  noticed  ante,  pp.  46  and  197. 

partnership  for  no  definite   time,  2  Contracts  for  the  service  of  at- 

and  the  bailor  could  have  removed  torneys  who  are  partners  in  busi- 

it  at  his  pleasure,  one  of  the  part-  ness  calling  for  professional  skill 

ners,  upon  retiring  from  the  part-  entitle  the  client  to  the  service  of 

nership,  may  give  the  bailor  notice  each  partner,  and  are  determined 

of  his  retiring  and  require  him  to  by    the    death   of  either  partner, 

remove  the  property,  and  absolve  McGill  v.  McGill,  2  Mete.  (Ky.)  258. 

himself  from  any  liability  for  loss  The  firm  of  T.  &  Co.  contracted 

of  property  occurring  after  his  re-  with  M.   for  the  manufacture  of 

tirement.     Winston  v.  Taylor,   28  boilers.     Before  thej»  were  deliv- 

Mo.  82.     See  post.  ered,  T.,  a  member  of  the  firm  of 

505 


*211 


EIGUTS    AND    OBLIGATIONS. 


[liOOK    II. 


the  estate  of  a  deceased  partner  in  respect  of  what  may  be 
done  by  his  copartners  after  his  decease,  (b) l  For,  by  the 
law  of  England,  the  authority  of  an  agent  is  determined  by 
the  death  of  his  principal,  whether  the  fact  of  death  is 
known  or  not.  (c) 2 

The  death  of  one  partner  does  not,  however,  determine 
an  authority  given  by  the  firm  through  him  before  his 
death ;  and  consequently,  if,  after  his  death,  such  an  author- 
ity is  acted  on,  the  surviving  partners  will  be  liable  for  it. 
In  Usher  v.  Dauncey,  (d)  bills  were  drawn  and  indorsed  in 
blank  by  a  partner  in  the  name  of  the  firm,  and  were  given 
by  him  to  a  clerk  to  be  filled  up  and  negotiated  as  occasion 
might  require.  The  partner  in  question  died,  and  after  his 
death,  and  after  the  name  of  the  firm  had  been  altered,  one 
of  the  bills  was  filled  up  and  negotiated.  Lord  Ellenbor- 
ough  held  that  the  bill  was  binding  on  the  surviving  part- 
ners, considering  that  the  power  to  fill  up  the  bill  emanated 


T.  &  Co.,  died.  The  boilers  were 
sent  to  the  survivors  of  the  firm, 
who  continued  the  business  in  the 
old  name,  and  they  executed  notes 
for  the  price  in  the  old  firm  name. 
Subsequently  the  surviving  part- 
ners purchased  T.'s  interest  in  the 
business,  and  afterwards  made  a 
general  assignment  for  the  benefit 
of  creditors.  Held,  on  a  proceeding 
in  chancery  by  M.  against  the  ad- 
ministrators of  T.  and  the  surviving 
partners  to  enforce  the  payment  of 
his  claim  by  the  estate  of  T.,  that 
this  was  an  indebtedness  subsisting 
against  the  firm  of  T.  &  Co.  in  T.'s 
life-time,  and  contracted  before  the 
firm  was  dissolved  by  T.'s  death, 
the  notes  executed  by  the  surviv- 
ors being  mere  evidence  of  the 
amount  of  the  debt  and  the  time  of 
payment,  and  the  debt  existing  in- 
dependent of  the  notes,  and  that 


said  indebtedness  was  a  debt  for 
which  the  separate  estate  of  T.  was 
responsible.  Mason  v.  Tiffany,  45 
111.  392. 

(6)  Devaynes  v.  Noble,  Houlton's 
Case,  1  Mer.  616;  Johnes'  Case,  id. 
619;  Brice's  Case,  id.  620;  Webster 
v.  Webster,  3  Swanst.  490.  See 
Vulliamy  v.  Noble,  3  Mer.  614; 
Brown  v.  Gordon,  16  Beav.  302,  as 
to  the  power  of  surviving  partners, 
who  are  the  executors  of  the  de- 
ceased partner,  to  bind  his  estate. 

^ee  Dickinson  v.  Dickinson,  25 
Gratt.  321 ;  Williams  v.  Mathews, 
14  La.  Ann.  11. 

(c)  See  Blades  v.  Free,  9  B.  &  C. 
167;  Smout  v.  Ilbery,  10  M.  &  W. 
1;  Campanari  v.  Woodburn,  15  C. 
B.  400. 

2  See  E well's  Evans  on  Agency, 
*87  and  note. 

(d)  4  Camp.  97. 


506 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  '"212 

from  the  partnership  and  not  from  the  individual  partner 
who  had  died.1 

Contribution  after  death.—  Moreover,  it  does  not  follow- 
that,  because  a  creditor  has  no  remedy  against  the  estate  of 
a  deceased  partner  in  respect  of  debts  contracted  by  his  co- 
partners since  his  death,  his  estate  is  not  liable  to 
contribute  to  such  debts  at  the  suit  of  the  ^surviving  [*212] 
partners.  That  is  a  different  matter  altogether,  and 
depends  on  the  agreement  into  which  he  entered  with  his 
copartners,  as  will  be  seen  hereafter  when  the  subject  of 
dissolution  is  under  consideration,  (e) 

Effect  of  bankruptcy. —  2.  "When  a  firm  becomes  bank- 
rupt the  authority  of  each  member  to  act  for  the  firm  at 
once  determines.2  If  one  partner  only  becomes  bankrupt 
his  authority  is  at  an  end,  and  his  estate  cannot  be  made 
liable  for  the  subsequent  acts  of  his  solvent  copartners.  At 
the  same  time,  if,  notwithstanding  the  bankruptcy  of  one 
partner,  the  others  hold  themselves  out  as  still  in  partner- 
ship with  him,  they  will  be  liable  for  his  acts,  as  if  he  and 
they  were  partners;  (f)  and  although  the  estate  of  a  bank- 
rupt partner  does  not  incur  liability  for  the  acts  of  the  other 
partners  done  since  the  bankruptcy,  yet  the  solvent  part- 
ners have  power  to  bring  the  partnership  transactions  to 
an  end  and  to  dispose  of  the  partnership  property.  This 
subject  will  be  examined  hereafter  in  the  chapter  on  Bank- 
ruptcy, to  which  the  reader  is  therefore  referred,  (g) 

Effect  of  retirement  of  dormant  partner.  —  3.  Another 
apparent  but  not  real  exception  to  the  rule  is  that,  if  a  dor- 

1  See  Bank  of  N.  Y.  v.  Vander-  Hamer's  Devisees'  Case,  2  De  G.  M. 

horst,    32    N.   Y.   553 ;  Wilson    v.  &  G.  366. 

Stewart,  5  Pa.  L.  J.  R.  450 ;  EvvelTs  2  See  Dickinson  v.  Dickinson,  25 

Evans  on  Agency,  *87,  note.  Gratt.  321. 

(e)  For  instances  where  the  estate  (/)  See  Lacy  v.  Woolcot,  2  Dowl. 

of  a  deceased  shareholder  has  been  &  Ry.  458. 

held  liable  to  contribute  to  debts  (g)  See  Fox  v.  Hanbury,  Cowp. 

incurred    since    his    decease,    see  445;   Morgan    v.    Marquis,    9    Ex. 

Baird's  Case,  5  Ch.  725 ;  Blakeley's  145. 
Executor's  Case,  3  Mc.  &  G.  726; 

507 


*213 


EIGHTS    AND    OBLIGATIONS. 


[HOOK    II. 


mant  partner  (i.  e.,  one  not  known  to  be  a  partner)  (A) ! 
retires,  the  authority  of  his  late  partners  to  bind  him  ceases 
on  his  retirement,  although  no  notice  of  it  be  given.2  But 
this  is  because  he  never  was  known  to  be  a  partner  at  all, 
and  the  reason  for  the  general  rule  has  therefore  no  appli- 
cation to  his  case.  The  following  decisions  illustrate  this 
exception:  In  Carter  v.  WhaUey,  (i)  the  defendant  Saund- 
ers was  a  partner  in  the  "  Plas  Madoc  Colliery  Co."  but 
there  was  nothing  to  show  that  the  plaintiff  or  the  public 
ever  knew  that  such  was  the  case.  Saunders  withdrew 
from  the  company,  but  no  notice  of  his  withdrawal  was  given 

either  to  the  plaintiff  or  to  the  public.     After  his 
[*213]  withdrawal  the  company  became  indebted  to  *the 

plaintiff,  and  it  was  held  that  Saunders  was  not  liable 
for  the  debt,  because  the  name  of  the  company  gave  no  in- 
formation as  to  the  parties  composing  it,  and  Saunders  him- 
self was  not  known  either  to  the  plaintiff  or  to  the  public 
to  have  belonged  to  the  company  before  he  withdrew. 
In  Heath  v.  Sansom,  (k)  the  defendants  Sansom  and  Evans 


(h)  A  du/mant  partner,  known  to 
a  few  persons  to  be  a  partner,  is  not 
dormant  as  to  them.  See  the  cases 
cited  infra,  note  (r). 

1  When  there  is  an  existing  part- 
nership under  a  fixed  firm  name, 
and  a  new  partner  is  taken  in,  and 
there  is  no  change  in  the  firm 
name,  the  new  partner  is  to  be 
considered  a  dormant  partner,  un- 
less it  appears  that  his  connection 
with  the  firm  is,  by  publication  or 
other  acts,  made  known  to  the  pub- 
lic.    Phillips  v.  Nash,  47  Ga.  218. 

Where  two  were  concerned  to- 
gether in  business,  but  the  busi- 
ness was  done  in  the  name  of  one, 
and  it  was  not  generally  known 
that  they  were  partners,  held,  that 
the  other  was  a  dormant  partner. 
Kelley  v.  Hurlburt,  5  Cow.  534. 

One  who  is  a  member  of  a  part- 


nership, trading  under  the  firm 
name  of  R.  M.  &  Co.,  does  not  be- 
come a  dormant  partner  by  reason 
of  the  creditor  being  ignorant  of 
the  name  of  the  copartner  of  R.  M. 
Deford  v.  Reynolds,  36  Pa.  St.  325. 

2  Kelley  v.  Hurlburt,  5  Cow.  534; 
Edwards  v.  McFall,  5  La.  Ann.  1G7; 
Warren  v.  Ball,  37  111.  76;  Scott  v. 
Colmesnil,  7  J.  J.  Marsh.  416;  Ma- 
gill  v.  Merrie,  5  B.  Mon.  168 ;  De- 
ford  v.  Reynolds,  36  Pa.  St.  325; 
Oppenheimer  v.  Clemmons,  18  Fed. 
Rep.  886.  See,  however,  Park  v. 
Wooten,  35  Ala.  242. 

In  the  case  of  creditors  who 
knew  him  to  be  a  member,  notice 
of  retirement  is  necessary.  Oppen- 
heimer v.  Clemmons,  supra;  Ewing 
v.  Frippe,  73  Ga.  776. 

(i)  1  B.  &  Ad.  11. 

(fc)  4  B.  &  Ad.  172. 


508 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  '"213 

carried  on  business  as  partners  under  the  style  of  Philip 
Sansom  dk  Co.,  but  Evans  was  not  known  to  be  a  partner. 
They  dissolved  partnership  by  mutual  agreement,  but  did 
not  notify  the  fact.  After  the  dissolution  Sansom  gave  the 
plaintiff  a  promissory  note,  on  which  he  sued  Sansom  and 
Evans.  The  court  decided  that  Evans  was  not  liable,  for 
when  his  right  to  share  profits  ceased  he  could  not  be  held 
responsible  for  the  subsequent  acts  of  his  copartner,  unless 
he  authorized  those  acts  or  held  himself  out  as  still  con- 
nected with  him,  and  he  had  done  neither.  (Z) 

Effect  of  lunacy. —  With  the  three  exceptions  which  have 
been  noticed  the  general  proposition  above  stated  holds 
good.  Thus,  if  a  partner  becomes  lunatic,  and  his  lunacy 
is  not  apparent  or  made  known,  his  power  to  bind  the  firm 
and  his  liability  for  the  acts  of  his  copartners  (m)  will  re- 
main unaffected. 

Effect  of  dissolution  of  which  no  notice  is  given. —  So 
if  a  partnership  is  dissolved,  or  one  of  the  known  members 
retires  from  the  firm,  until  the  dissolution  or  retirement  is 
duly  notified  the  power  of  each  to  bind  the  rest  remains  in 
full  force,  although  as  between  the  partners  themselves  a 
dissolution  or  a  retirement  is  a  revocation  of  the  author- 
ity of  each  to  act  for  the  others,  (w)1     Thus,  if  a  known 

(J)  See,  too,  Evans  v.  Druramond,  iv,  chapter  1,  section  2,  to  show 
4  Esp.  89.  This  doctrine  seems  not  that  the  lunacy  of  one  partner 
to  apply  to  Scotland.  See  Hay  v.  does  not  dissolve  the  firm.  See, 
Mair,  3  Ross,  L.  C.  on  Com.  Law,  further,  on  this  subject,  Story  on 
639.  The  case  of  The  Western  Bank  Agency,  section  481,  and  note 
of  Scotland  v.  Needell,  1  Fos.  &  there.  See,  also,  Drew  v.  Nunn, 
Fin.  461,  seems  at  first  sight  op-  4  Q.  B.  D.  661. 
posed  to  the  authorities  in  the  text,  (n)  See  Mulford  v.  Griffin,  1  Fos. 
But  it  is  conceived  that  in  that  case  &  Fin.  145 ;  Faldo  v.  Griffin,  id. 
there  must  have  been  evidence  to  147,  and  the  cases  in  the  next  note, 
show  that  the  defendant  was  l  Tabb  v.  Gist,  1  Brock.  33 ;  South- 
known  to  the  plaintiffs  to  have  wick  v.  McGovern,  28  Iowa,  533; 
been  a  partner  before  he  retired.  Bradley  v.  Camp,  Kirby,  77 ;  Ken- 

(m)See  Molton  v.  Camroux,  2  Ex.  nedy  v.  Bohannon,  11  B.  Mon.  118; 

487,  and  4  id.  17;  and  Baxter  v.  Amidown  v.   Osgood,  24  Vt.  278; 

The  Earl  of  Portsmouth,  5  B.  &  C.  Lamb  v.  Singleton,  2  Beav.  490; 

170,  and  the  cases  cited  post,  book  Heroy  v.  Van  Pelt,   4  Bosw.  60 ; 

509 


*214 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


[*214]  partner  ^retires,  and  no  notice  is  given,  he  will  be 
liable  to  be  sued  in  respect  of  a  promissory  note  made 


Schurten  v.  Davis,  21  La.  Ann. 
173;  Dickinson  v.  Dickinson,  25 
Gratt.  321 ;  Southern  v.  Grim,  67 
111.  106;  Howell  v.  Adams,  68  N.  Y. 
314;  Benjamin  v.  Covert,  47  Wis. 
375;  S.  C.  55  id.  157;  S.  C.  2  N.  W. 
Rep.  N.  S.  625;  Buffalo  City  Bank 
v.  Howard,  35  N.  Y.  500 ;  Hunt  v. 
Hall,  8  Ind.  215;  Newcomet  v. 
Brotzman,  69  Pa.  St.  185;  Price 
v.  Towsey,  3  Litt.  423 ;  Ketcham  v. 
Clarke,  6  Johns.  144;  Merrit  v.  Pol- 
lys, 16  B.  Mon.  355 ;  Grady  v.  Rob- 
ison,  28  Ala.  289 ;  Holt  v.  Simmons, 
16  Mo.  App.  97 ;  Richards  v.  Butler, 
65  Ga.  593;  Richards  v.  Hunt,  id. 
342;  Long  v.  Garnett,  59  Tex.  229; 
Coggswell  v.  Davis,  65  Wis.  191 ; 
Uhl  v.  Harvey,  78  Ind.  26:  St. 
Louis  Electric  Lamp  Co.  v.  Man- 
hall,  1  S.  E.  Rep.  430 ;  Clement  V. 
Clement,  35  N.  West.  Rep.  (Wis.) 
17 ;  Foellinger  v.  Leh,  9  West.  Rep. 
(Ind.)  75;  Bloch  v.  Price,  32  Fed. 
Rep.  562;  Spears  v.  Toland,  1  A.  K. 
Marsh.  203;  Thurston  v.  Perkins, 
7  Mo.  29 ;  Princeton,  etc.  Turnpike 
Co.  v.  Gulick,  16  N.  J.  L.  161 ;  Ber- 
nard v.  Torance,  5  Gill  &  J.  383. 
See.  also,  Woodruff  v.  King,  47 
Wis.  261. 

See,  however,  Brisban  v.  Boyd, 
4  Paige,  17,  where  it  was  held  that 
a  contract  by  a  customer  of  a  part- 
nership with  one  of  the  partners, 
on  account  of  the  firm,  after  a  dis- 
solution, but  without  notice  of  the 
dissolution,  will  not  bind  the  firm, 
unless,  by  the  avoidance  of  the 
contract,  the  customer  would  suffer 
a  loss,  or  be  put  in  a  worse  situa- 
tion than  he  would  have  been  in 
had  he  been  advised  of  the  dissolu- 
tion before  making  the  contract. 


Where  one  of  three  partners  re- 
tires from  or  a  new  partner  comes 
into  the  firm,  or  both,  and  notice 
thereof  is  given,  but  the  business 
continues  to  be  carried  on  in  other 
respects  as  before,  those  partners 
as  to  whom  no  notice  was  given 
will  be  presumed  to  hold  the  same 
relation  to  the  concern  afterwards 
that  they  did  before.  Howe  v. 
Thayer,  17  Pick.  91. 

Where  two  individuals  compos- 
ing a  firm  divide  the  stock  between 
them,  and  carry  on  separate  estab- 
lishments in  the  firm  name,  and 
either  of  them  purchases  goods  on 
credit  in  the  firm  name,  in  the  ab- 
sence of  personal  or  public  notice 
to  the  creditor  that  the  firm  is  dis- 
solved, either  or  both  partners  may 
be  held  for  the  debt.  Moline  Wagon 
Co.  v.  Rummell,  2  McCrary,  C.  Ct. 
307;  S.  C.  14  Fed.  Rep.  155;  12  id. 
658. 

Where  partners  have  dealt  as 
such  with  a  vendor,  and  after  be- 
coming incorporated  continue  to 
deal  as  before,  having  their  bills 
made  in  the  same  way  without 
giving  any  notice  of  their  altered 
condition,  they  will  continue  to  be 
liable  as  partners  until  the  sellers 
have  knowledge  thereof  derived 
from  some  other  source.  Martin 
v.  Fewell,  79  Mo.  401. 

To  establish  the  liability  as  part- 
ners of  defendants  who  have  dis- 
solved partnership  it  must  appear: 
1,  that  the  plaintiff,  at  the  time  the 
contract  was  made  under  which 
his  account  accrued,  knew  that  the 
defendants  had  been  in  partner- 
ship; 2,  that  he  was  ignorant  of 
their  dissolution;  and  3,  that  he 
510 


OH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*214 


since  his  retirement  by  his  late  partner,  even  though  the 
plaintiff  had  no  dealings  with  the  firm  before  the  making 


made  the  contract  supposing  he 
was  contracting  with  the  defend- 
ants as  partners,  and  in  reliance 
upon  their  joint  liability.  Pratt  V. 
Page,  32  Vt,  13;  Benton  v.  Cham- 
berlain, 23  Vt.  711. 

After  dissolution  and  notice  the 
power  of  each  to  bind  the  others 
ceases.  See  the  cases  already  cited ; 
also  Crowly  v.  Bank  of  Ky.  18  B. 
Mon.  405;  Whitesides  v.  Lee,  1 
Scam.  548 ;  Lane  v.  Tyler,  48  Me. 
252. 

A  bill  of  exchange  drawn  by  a 
partnership  and  sent  to  an  agent 
for  sale,  but  sold  after  notice  to 
the  agent  and  the  purchaser  that 
one  partner  has  retired,  binds  the 
remaining  partner  only.  Robb  v. 
Mudge,  14  Gray,  534. 

The  principle  that,  after  a  part- 
nership is  dissolved,  one  partner, 
dealing  with  a  person  who  has  no 
notice  of  the  dissolution,  may  bind 
his  copartner,  applies  only  to  trans- 
actions in  the  usual  course  of  busi- 
ness. Whitman  v.  Leonard,  3  Pick. 
177. 

If,  after  dissolution,  one  partner 
executes  a  note  in  the  individual 
names  of  both  partners  (not  the 
firm  name),  for  goods  in  the  line  of 
their  business  sold  to  him  on  the 
firm's  credit  by  one  who  dealt  with 
the  firm  and  had  no  knowledge  of 
the  dissolution,  the  note  will  bind 
both.  Iddings  v.  Pierson,  100  Ind. 
418. 

Where  a  firm  executes  a  continu- 
ing guaranty  for  the  payment  of  a 
sum  by  another  the  guaranty  is 
joint,  and  notice  to  the  guarantee 
of  the  dissolution  of  the  firm  de- 
termines its  right  to  make  further 


advances  on  the  faith  of  such 
guai-anty,  or  to  make  further  re- 
newals of  existing  obligations. 
City  National  Bank  v.  Phelps,  86 
N.  Y.  484;  S.  C.  16  Hun,  158. 

A  firm  ordering  merchandise 
which  was  forwarded  by  the  vend- 
ors before  they  knew  of  the  disso- 
lution of  the  firm  will  be  liable 
therefor  in  an  action  for  goods  sold 
and  delivered,  notwithstanding 
they  accept  a  note  made  in  the 
firm  name  by  the  remaining  part- 
ner after  the  dissolution.  Good- 
speed  v.  South  Bend  Plow  Co.  45 
Mich.  237. 

A.,  a  stage  proprietor,  engaged 
B.  to  board  a  person  in  A.'s  em- 
ployment. Afterwards  A.  sold 
half  his  interest  in  the  stage  prop- 
erty to  C,  and  A.  and  C.  became 
partners.  The  person  so  in  the 
employment  of  A.  continued  in  the 
employment  of  the  partners,  and 
continued  to  board  with  B.,  but  no 
notice  was  given  to  B.  of  the  terms 
of  said  partnership,  nor  was  B.  in- 
formed by  A.  that  he  should  not 
pay  such  person's  board  after 
the  formation  of  such  partnership. 
Held,  that  B.  might  recover  against 
A.  after  the  formation  of  the  part- 
nership as  well  as  before.  Taggart 
v.  Phelps,  10  Vt.  318. 

A  party,  after  his  withdrawal 
from  a  firm,  suffered  his  name  to 
appear  in  the  firm  name  for  some 
time  after  his  withdrawal,  and  his 
name  appeared  before  his  with- 
drawal in  the  business  card  of  the 
firm  published  in  a  newspaper  to 
which  he  was  a  subscriber.  It  ap- 
peared he  had  admitted  that  he  still 
had  an  interest  in  the  firm,  and  that 


511 


*2U 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    II. 


of  the  note,  (p)     And  in  determining  which  was  first  in 
point  of  time,  viz.,  notice  of  the  dissolution  or  the  making 


his  name  was  used  as  before,  and 
that  he  was  liable  to  the  same  ex- 
tent he  had  been.  He  continued 
for  more  than  a  year  after  his 
withdrawal  at  his  place  in  the 
firm.  No  notice  of  dissolution 
was  given.  Held,  that  from  these 
facts  the  jury  were  fully  war- 
ranted in  finding  him  liable  as  a 
member  of  the  firm.  Ellis  v. 
Bronson,  40  111.  455.  See,  also, 
Hixon  v.  Pixley,  15  Nev.  475 ;  Stim- 
son  v.  Whitney,  130  Mass.  591. 

Mere  publication  of  a  notice  of 
dissolution  does  not  preclude  proof 
that,  in  fact,  a  partnership  contin- 
ued thereafter.  Its  continued  ex- 
istence may  be  inferred  from  cir- 
cumstances; and  entries  in  the 
books,  made  by  one  of  the  firm 
after  the  alleged  dissolution,  are 
admissible  in  evidence  as  against 
him.  Gilchrist  v.  Brande,  58  Wis. 
184. 

After  the  dissolution  of  a  firm, 
and  on  assignment  of  its  property, 
a  debtor  settled  with  one  of  the 
partners  without  actual  notice  of 
the  assignment.  Held,  that  the  set- 
tlement was  binding  on  the  as- 
signee, because  one  partner  has  au- 
thority to  settle  firm  debts  after  dis- 
solution, in  the  absence  of  an  agree- 
ment to  the  contrary  known  to  the 
debtor ;  and  because  the  dissolution 
was  not  sufficient  to  put  the  debtor 
on  inquiry  as  to  whether  there  was 
any  such  agreement  or  any  assign- 


ment. Huntington  v.  Potter,  32 
Barb.  300. 

One  member  of  a  firm,  without 
the  knowledge  of  his  partner, 
signed  a  draft  with  the  partnership 
name  and  delivered  it  to  a  third 
party  for  his  accommodation.  The 
latter  filled  in  his  own  name  as 
payee  and  that  of  his  own  firm  as 
drawees  in  the  presence  of  the 
plaintiff,  and,  having  indorsed  it, 
procured  it  to  be  discounted  by  the 
plaintiff.  Held,  that  the  plaintiff 
was  not  chargeable  with  notice 
that  it  was  accommodation  paper ; 
and  that  the  partner  of  the  drawee 
was  liable,  although,  in  fact,  the 
firm  had  been  dissolved  a  short 
time  before.  No  notice  of  such 
dissolution  had  come  to  the  plaint- 
iff. Chemung,  etc.  Bank  v.  Brad- 
ner,  44  N.  Y.  680. 

A  firm  doing  business  in  A.  was 
dissolved,  but  no  notice  of  the  dis- 
solution was  published  in  a  news- 
paper. About  the  time  of  the  dis- 
solution B. ,  a  member  of  the  firm, 
gave  a  note  in  the  name  of  the  firm 
to  a  bank  at  C,  which  note  was, 
after  the  dissolution,  renewed  by 
an  agent  acting  under  a  sealed 
power  of  attorney  given  by  B.  in 
the  name  of  the  firm.  Held,  that 
the  notice  of  the  dissolution  was 
insufficient  so  far  as  the  bank  at 
C.  was  concerned;  that  the  firm 
were  liable  on  the  note,  whether 
given  before  or  after  the  dissolu- 


(o)  See  Parkin  v.  Carruthers,  3 
Esp.  248;  Williams  v.  Keats,  2 
Stark.  290;  Brown  v.  Leonard,  2 
Chitty,  120;  Dolman  v.  Orchard,  2 
C.  &  P.  104,  in  which  three  last 


cases,  however,  there  was  a  con- 
tinual holding  out.  See,  as  to  or- 
dering such  a  bill  to  be  delivered 
up,  Ryan  v.  Mackmath,  3  Bro.  C. 
C.  15. 


512 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*2U 


of  the  note,  effect  must  be  given  to  the  presumption  that 
the  instrument  was  made  and  issued  on  the  day  it  bore  date, 
unless  some  reason  to  the  contrary  can  be  shown,  (p) 


tion ;  that,  if  the  renewal  was  void, 
the  bank  had  the  right  to  recover 
on  the  original  note,  which  it  had 
retained ;  that  an  assignee  of  the 
firm,  for  the  payment  of  the  debts 
thereof,  had  properly  paid  this 
debt  to  the  bank,  although  he, 
the  assignee,  may  have  had  the 
requisite  notice  of  the  dissolution 
and  that  the  debt  was  contracted 
afterwards.  Hammond  v.  Aiken, 
3  Rich.  Eq.  119. 

Two  partners  in  a  mill  and  cot- 
ton factory  in  a  small  town  dis- 
solved their  partnership,  and  posted 
up  written  notices  of  the  dissolu- 
tion in  four  or  five  places  in  the 
town.  Soon  after  one  of  the  part- 
ners gave  a  note  in  the  name  of 
the  firm  to  a  bank  in  a  town  twelve 
miles  distant.  Held,  that  the  court 
could  not  say  that  the  notice  was 
sufficient,  nor  disturb  a  verdict  for 
the  bank,  which  implied  that  it 
was  insufficient,  as  being  contrary 
to  evidence.  Mitchum  v.  Bank  of 
Kentucky,  9  Dana,  166. 

A.  brought  an  action  as  indorsee 
on  a  note  made  in  October,  1836,  in 
renewal  of  a  note  made  in  July, 
1834,  by  the  firm  of  B.  and  C.  B. 
had  formed  a  partnership  with  D. 
in  January,  1834.  but  the  new  firm 
retained  the  books  of  B.  and  C. 
and  collected  their  debts.  Held, 
that  the  liability  of  a  member  of 
the  firm  to  pay  the  note  depended 
on  their  partnership  when  the  first 
note  was  given ;  that,  to  show  their 
dissolution,  so  as  to  take  away 
B.'s  rights,  some  notice  to  A.  must 


be  clearly  proven ;  that  the  fact  of 
forming  a  new  connection,  when 
the  new  firm  occupied  the  old 
store,  and  used  the  old  firm's 
books,  and  collected  their  debts, 
was  not  sufficient  evidence  of  a 
dissolution,  as  the  old  firm  might 
have  been  continued  for  the  pur- 
pose of  settling  its  affairs.  Brown 
v.  Clark,  14  Pa.  St.  469. 

A  partnership  in  Mobile,  Ala., 
was  broken  up  by  violence  which 
was  notorious,  and  public  notice 
of  the  dissolution  was  given.  The 
following  year  one  of  the  partners 
set  up  business  under  the  same 
firm  name,  which  indicated  by 
name  only  himself,  in  Milwaukee, 
and  dealt  with  persons  in  New 
York  who  had  formerly  dealt 
with  the  old  firm  in  Mobile.  Upon 
one  of  his  notes  these  New  York 
dealers  strove  to  hold  his  former 
partners  in  Mobile  liable.  Held, 
that  the  circumstances  of  the  case 
were  such  as  to  put  the  New  York 
dealers  upon  their  inquiry,  and 
that  they  could  not  be  allowed  to 
hold  the  defendant.  Clapp  v.  Up- 
son, 12  Wis.  492. 

Where  a  note  was  signed  by  one 
of  the  members  of  a  commercial 
firm,  with  the  addition  of  the 
words,  "in  liquidation,"  held,  that 
such  a  note  was  a  notice  to  the 
payee  that  the  firm  was  dissolved, 
and  that,  without  a  special  author- 
ization to  the  partner  signing  the 
note,  from  his  copartner,  the  note 
was  not  binding  on  him.  Speake 
V.  Barrett,  13  La.  Ann.  479. 


(p)  See  Anderson  v.  Weston,  6  Bing.  N.  C.  296. 
Vol.  1  —  33  513 


*214 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Torts  after  dissolution. —  A  partner  who  retires  and  does 
not  give  sufficient  notice  exposes  himself  to  the  risk  of  being 


Where  the  plaintiffs,  who  were 
lawyers,  drew  a  writ  in  favor  of 
three  persons  who  had  been  part- 
ners, describing  one  of  them  as  late 
partner  of  a  certain  firm,  held,  that 
this  was  sufficient  proof  that  the 
plaintiffs,  at  the  time  of  the  draw- 
ing of  the  writ,  knew  that  the  one 
described  as  late  partner  has  ceased 
to  be  a  member  of  the  firm.  Cahoon 
v.  Hobart,  38  Vt.  244. 

Notice  of  dissolution  of  a  part- 
nership may  be  shown  either  by  di- 
rect or  circumstantial  evidence 
sufficient  to  establish  the  fact  that 
the  person  seeking  to  enforce  the 
partnership  liability  knew  of  the 
dissolution.  Laird  v.  Ivens,  45 
Tex.  622.  See,  also,  Lovejoy  v. 
Spafford,  93  U.  S.  430 ;  Coddington 
v.  Hunt,  6  Hill,  595;  Mauldin  v. 
Branch  Bank,  2  Ala.  502. 

Circumstances  such  as  leave  no 
rational  doubt  on  the  mind  that 
one  knew  of  the  dissolution  of  a 
partnership  are  as  satisfactory  as 
direct  and  positive  proof.  Irby  v. 
Vining,  2  McCord,  379. 

See,  however,  Pitcher  v.  Bar- 
rows, 17  Pick.  361,  where  it  was 
held  that  where  notice  of  the  dis- 
solution of  a  partnership  has  not 
been  published  in  a  newspaper,  or 
brought  home  to  the  knowledge  of 
the  party  to  be  affected  by  it,  evi- 
dence of  the  mere  notoriety  of  the 
dissolution  is  not  admissible  to 
prove  such  notice. 

A  change  of  the  partnership 
name  which  in  itself  indicates  who 
the  individual  partners  are  may 
be  sufficient  evidence  of  a  dissolu- 
tion ;  but  where  the  name  under 
which  the  business  is  transacted 


gives  no  indication  of  the  names  of 
the  persons  composing  the  firm,  a 
change  in  such  name  is  not  notice 
of  the  retirement  of  a  person  pre- 
viously known  to  have  been  a  part- 
ner. Coggswell  v.  Davis.  65  Wis. 
191. 

Where  the  old  sign  remains  and 
the  old  business  is  carried  on  at 
the  old  stand  through  the  wife  of 
the  old  proprietor,  who  receives  the 
entire  proceeds  and  carries  on  the 
business  with  the  assistance  of  her 
husband  and  sons,  the  jury  would 
be  warranted  in  inferring  that  the 
father  owned  the  business  or  was 
a  partner,  notwithstanding  he  has 
nominally  assigned  the  business  to 
his  sons.  Tregerthen  v.  Lohrum, 
6  Mo.  App.  576. 

A  father  sold  out  to  his  sons,  who 
continued  in  the  business,  no 
change  being  made  in  the  names 
or  signs  about  place  of  business. 
The  son  bought  goods  of  the  plaint- 
iff, who  had  formerly  dealt  with 
the  father,  but  who  had  notice  that 
the  father  had  retired.  Held,  that 
the  father  was  not  liable  for  goods 
sold  to  the  son.  Gathright  v. 
Burke,  101  Ind.  590. 

When,  after  the  death  of  a  mem- 
ber of  a  firm  of  millers,  his  s6n, 
without  new  articles  of  copartner- 
ship, entered  actively  into  the  busi- 
ness under  the  old  style,  and  a 
promissory  note  was  given  in  the 
firm  name  to  a  party  in  the  regular 
course  of  business,  the  son  was  lia- 
ble as  a  partner  to  a  bona  fide 
holder  of  the  note  without  notice, 
even  though  another  person  has 
meanwhile  taken  his  place  in  the 
business  and  given  him  an  indem- 


514 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


:214 


sued  for  torts  committed  subsequently  to  his  retirement  by 
his  late  copartners  or  their  agents ;  and  in  the  absence  of 


nity  bond  against  the  debts  of  the 
old  firm.  Swift  v.  Mead,  28  N.  W. 
R.  844. 

One  dealing  with  a  partnership 
and  continuing  so  to  deal  with  it 
until  their  suspension,  without  no- 
tice that  they  had  ceased  to  be  a 
firm  and  had  become  incorporated, 
may  hold  the  members  of  the  firm 
liable  to  him  as  partners  notwith- 
standing their  incorporation.  And 
the  receipt  by  him  of  a  portion  of 
his  debt  from  the  assignee  of  the 
corporation  will  not  transfer  liabil- 
ity from  the  firm  to  the  corpora- 
tion. Johns  v.  Brown,  1  Tex.  App. 
568. 

Where  it  is  material  to  know  the 
exact  time  of  the  dissolution  of  a 
firm,  evidence  that  one  had  notice 
of  such  dissolution  at  a  certain 
time  is  not  admissible.  Shaffer  v. 
Snyder,  7  Serg.  &  R.  503. 

A  partnership  to  expire  in  Janu- 
ary appointed  an  attorney  to 
"  buy  and  sell  goods,  sign  notes 
and  perform  all  acts  concerning 
the  business."  Held,  that  one  hav- 
ing notice  at  the  beginning  of  the 
partnership  of  the  time  of  ending 
could  not  charge  the  firm  with 
goods  sold  to  the  attorney  after  the 
expiration.  The  dissolution  was  a 
revocation.  Schalter  v.  Winpenny, 
75  Pa.  St.  321. 

A  person  who  takes  a  partner- 
ship note,  knowing  that  the  part- 
nership articles  provide  for  its  dis- 
solution in  case  of  the  withdrawal 
of  the  capital,  is  put  upon  inquiry 
as  to  whether  such  dissolution  has 
taken  place.  Smith  v.  Vander- 
burg,  46  111.  34. 

In  an  action  to  charge  two  de- 


fendants as  partners  with  the  pay- 
ment of  plaintiff's  services  in  run- 
ning a  shingle  mill  previously 
owned  by  both  as  a  firm,  but  then 
belonging  to  one  only,  reports  of 
a  scaler  employed  by  plaintiff, 
wherein  the  mill  is  described  by 
the  name  of  the  one  defendant 
alone,  and  which  were  made  for 
the  purpose  of  enabling  the  plaint- 
iff to  settle  with  the  boom  com- 
pany for  boom  charges,  are  admis- 
sible in  evidence  as  tending  to 
show  notice  to  plaintiff  that  the 
mill  business  was  being  carried  on 
on  such  defendant's  individual  ac- 
count, and  not  as  formerly  by  the 
firm.  Robinson  v.  Warden,  33 
Mich.  316. 

The  mailing  of  a  notice  of  disso- 
lution, properly  directed,  to  the 
party  sought  to  be  charged  with 
such  notice,  is  not  sufficient  alone 
to  relieve  the  retiring  partner;  it 
raises  a  presumption  of  notice,  but 
one  which  may  be  repelled  by 
proof  that  the  notice  was  not  in 
fact  received.  Austin  v.  Holland, 
69  N.  Y.  571. 

If  a  partnership  note  has  been 
given,  payable  on  demand  to  the 
order  of  one  of  the  firm  and  in- 
dorsed by  him,  a  retiring  partner 
cannot  defend  an  action  thereon, 
brought  by  the  indorsee  against 
him  and  his  late  partners,  by  proof 
of  the  execution  by  them  and  his 
successor  in  the  firm  of  a  bond  to 
him  to  pay  all  the  debts  and  liabil- 
ities of  the  late  firm.  Richards  v. 
Fisher,  2  Allen,  527. 

Notice  of  dissolution  is  necessary 
where  the  outgoing  partner  holds 
himself  out  as  the  representative 


515 


*2U 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


proof  of  the  true  state  of  things  he  would  be  held  liable  for 
them,  (q) 

Case  of  dormant  partner.—  Moreover,  if  a  dormant  part- 
ner is  known  to  certain  individuals  to  have  been  a  partner, 
he  is  as  to  them  no  longer  in  the  situation  of  a  dormant 
partner,  and  must  therefore  give  them  notice  of  his  retire- 
ment if  he  would  free  himself  from  liability  in  respect  of 
the  future  transactions  between  them  and  his  late  part- 
ners. (r)1 


of  the  firm,  but  not  where  he  acts 
exclusively  for  himself.  Taylor  v. 
Young,  3  Watts,  339. 

A  member  of  a  firm  who  retired 
therefrom  without  publishing  no- 
tice of  the  dissolution  is  not  liable 
on  a  note  signed  in  the  firm  name 
by  another  member  and  given  to  a 
new  customer  eleven  years  after 
the  retirement.  Farmers',  etc. 
Bank  v.  Green,  30  N.  J.  L.  316. 

Persons  having  no  knowledge  of 
a  partnership  are  not  entitled  to 
notice  of  its  dissolution.  Chamber- 
lain v.  Dow,  10  Mich.  319;  Bloch 
v.  Price,  24  Mo.  App.  14. 

See  further,  as  to  evidence  of  no- 
tice of  dissolution,  Buxton  v.  Ed- 
wards, 134  Mass.  567. 

The  notice  of  dissolution  of  a 
firm,  and  that  one  of  the  members 
would  thereafter  conduct  the  busi- 
ness, is  evidence  of  the  facts 
therein  contained,  and  admissible 
on  the  question  who  was  conduct- 
ing the  business  and  in  whose  pos- 
session the  firm  property  remained 
after  dissolution.  Kelly  v.  Murphy, 
12  Pac.  Rep.  467. 

(q)  Stables  v.  Eley,  1  Car.  &  P. 
614.  In  this  case  such  proof  was 
given,  and  the  defendant  was  nev- 
ertheless held  liable  on  the  ground 
of  holding  out.  This,  however, 
was  a  wrong  application  of  that 


doctrine.     See  ante,  p.  47,  and  Pol- 
lock, Dig.  25,  ed.  3. 

(r)  Farrar  v.  Deflime,  1  Car.  &  K. 
530.  See,  too,  Evans  v.  Drum- 
mond,  4  Esp.  89,  and  Carter  v. 
Whalley,  1  B.  &  Ad.  14. 

1  The  duty  of  a  retiring  dormant 
partner  to  give  notice  of  the  disso- 
lution of  the  partnership  is  a  duty 
which  he  owes  to  those  who,  be- 
fore that  time,  had  some  knowl- 
edge of  his  connection  with  the 
firm.  To  strangers  having  no  such 
knowledge  he  o%ves  no  such  duty ; 
as  to  them  he  can  only  be  charged 
as  a  partner,  when  in  fact  he  was 
not,  by  showing  that  he  in  some 
way  misled  them ;  as,  that  he  held 
himself  out  to  the  world  as  such,  or 
that  he  so  held  himself  out  to  them. 
Nussbaumer  v.  Becker,  87  111.  281 ; 
Cregler  v.  Durham,  9  Ind.  375. 

A  partner  whose  name  has  not 
appeared  in  the  firm  will  be  liable 
to  persons  dealing  with  the  part- 
nership after  his  retirement  from 
it,  if  he  was  known  to  such  persons 
as  a  member  of  the  firm,  either  by 
direct  transactions  or  public  noto- 
riety, and  they  have  not  been  noti- 
fied of  the  dissolution  of  the  con- 
nection. Davis  v.  Allen,  3  N.  Y. 
168. 

B.  having  been  a  dormant  part- 
ner with  T.,  under  the    style    of 


516 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *2l'5 

Importance  of  notifying  dissolution  —  Each  partner 
has  a  right  to  notify  it. —  It  is  obvious,  therefore,  that  on 
the  dissolution  of  a  firm  or  the  retirement  of  a  partner  it  is 
of  the  greatest  importance  to  notify  the  fact;  and  each 
partner  has  a  right  to  notify  it.  If  his  copartners  prevent 
him  from  exercising  that  right  they  will  be  compelled  to 
do  what  may  be  necessary  to  enable  notice  to  be  given, 
e.  g.,  to  sign  advertisements  for  publication  in  the  "  Ga- 
zette." (.9) 

*Effect  of  notice  of  dissolution. —  Subject  to  two  [*215] 
exceptions,  which  will  be  examined  hereafter,  notice 
of  dissolution  of  a  firm  or  the  retirement  of  a  partner,  duly 
given,  determines  the  power  previously  possessed  by  each 
partner  to  bind  the  others.1  Hence,  after  the  dissolution  of 
a  firm  or  the  retirement  of  a  member  and  notification  of  the 
fact,  no  member  of  the  previously  existing  firm  is,  by  virtue 
of  his  connection  therewith,  liable  for  goods  supplied  to  any 
of  his  late  partners  subsequently  to  the  notification ;  (t)  nor 
is  he  liable  on  bills  or  notes  subsequently  drawn,  accepted 
or  indorsed  by  any  of  them  in  the  name  of  the  late  firm ;  (u) 
even  although  they  may  have  been  dated  before  the  disso- 
lution, (x)  or  have  been  given  for  a  debt  previously  owing 

"  The  Atlantic  Forge  Company,"  partner.     Holdane  v.  Butterworth, 

the  firm  was  dissolved,  and  a  new  5  Bosw.  (N.  Y.)  1. 

firm  was  formed  by  T.  with  a  third  (s)  Hendry  v.  Turner,  32  Ch.  D. 

person  under  a  different  name  to  355;    Troughton    v.    Hunter,     18 

conduct  the  same  business  at  the  Beav.  470. 

same  place ;  and  the  new  firm  sent  l  There  can  be  no  business  carried 

notice  by  mail  to  all  persons  who  on  by  partnership  after  dissolution 

had  transacted  business  with  the  and  the  appointment  of  a  receiver, 

old  firm.     A  person  who  had  never  Lennig  v.  Lennig,  11  "Weekly  N. 

dealt  with  the  old  firm  sold  goods  Cas.  18. 

nominally  to  T.  and  took  the  note  (t)  Minnit  v.  Whinery,  5  Bro.  P. 

of    the  new  firm  therefor.      The  C.  489. 

jury  found  that  the  dissolution  and  (u)  Paterson      v.     Zachariah,     1 

formation  of  the  new  firm  were  Stark.  71 ;  Abel  v.  Sutton,  3  Esp. 

matters  of  public  notoriety.    Held,  108;    Spenceley  v.    Greenwood,   1 

that  the  retiring  partner  was  not  Fos.  &  Fin.  297. 

liable  for  the    goods  so  sold,   al-  (x)  Wrightson  v.  Pullan,  1  Stark, 

though  the  vendor,  at  the  time  of  375 ;   S.  C.  Wright   v.  Pulham,  2 

the  sale,  supposed  him  still  to  be  a  Chitty,  121. 

517 


*215 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


from  the  firm  (y)  by  the  partner  expressly  authorized  to 
get  in  and  discharge  its  debts,  (z)1 


(y)  Kilgour  v.  Finlyson,  1  H. 
Blacks.  156;  Doltnan  v.  Orchard,  2 
Car.  &  P.  104. 

(z)  Kilgour  v.  Finlyson,  1  H. 
Blacks.  156.  See  Lewis  v,  Reilly, 
infra,  note  (c). 

1  As  a  general  rule,  after  a  disso- 
lution of  a  partnership,  neither  part- 
ner can  make  a  new  contract  or  in- 
cur new  responsibilities  in  the  firm 
name  binding  on  the  othei's  with- 
out express  authority ;  and  no  note, 
draft  or  acceptance  so  executed  in 
the  name  of  the  firm  will  be  valid 
if  the  party  with  whom  the  con- 
tract is  made  had  notice  of  the  dis- 
solution. Easter  v.  Farmers'  Nat. 
Bank,  57  111.  215;  Curry  v.  White, 
51  Cal.  530 ;  Brown  v.  Broach,  52 
Miss.  536;  Maxey  v.  Strong,  53 
Miss.  280;  Smith  v.  Shelden,  35 
Mich.  42;  Floyd  v.  Miller,  61  Ind. 
225;  Bacon  v.  Hutchings,  5  Bush, 
595;  Montague  v.  Reakert,  6  id. 
333;  Gale  v.  Miller,  1  Lans.  451; 
Whitworth  v.  Ballard,  56  Ind.  279; 
Meyer  v.  Atkins,  29  La.  Ann.  586 ; 
Vaccarou.  Toof,  9Heisk.  194;  Con- 
rad v.  Buch,  21  W.  Va.  396;  Bank 
of  Montreal  v.  Page,  98  111.  109; 
Goodspeed  v.  So.  Bend  Plow  Co.  45 
Mich.  237;  First  Nat.  Bank  v.  Ells, 
68  Ga.  192;  Roots  v.  Salt  Co.  27  W. 
Va.  484;  Spurck  v.  Leonard,  9 
Bradw.  174;  Dunlap  v.  Limes,  49 
la,  177;  Hier  v.  Odell,  18  Hun,  314; 
Goodspeed  v.  Wiard  Plow  Co.  45 
Mich.  322;  Walter  v.  Davis,  59  la. 
103. 

It  is  competent,  in  an  action 
against  the  partnership,  to  show 
that,  notwithstanding  the  with- 
drawal of  a  partner  and  the  change 
of  the  firm  name,  the  partnership 


has  remained  practically  the  same 
and  the  business  conducted  by  the 
same  persons  both  before  and  after 
the  withdrawal  and  change.  Mel- 
linger  v.  Parsons,  51  la.  58. 

Where  one  engaged  in  business 
under  the  firm  name  purchases 
goods  from  plaintiffs  from  time  to 
time,  and  afterwards  sells  the  busi- 
ness and  property  to  a  son,  who 
continues  the  business  under  the 
same  name,  and  under  such  name 
purchases  similar  goods  from  the 
plaintiffs,  who  have  no  knowledge 
of  the  transfer,  the  former  is  liable 
to  plaintiffs  for  the  goods  thereafter 
so  purchased  by  the  son.  Elverson 
v.  Leeds,  97  Ind.  336;  S.  C.  49  Am. 
Rep.  458. 

Where  a  partnership  owns  farm- 
ing property  either  party  has  a 
right  after  dissolution  to  incur  a 
reasonable  expense  in  protecting 
it  from  injury.  Holloway  v. 
Turner,  61  Md.  217. 

In  New  York  it  has  been  held 
that  a  solvent  partner,  in  closing 
up  the  firm  business  upon  a  disso- 
lution of  the  firm  by  the  insolvency 
of  his  copartner,  may  execute  in 
the  firm  name  a  chattel  mortgage 
upon  all  the  stock  of  goods  of  the 
firm  and  fixtures  in  the  store  to  a 
creditor  of  the  firm  to  secure  pay- 
ment to  him  within  three  months 
of  the  amount  due  to  him  for 
money  loaned  and  goods  sold  the 
firm.  Ogden  v.  Aruot,  29  Hun 
(N.  Y.),  146. 

Where  one  of  two  copartners, 
after  the  dissolution  of  the  partner- 
ship, gave  a  note  in  the  name  of 
the  firm  for  his  own  private  debt, 
the  creditor  knowing  that  the  part- 


518 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*215 


Cases  in  which  notice  is  immaterial. —  There  are,  it  is 
true,  cases  to  be  met  with  in  which,  notwithstanding  a  dis- 


nership  was  dissolved;  and  this 
note  being  afterwards  sued,  and 
the  party  who  made  it  having  be- 
come bankrupt,  the  other  partner 
compromised  the  suit  by  giving  his 
own  note  for  half  the  debt  and  all 
the  cost,  part  of  which  note  he 
afterwards  voluntarily  paid,  held, 
that  the  making  and  acceptance  of 
the  first  note  was  a  fraud  upon  the 
absent  partner,  and  that  the  second 
note  was  therefore  void.  Stearns 
v.  Burnham,  4  Me.  84. 

To  charge  one  partner  on  a  firm 
note  made  by  another  partner 
without  special  authority,  after 
the  dissolution  of  the  firm,  a  ratifi- 
cation with  knowledge  of  the  facts 
must  be  shown.  McElroy  v. 
Melear,  7  Coldw.  140. 

After  dissolution  only  the  liqui- 
dating partner  may,  without  ex- 
press authority  from  his  fellows, 
borrow  money  to  pay  a  firm  debt 
and  give  a  firm  note  for  it. 
McCowin  v.  Cubbison,  72  Pa.  St. 
358. 

A  promissory  note  executed  in 
the  name  of  a  commercial  firm  and 
signed  "  John  Bishop  &  Co.  in  liq- 
uidation," by  an  agent  of  one  of 
the  former  partners,  after  the  disso- 
lution of  the  firm,  is  not  binding  on 
the  former  members  who  have  not 
given  any  specific  authority  for  the 
execution  of  the  note.  Dodd  v. 
Bishop,  30  La.  Ann.  1178. 

A  declaration  alleging  that  a 
note  was  made  in  the  name  of  the 
firm  by  one  of  the  partners  after  a 
dissolution,  unless  for  the  purpose 
of  settlement,  and  given  for  a  pre- 
existing debt  of  the  firm,  does  not 
show  a  partnership    liability,  but 


does  show  the  liability  of  the  part- 
ner making  the  note  in  his  separate 
capacity.  Fontaine  v.  Lee,  6  Ala. 
889. 

It  has  been  held  that  a  partner, 
after  dissolution  of  the  firm,  with 
notice  to  its  creditors,  cannot  re- 
new a  partnership  note  of  his  late 
partnership.  Moore  v.  Lackman, 
52  Mo.  323.  See,  also,  Haddock  v. 
Crocheron,  32  Tex.  276 ;  First  Nat. 
Bk.  v.  Ells,  68  Ga.  192 ;  Bank  of 
Toronto  v.  Nixon,  4  U.  C.  App. 
346,  reversing  S.  C.  43  U.  C.  R.  447; 
Rose  v.  Coffield,  53  Md.  18 ;  S.  C. 
36  Am.  Rep.  389;  Brown  v.  Chan- 
cellor, 61  Tex.  437;  Sanborn  v. 
Stark,  31  Fed.  Rep.  18;  Daniel  v. 
Be  Graffenreid,  14  Lea,  385.  See, 
however,  Taylor  v.  Hill,  36  Md. 
494. 

So,  after  dissolution,  one  partner 
cannot  bind  the  others  by  a  prom- 
issory note  or  acceptance  for  a 
prior  debt  of  the  firm,  nor  by  a 
guaranty  upon  the  renewal  of  an 
original  note.  Spurck  v.  Leonard, 
9  Bradw.  174;  Rose  v.  Coffield,  53 
Md.  18;  S.  C.  36  Am.  Rep.  389. 
See,  also,  cases  above  cited. 

If,  however,  a  person  having  a 
claim  against  a  partnership  takes 
in  payment  a  promissory  note  of 
the  successors  of  the  firm,  without 
knowledge  that  the  old  firm  had 
been  dissolved,  and  supposing  that 
the  note  was  that  of  the  old  firm, 
he  may  maintain  an  action  on  the 
debt  without  showing  that  he  was 
fraudulently  induced  to  take  the 
note.  Buxton  v.  Edwards,  134 
Mass.  567. 

But  where  a  firm  was  under  ob- 
ligation to  execute  a  guaranty,  and 


519 


*215 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


solution  and  notice,  a  bill  or  note  in  the  name  of  the  firm  has 
been  held  to  bind  those  who  were  members  thereof  prior  to 


one  partner,  after  the  dissolution, 
executed  it,  held,  that  the  other 
members  of  the  firm  were  bound 
thereby,  and  that  they  should  not 
have  been  permitted  to  testify  that 
the  guaranty  was  not  authorized 
by  them.  Star  Wagon  Co.  v. 
Swezey,  59  la.  609;  S.  C.  52  id. 
391. 

A  verbal  guaranty,  made  at  the 
request  of  a  firm  to  certain  of  its 
creditors,  to  pay  certain  subsisting 
demands  against  the  partnership, 
followed  by  payment,  though 
made  after  and  with  notice  of  the 
dissolution  of  the  firm,  constitutes 
a  good  cause  of  action  against  the 
firm.     Lee  v.  Stowe,  57  Tex.  444. 

Where,  however,  the  only  re- 
quest was  made  by  one  of  the  firm 
after  dissolution,  the  other  partner 
would  not  be  liable,  unless,  before 
the  dissolution,  there  had  been  a 
similar  course  of  business  between 
the  firms,  and  the  payments  were 
made  without  notice  of  the  dis- 
solution. Lee  v.  Stowe,  57  Tex. 
444. 

After  dissolution  one  partner 
cannot  transfer  a  chose  in  action 
belonging  to  the  firm  without  spe- 
cial authority,  express  or  implied, 
from  the  other  partners.  Stair  v. 
Richardson,  108  Ind.  429. 

When,  in  the  advertisement  of 
the  dissolution  of  a  copartnership, 
power  is  given  to  the  continuing 
partner  to  settle  the  business  of  the 
firm  and  for  that  purpose  to  use 
the  partnership  name,  the  jury 
may  infer,  from  the  transactions 
of  trade,  and  the  usage  and  cus- 
tom of  merchants,  as  well  as  from 
the  advertisement  itself,  whether 


this  power  extends  to  the  signing 
of  the  partnership  name  to  renew- 
als of  a  note  which  had  been  dis- 
counted in  bank  previous  to  the 
dissolution ;  and  it  is  not  necessary 
that  the  authority  should  be  given 
by  a  special  power  of  attorney  or 
other  written  instrument.  Myers 
v.  Huggins,  1  Strobh.  473. 

In  First  Nat.  Bk.  v.  Ells,  how- 
ever, a  general  power  in  one  part- 
ner to  settle  up  the  firm  business 
was  held  not  to  authorize  the  in- 
dorsement of  a  new  draft  and  its 
substitution  for  an  old  one  previ- 
ously indorsed  by  the  firm.  The 
same  point  was  also  ruled  in  Brown 
v.  Chancellor,  61  Tex.  437. 

Where  a  partner,  after  the  part- 
nership had  been  dissolved  by  the 
absconding  of  his  copartner,  gave 
a  note  in  the  name  of  the  firm, 
payable  on  demand,  in  lieu  of  a 
note  given  by  the  firm  which  had 
not  become  payable,  with  a  view 
to  enable  the  ci-editor  to  secure  his 
debt  by  an  attachment  of  property, 
held,  that  the  other  partner  was 
not  bound  by  the  transaction,  be- 
cause the  giving  of  the  new  note 
was  not  in  the  usual  course  of  deal- 
ing, and  that  the  attachment  was 
void  as  to  other  creditors.  Whit- 
man v.  Leonard,  3  Pick.  177. 

A  partner  drew  a  check  in  the 
name  of  his  firm,  retained  it  in  his 
possession,  and  after  the  dissolution 
of  the  firm  transferred  it  to  a  cred- 
itor in  payment  of  his  individual 
indebtedness.  In  an  action  brought 
by  the  latter  thereon,  held,  that 
after  the  dissolution  of  the  firm 
one  partner  could  not,  by  trans- 
ferring a  check  previously  signed, 


520 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


-216 


the  dissolution;  but  in  each  of  these  cases  there  was  some 
circumstance  taking  it  out  of  the  ordinary  rule.  In  Burton 
v.  Issitt,  (a)  the  continuing  partner  had  authority  to  use 
the  name  of  the  retired  partner  in  the  prosecution  of  all 
suits  for  the  recovery  of  partnership  property.  This  was 
held  to  authorize  the  giving  of  a  promissory  note  for  six- 
pences, payable  under  the  Lords'  Act,  and  the  retired  part- 
ner was  therefore  held  bound  by  a  note  given  by  his  late 
partner  in  payment  of  those  sixpences.  In  Smith  v.  Win- 
ter, (b)  the  continuing  partner  had  express  permission  to 
use  the  name  of  his  late  partner,  who  was,  therefore,  justly 
held  liable  on  a  bill  given  in  the  name  of  the  old  firm 
after  his  retirement.  The  only  case,  *indeed,  of  this  [*216] 
description  which  presents  any  difficulty  is  Lewis 


create  a  liability  against  it.  Gale 
v.  Miller,  54  N.  Y.  536. 

A  dissolution  revokes  all  author- 
ity to  make  new  contracts,  such  as 
the  giving  or  indorsing  of  a  promis- 
sory note  or  the  acceptance  of  a 
bill  or  draft,  although  it  may  be 
for  a  prior  debt.  Bank  of  Montreal 
v.  Page,  98  111.  109;  Carlton  v. 
Jenness,  42  Mich.  110.      See  post. 

After  the  dissolution  of  a  part- 
nership, however,  a  note  made  in 
the  firm  name,  with  the  assent  of 
the  partners,  for  a  debt  due  by  the 
firm,  is  a  valid  obligation.  The 
debt  due  by  the  firm,  particularly 
when  an  extension  of  the  time  of 
its  payment  is  secured  by  giving 
the  note,  is  a  sufficient  considera- 
tion therefor.  Randolph  v.  Peck, 
1  Huu,  138. 

Written  authority  to  one  of  the 
partners  to  use  the  firm  name  after 
the  partnership  is  dissolved,  so  as 
to  be  binding  on  all,  is  not  required ; 
it  may  be  given  by  parol.  Easter 
v.  Farmers'  Nat.  Bank,  57  111.  215. 

The  mere  fact,  however,  that  the 


other  partners  have  for  some  rea- 
son paid  certain  other  notes  exe- 
cuted by  him  in  the  firm  name 
after  dissolution  is  not  of  itself 
sufficient  evidence  of  authority  in 
such  partner  to  execute  the  note  in 
question.  Easter  v.  Farmers'  Nat. 
Bank,  supra. 

An  authority  to  one  of  a  partner- 
ship to  settle  the  affairs,  receive 
and  pay  the  debts,  does  not  war- 
rant his  drawing  a  bill  or  giving  a 
note  in  the  partnership  name  after 
dissolution  of  the  firm.  Martin  v. 
Walton,  1  McCord,  16;  Bank  of 
S.  C.  v.  Humphreys,  id:  388. 

Where  one  of  the  surviving 
members  of  a  partnership  an- 
swered under  oath  to  a  suit  upon 
a  due-bill,  signed  in  the  firm  name, 
denying  its  execution  and  the  ex- 
istence of  such  a  firm,  a  reply  that 
after  its  execution  he  ratified  the 
act  of  his  partner  in  signing  it  was 
held  to  be  good  on  demurrer.  Pat- 
tison  v.  Norris,  29  Ind.  165. 

(a)  5  B.  &  A.  267. 

(6)  4  M.  &  W.  454. 


521 


*216  RIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

v.  Reilly  (c)  There  two  partners  drew  a  bill  payable  to 
their  own  order,  and  afterwards  dissolved  partnership.  One 
of  them  then  indorsed  the  bill  in  the  name  of  both  to  the 
plaintiff,  who  knew  of  the  dissolution.  It  was  held,  in  an 
action  by  him  against  both  partners,  that  he  was  entitled  to 
recover  on  the  bill,  and  that  it  was  immaterial  whether  he 
knew  of  the  dissolution  or  not.  The  precise  ground  of  this 
decision  does  not  distinctly  appear.  The  court  seems  to 
have  proceeded  on  the  supposition  that  an  indorsement  by 
one  of  several  payees  in  the  name  of  all  is  sufficient;  but 
the  writer  has  been  unable  to  find  any  previous  authority 
for  such  a  doctrine,  save  where  the  indorsers  are  partners, 
which,  in  the  case  in  question,  they  were  not,  as  the  plaintiff 
was  found  by  the  jury  to  have  known.  The  case  is  cer- 
tainly anomalous  and  requires  reconsideration,  (d) 

Exceptions  to  rule. —  The  exceptions  alluded  to  above  as 
qualifying  the  rule  that  the  agency  of  each  partner  is  de- 
termined by  dissolution  (or  retirement)  and  notice  are: 

When  a  partner  continues  to  hold  himself  out. —  First, 
where  a  partner  who  has  retired  and  notified  his  retirement 
nevertheless  continues  to  hold  himself  out  as  a  partner;  and 
secondly,  where  what  is  done  only  carries  out  what  was 
begun  before. 

Effect  of  not  preventing  use  of  name. —  1.  If  a  partner 
retires  and  gives  notice  of  his  retirement,  and  he  neverthe- 
less allows  his  name  to  be  used  as  if  he  were  still  a  part- 
ner, he  will  continue  to  incur  liability  on  the  principle  of 
holding  out,  explained  in  an  earlier  part  of  this  treatise.1 

(c)  1  Q.  B.  349.  tinued  in  the  name  and  style  of  the 

(d)  See  Story  on  Bills.  §  197,  and  firm  formed  by  his  former  copart- 
Abel  v .  Sutton,  3  Esp.  108.  The  ners,  with  his  knowledge,  sanction 
cases  go  further  than  is  suggested  and  approval,  held,  that  he  was 
in  Garland  v.  Jacomb,  L.  R.  8  Ex.  liable  on  the  contracts  and  obliga- 
220,  for  the  notice  of  dissolution  is  tions  of  the  firm  so  using  his  name 
what  creates  the  difficulty.  See  as  if  he  had  actually  continued  as 
infra,  p.  220,  note  (s).  a  member    and    partner    thereof. 

1  Where  the  relations  of  a  part-  Freeman  v.  Falconer,  44  N.  Y.  Sup. 
ner  to  his  copartners  have  been  Ct.  (12  Jones  &  Sp.)  132.  See,  also, 
terminated,  yet  his  name  was  con-    Ellis  v.  Bronson,  40  111.  455;  Speer 

522 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*216 


In  Williams  v.  Keats,  (e)  after  a  partner  had  retired,  and 
after  notice  thereof  had  been  given  by  advertisement,  a  bill 


v.  Bishop,  24  Ohio  St.  598;  Stimson 
v.  Whitney,  130  Mass.  591;  Hixon 
v.  Pixley,  15  Nev.  475;  Gammon  v. 
Huse,  100  111.  234 ;  S.  C.  9  Bradw! 
557;  Richards  v.  Hunt,  65  Ga.  342. 

A  retiring  partner  who  gives 
notice  by  publication  in  a  news- 
paper that  he  has  ceased  to  be  a 
partner,  but  who  after  that  allows 
his  name  to  appear  in  the  firm  as 
a  partner,  and  continues  in  its  em- 
ployment, is  liable  as  a  partner  to 
one  who  deals  with  the  firm,  and 
is  misled  by  the  appearances,  and 
has  no  notice  that  he  is  not  a  part- 
ner, although  the  fact  is  generally 
known  at  the  place  where  the  con- 
tract is  made.  Wait  v.  Brewster, 
31  Vt.  516. 

It  is  competent,  in  an  action 
against  a  partnership,  to  show  that, 
notwithstanding  the  withdrawal 
of  a  partner  and  a  change  of  the 
firm  name,  the  partnership  had 
remained  practically  the  same,  and 
the  business  was  conducted  by 
the  same  persons  both  before  and 
after  the  withdrawal  and  change. 
Mellinger  v.  Parsons,  51  Iowa,  58. 

The  mere  fact  that  a  partnership 
name  has  been  kept  over  the  door 
after  the  dissolution  of  the  partner- 
ship is  not  of  itself  sufficient  to  au- 
thorize one  who  holds  a  note  signed 
in  the  partnership  name  to  recover 
upon  it.  Boyd  v.  McCann,  10  Md. 
118. 

Two  surviving  partners  publish 
notice  "  that  the  business  of  the 
late  firm  will  for  the  present  be 
carried  on  in  the  same  name,  under 


the  charge  of  J.  H."  (one  of  the 
partners),  "  who  will  continue,  and 
who  is  duly  authorized,  to  adjust 
and  settle  matters  relative  to  the 
same."  Held,  that  the  surviving 
partners  held  out  to  the  world  that 
they  would  continue  to  transact 
business  under  that  name,  and  that 
a  note  given  by  J.  H.  in  the  name 
of  the  firm  was  binding  upon  both. 
Casco  Bank  v.  Hills,  16  Me.  155. 

The  members  of  a  firm,  in  the 
publication  of  notice  of  their  disso- 
lution, used  the  following  lan- 
guage; "  Either  of  the  parties  are 
authorized  to  use  the  name  of  the 
firm  in  liquidation  only  of  past 
business."  Held,  that  this  did  not 
authorize  the  parties  to  renew  a 
note  given  by  the  firm  for  a  part- 
nership debt,  nor  confer  upon  any 
of  the  parties  powers  which  they 
did  not  possess  by  law.  Martin  v. 
Kirk,  2  Humph.  529. 

A  copartnership  was  incorpo- 
rated and  transferred  their  prop- 
erty to  the  corporation,  and,  by  a 
by-law,  the  business  was  to  be  car- 
ried on  in  the  name  of  the  copart- 
nership. Held,  that,  though  the 
partnership  was  thus  dissolved,  the 
members  were  liable  as  partners 
upon  contracts  subsequently  made 
with  third  persons  having  no  notice 
of  the  dissolution.  Goddard  v. 
Pratt,  16  Pick.  412. 

If  a  retiring  partner,  after  publi- 
cation of  notice  of  dissolution  in  a 
newspaper,  holds  himself  out  to 
the  world  as  a  partner,  he  must,  in 
order  to  relieve  himself  from  lia- 


(e)  2  Stark.  290.     See,  too,  Dolman  v.  Orchard,  2  Car.  &  P.  104;  Em- 
met v.  Butler,  7  Taunt.  600. 

523 


*X'217  RIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

was  accepted  by  his  copartner  in  the  names  of  himself  and 
late  partner.  The  names  of  both  still  remained  painted  up 
over  their  late  place  of  business,  and  Lord  Ellenborough 
held  that  the  partner  who  had  retired  was  liable  on  this  bill 

notwithstanding  the  advertisement;  for  there  was  no 
[*217]  evidence  to  show  -that  the  plaintiff  in  fact  knew  of 

the  dissolution.  (/)  Upon  this,  however,  it  is  to  be 
observed  that  the  only  evidence  that  the  retired  partner 
authorized  the  continued  use  of  his  name  was  the  fact  that 
he  had  not  prevented  it.  Now,  authorities  are  not  wanting 
to  show  that  if  a  partner  retires,  and  notice  of  his  retire- 
ment is  given  by  advertisement,  he  will  not  continue  to 
incur  liability  by  the  acts  of  his  copartners,  simply  because 
they  continue  to  carry  on  business  in  the  old  name,  and  he 
does  not  take  steps  to  stop  them,  (g)  His  forbearance  in 
this  respect  does  not  necessarily  amount  to  an  authority  to 
use  his  name  as  before;  and  unless  his  name  is  used  by  his 
authority  he  is  not  liable  on  the  ground  that  he  holds  him- 
self out  as  a  partner.  (A)  But  although  it  may  be  doubtful 
whether  in  Williams  v.  Keats  there  was  a  sufficient  holding 
out,  it  is  clear  that  if  a  partner  retires  and  does  still  hold 
himself  out  as  a  partner,  this  is  in  fact  signifying  that  he  is 
willing  to  incur  the  responsibilities  of  a  partner  for  the  sake 
of  those  with  whom  his  name  is  associated;  and  therefore 
he  will  continue  to  be  answerable  for  their  conduct,  even 
to  persons  dealing  with  them  with  knowledge  of  his  retire- 
ment. This  was  decided  in  Brown  v.  Leonard,  (i)  in  which 
the  plaintiff  sued  on  a  promissory  note  made  in  the  name 
Spring,  Leonard  and  Bush.      Before  the  note  was  made 

bility  on  account  of  such  publica-  (h)  As  to  a  retiring  partner's 
tion,  prove  that  knowledge  of  such  right  to  an  injunction  to  restrain 
notice  of  dissolution  came  to  the  the  continuing  partners  from  carry- 
actual  notice  of  the  plaintiff,  ing  on  business  in  the  old  name, 
Hixon  v.  Pixley,  15  Nev.  475.  see   De  Tastet  v.  Bordenave,  Jac. 

(/)  See,   as    to  this,    Brown    v.  516 ;  Webster  v.  Webster,  3  Swanst. 

Leonard,  2  Chitty,  120,  infra.  490,    note ;  Lewis    v.   Langdon,   7 

(g)  See    Newsome    v.    Coles,    2  Sim.  421. 

Camp.  617.  (i)  2  Chitty,  120. 

524 


OH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  "218 

Bush  had  retired  from  the  firm,  and  the  plaintiff,  before  he 
took  the  note,  was  told  by  Bush  that  he  had  ceased  to  be  a 
partner  with  Leonard  and  Spring,  but  that  his  name  was  to 
continue  for  a  certain  time.  Bush  was  held  liable  on  the 
note;  for,  notwithstanding  his  retirement,  his  name  was 
continued,  and  with  it  his  responsibility,  (k) 

Agency  continuing  for  purposes  of  winding  up. —  2.  It 
is  said  that  a  firm,  notwithstanding  its  dissolution,  continues 
to  exist  so  far  as  may  be  necessary  for  the  winding  up  of 
its  business.  (J)  This  doctrine  requires  consideration. 
*No  doubt  after,  as  well  as  before,  dissolution,  each  [*218] 
partner  can  pay,1  or  receive  payment  of,  a  partner- 
ship debt;  for  it  is  clearly  settled  that  payment  by  one  of 
several  joint  debtors,  or  to  one  of  several  joint  creditors,  (m) 
extinguishes  the  debt  irrespectively  of  any  question  of  part- 
nership. So,  again,  as  regards  dealing  with  the  partnership 
assets,  it  has  been  held  that  the  power  of  a  continuing  or 
surviving  partner  to  sell  or  pledge  partnership  assets  is  as 
extensive  as  that  of  a  partner  in  a  going  concern,  (n) 2    But 

(k)  Bush,    however,     seems     to  so  although  the  partnership  was 

have    undertaken    that    the    note  dissolved.      Stebbins  v.    Williard, 

should  be  provided  for.     See  the  53  Vt.  665. 
judgment.  (m)  *■  e.,  if  they  are  not  trustees. 

(I)  Ex  parte  Williams,  11  Ves.  5 ;  Payment  to  one  of  several  trustees 

Peacock  v.    Peacock,    16    id.    57 ;  is  no  discharge.    Webb  v.  Ledsam, 

Oawshay  v.   Collins,  15  Ves.  227,  1  K.  &  J.  385. 
and  2  Russ.  342;  Wilson  v.  Green-        (?;)  See  Fox  v.  Hanbury,  Cowp. 

wood,  1  Swanst.  480;  Crawshay  v.  445;  Smith  v.  Stokes,  1  East,  363; 

Maule,  id.  507 ;  Butcbart  v.  Dresser,  Smith  v.  Oriell,  id.  368 ;  Harvey  v. 

4  De  G.  M.  &  G.  542.     N.  B.—  The  Crickett,  5  M.  &  S.   336;  Morgan 

diet  a  of  Lord  Eldon  were  not  made  v.  Marquis,  9  Ex.  145 ;  Butchart  v. 

in  any  case  in  which  the  power  of  Dresser,  4  De  G.  M.  &  G.  542 ;  Re 

one  partner  to  bind  the  others  after  Clough,  31  Ch.  D.  324. 
a  dissolution  was  before  him  for        2  In  the  absence  of  evidence  to 

decision.  the  contrary  it  will  be  presumed 

1  Where  one  pays  a  decree  for  that  one  of  the  members  of  a  dis- 

the  foreclosure  of  a  mortgage  on  solved  firm  has  the  power  to  dis- 

firm  property  for  the  benefit  of  one  pose  of  the  articles  of  firm  prop- 

of  the  partners  and  by  his  procure-  erty  left  in  his   possession  either 

nient,  such  payment  does  not  ex-  for  himself  or  the  firm.     Bach  v. 

tinguish  the  mortgage ;  and  this  is  State  Ins.  Co.  64  la.  595. 

525 


f218 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


when  questions  of  a  different  sort  arise,  considerable  diffi- 
culty is  experienced,  and  this  difficult}'  is  rather  increased 
than  diminished  by  the  loose  statement  that  a  partnership 
which  is  dissolved  is  nevertheless  deemed  to  continue  so  far 
as  may  be  necessary  for  winding  up  its  affairs.1 


1  Generally  a  dissolution  of  part- 
nership leaves  every  partner  in 
possession  of  the  full  power  (unless 
upon  the  dissolution  it  has  been  ex- 
clusively confided  and  delegated  to 
some  other  partner  or  person)  to 
adjust  and  settle  its  affairs;  to  pay 
and  collect  debts  due  to  the  part- 
nership; to  apply  the  partnership 
funds  and  effects  to  the  discharge 
of  the  partnership  debts;  to  adjust 
and  settle  the  unliquidated  debts 
of  the  partnership ;  to  receive  any 
property  belonging  to  the  partner- 
ship; to  make  due  acquittances, 
discharges,  receipts  and  acknowl- 
edgments of  their  acts  in  the 
premises,  and  to  divide  the  pro- 
ceeds of  the  partnership  property 
among  the  parties  entitled  thereto. 
Ruff ner  v.  Hewett,  7  W.  Va.  585 ; 
Robbins  v.  Fuller,  24  N.  Y.  570; 
Heart  v.  Walsh,  75  111.  200;  Nickels 
v.  Mooring,  16  Fla.  76;  Riddle  v. 
Etting,  32  Penn.  St.  412;  Ward  v. 
Barber,  1 E.  D.  Smith,  423 ;  Granger 
v.  McGilvra,  24  111.  152;  Mayor  v. 
Hawkes,  12  111.  298 ;  Gannett  v.  Cun- 
ningham, 34  Me.  56;  Milliken  v. 
Loring,  37  Me.  408 ;  Dowry  v.  Rob- 
erts, 2  Md.  Ch.  157 ;  Hall  v.  Clagett, 
48  Md.  225 ;  Conrad  v.  Buck,  21  W. 
Va.  396 ;  Bank  of  Montreal  v.  Page, 
98  111.  109;  Buxton  v.  Edwards, 
134  Mass.  567 ;  Dunlap  v.  Limes,  49 
la.  177. 

Where  a  book-keeper  is  neces- 
sary, one  of  the  partners  after  dis- 
solution,  in    the  absence  of    any 


sufficient  reason  to  the  contrary, 
may  continue  the  employment  of 
the  book-keeper  of  the  firm  for  the 
purpose  of  keeping  the  books  dur- 
ing process  of  liquidation.  Hollo- 
way  v.  Turner,  61  Md.  217. 

The  statute  of  Missouri  regulat- 
ing the  administration  of  partner- 
ship estates  does  not  prohibit  a 
surviving  partner  from  winding 
up  and  settling  the  partnership 
concerns  unless  he  first  gives  bond 
with  security  for  the  faithful  dis- 
charge of  his  duties.  Bredow  v. 
Mutual  Savings  Institution,  28  Mo. 
181. 

A  solvent  partner  of  a  firm  which 
has  been  dissolved  by  the  separate 
insolvency  of  the  other  partners  is 
not  entitled  as  of  right  to  adminis- 
ter the  partnership  assets  and  settle 
its  affairs.  Hubbard  v.  Guild,  1 
Duer,  662. 

A  dissolution  of  partnership  re- 
vokes the  authority  of  one  partner 
to  bind  the  other  in  respect  to  any 
new  contracts,  and  restricts  it  to 
the  settlement  of  the  partnership 
concerns.  Bell  v.  Morrison,  1  Pet. 
351 ;  Neal  v.  Hassan,  3  McCord,  278 ; 
Chase  v.  Kendall,  6  Ind.  304;  Pal- 
mer v.  Dodge,  4  Ohio  St.  21 ;  Perrin 
v.  Keene,  20  Me.  355;  Ellicott  v. 
Nichols,  7  Gill,  85 ;  Hurst  v.  Hill,  8 
Md.  399 ;  Speake  v.  White,  14  Tex. 
364 ;  Bank  of  Port  Gibson  v.  Baugh, 
16  Miss.  290;  Sutton  v.  Dillaye,  3 
Barb.  529 ;  Whitehead  v.  Bank  of 
Pittsburg,  2  Watts  &  S.  172 ;  Dun- 


526 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBEKS. 


:"218 


Lyon  v.  Haynes  (o)  is  a  strong  authority  to  show  that 
when  an  unincorporated  company  is  dissolved  by  a  resolution 


lap  v.  Limes,  49  Iowa,  177.  See, 
also,  Bennett  v.  Buchan,  61  N.  Y. 
222.     See  ante. 

Where  a  plaintiff  in  a  judgment 
given  him  by  a  firm  composed  of 
three  members,  for  liabilities  in- 
curred upon  notes  discounted  for 
their  use,  continues  his  liability  as 
accommodation  drawer  or  indorser 
of  new  notes  given  by  the  firm, 
after  he  knows  that  one  member 
has  retired,  he  cannot  in  a  sci.  fa. 
to  revive  his  judgment,  in  which 
the  two  surviving  members  of  the 
old  firm  and  the  administrator  of 
the  retiring  partner,  who  died  after 
suit  brought,  are  defendants,  re- 
cover for  the  new  liabilities  as- 
sumed after  the  dissolution,  unless 
they  are  renewals  of  the  notes  of 
the  old  firm.  Hartley  v.  Kirlin,  45 
Pa.  St.  49. 

No  liability  can  be  created  on  the 
credit  of  a  firm  which  has  been 
dissolved  unless  the  firm  name  is 
used  in  making  purchases.  Kirby 
v.  Hewitt,  26  Barb.  607. 

After  dissolution  of  the  partner- 
ship one  partner  cannot  be  sub- 
jected to  liability  for  use  of  the 
money  of  a  third  party  by  his  part- 
ner, when  he  himself  has  derived 
no  advantage  from  its  use,  nor 
ratified  the  act  of  the  partner  in 
using  it.  Dunlap  v.  Limes,  49 
Iowa,  177. 

The  remaining  partners,  after  a 


dissolution,  are  entitled  to  the  pos- 
session of  the  effects  for  the  pur- 
pose of  settling  up  the  concern,  and 
without  interference,  unless  for 
good  cause  shown,  on  the  part  of 
strangers  who  may  have  purchased 
the  shares  of  retiring  partners. 
Reece  v.  Hoyt,  4  Ind.  169. 

Though  a  partnership  for  a  single 
transaction,  as  in  a  contract  upon 
a  canal,  mutually  terminates  with 
the  completion  of  the  purposes  for 
which  it  was  formed,  yet,  as  be- 
tween the  partners  themselves  and 
others,  it  continues  for  the  purpose 
of  winding  up  its  affairs.  Petriken 
v.  Collier,  1  Pa.  St.  247. 

It  is  competent  for  partners  after 
dissolution  to  carry  out  a  contract 
previously  made  and  in  part  per- 
formed. Holmes  v.  Shands,  27 
Miss.  40. 

For  the  purpose  of  carrying  out 
a  contract,  intended  to  be  fulfilled 
after  dissolution,  the  partnership 
continues  after  the  dissolution. 
Western  Stage  Co.  v.  Walker,  2 
Iowa,  504. 

If,  during  the  existence  of  a 
firm,  the  firm  requests  the  plaintiff 
to  pay  certain  bills  at  maturity, 
which  he  pays  after  the  dissolution 
with  notice  thereof,  the  partnership 
will  be  liable  unless  there  has  been 
a  revocation  of  the  request.  Lee 
v.  Stowe,  57  Tex.  444. 

On  the  dissolution  of  a  law  firm, 


(o)  5  Man.  &  Gr.  504.     The  ques-    the  company  had   been  dissolved. 


tion  in  this  case  was  whether  an 
action  would  lie  by  a  shareholder 
against  directors  for  not  applying 
the  assets  of  the  company  as  pre- 
scribed by  a  resolution  made  after 


It  was  held  that  such  action  did 
not  lie,  although  the  directors  had 
assumed  to  wind  up  the  company 
under  the  authority  of  the  resolu- 
tion. 


527 


*218 


KIGUTS    AND    OBLIGATIONS. 


BOOK    II. 


of  a  meeting  competent  to  dissolve  it  the  power  of  a  ma- 
jority of  shareholders  to  bind  the  minority  is  at  an  end; 


in  the  absence  of  a  contrary  agree- 
ment, either  partner  may  give  his 
attention  to,  and,  in  the  absence  of 
the  other,  control,  any  unfinished 
cases  of  the  firm.  As  to  such  un- 
finished business  they  are  still  part- 
ners. Williams  v.  Whitmore,  9 
Lea  (Tenn.),  262. 

If  a  claim  is  placed  in  the  hands 
of  two  attorneys  practicing  in 
partnership,  and,  before  any  steps 
are  taken  in  the  collection  of  the 
claim,  the  firm  dissolves,  and  one 
of  the  members  takes  charge  of  the 
claim,  and  renders  all  the  services 
in  its  collection,  and  sues  individu- 
ally the  owner  of  the  claim  for  his 
fees  in  so  doing,  the  jury  will  be 
justified  in  inferring  that  it  was 
part  of  the  contract  of  dissolution 
between  the  partners  that  the  one 
who  has  rendered  the  services 
should  attend  to  the  claim  and  re- 
ceive the  compensation,  and  their 
verdict  to  that  effect  will  be  upheld. 
Anderson  v.  Tarpley,  12  Miss.  507. 

After  the  dissolution  of  a  part- 
nership, and  a  sale  by  one  partner 
of  his  interest  to  the  other,  who 
undertook  to  pay  all  the  partner- 
ship debts,  held,  that  an  account 
rendered  by  the  acting  partner  or 
his  clerk,  after  the  dissolution, 
showing  a  balance  due  from  the 
partnership,  was  binding  on  the  re- 
tired partner.  Garland  v.  Agee,  7 
Leigh,  362.  See,  however,  Wood- 
worth  v.  Downer,  13  Vt.  522;  also 
Eoots  v.  Wellford,  4  Munf.  215, 
where  it  was  held  that  one  partner, 
after  the  dissolution  of  the  partner- 
ship, cannot  bind  the  rest  without 
their  consent  by  settling  accounts 
with,  or  allowing  credits  to,  cus- 


tomers of  the  firm.  In  Vinal  v. 
Burrill,  16  Pick.  401,  it  was  held 
that,  in  an  action  against  partners 
upon  an  alleged  partnership  ac- 
count, it  is  competent  for  the 
plaintiff  to  prove  that  one  of  the 
partners,  after  the  dissolution  of 
the  copartnership,  acknowledged 
the  account  to  be  correct,  and  di- 
rected that  a  balance  against  a 
copartner,  on  a  separate  account 
with  the  plaintiff,  should  be  trans- 
ferred to  the  debit  of  the  partner- 
ship, stating  that  it  was  all  one 
concern. 

Where  a  partnership  is  dissolved 
and  one  partner  assigns  all  his  in- 
terest to  the  other,  such  assignee 
takes  all  the  rights  of  the  firm,  and 
may  exercise  them  in  the  firm 
name  for  all  purposes  necessary  to 
their  enforcement  and  for  closing 
up  the  joint  business.  An  action 
may  be  maintained  in  his  own 
name  unless  objection  for  want  of 
the  other  as  a  party  be  distinctly 
made.     Molen  v.  Orr,  44  Ark.  486. 

Copartners,  upon  dissolution  of 
the  firm,  may  appoint  one  of  their 
number  a  special  agent  for  winding 
up  its  affairs,  and  this  having  been 
done,  third  persons  who,  with  no- 
tice of  the  arrangement,  deal,  in 
matters  connected  with  the  liqui- 
dation, with  the  partner  other  than 
the  one  thus  authorized,  are  sub- 
ject to  the  equitable  rights  of  the 
other  partners.  Hilton  v.  Vander- 
bilt,  82  N.  Y.  591. 

Upon  the  dissolution  of  partner- 
ship between  attorneys  at  law,  an 
agreement  by  one  of  the  partners 
to  wind  up  the  business  of  the  firm 
and  pay  the  other  his  share  of  the 


528 


CH.  n,  SEC.  III.]  LIABILITY    OF   MEMBEES. 


*218 


and  that,  even  as  regards  the  mode   of  winding  up  the 
concerns   of    the   defunct   company,   the   majority   of   its 


fees  collected  is  not  without  con- 
sideration or  void,  and  not  within 
the  statute  of  frauds,  although  at 
the  time  it  was  made  the  partner 
did  not  expect  that  all  the  business 
would  be  wound  up  within  the 
year.  Osment  v.  McElrath,  68  Cal. 
466. 

An  agreement  of  the  partners 
that  one  of  their  number  shall 
wind  up  the  business  does  not  en- 
large his  powers  so  as  to  enable 
him  to  impose  any  new  liability  of 
the  firm  or  create  any  cause  of  ac- 
tion against  the  partners.  Conrad 
v.  Buck,  21  W.  Va.  396. 

The  sole  remaining  solvent  part- 
ner has  the  right  to  demand  and 
take  from  his  insolvent  copartner 
liquidation  of  the  affairs  of  the 
firm.  This  right  to  administer  is  a 
personal  privilege,  and  if  the  solv- 
ent partner  permits  his  insolvent 
partner,  or  his  representative,  to 
administer  the  assets,  he  thereby 
waives  his  privilege.  Vetterlein  V. 
Barnes,  6  Fed.  Rep.  693. 

The  authority  to  act  as  liquidat- 
ing partner  does  not  require  an 
express  and  specific  appointment. 
Where  one  so  acts  with  the  knowl- 
edge of  his  late  copartners,  their 
permission  may  be  presumed,  and 
they  may  be  bound  as  to  third  per- 
sons by  his  acts.  Fulton  v.  Central 
Bank,  92  Pa.  St.  112;  S.  C.  38  Leg. 
Intel.  355. 

After  the  dissolution  of  a, firm  a 
liquidating  partner  may  bind  his 
late  copartners  by  a  note  given  by 
him  in  the  firm  name  for  money 
which  he  borrows  to  pay  a  debt  of 
the  firm  and  which  he  so  applies. 
Express    authority  in   liquidating 


partner  need  not  be  proved;  au- 
thority may  be  implied  by  the  con- 
tinuance of  its  exercise  for  a  con- 
siderable period  of  time  with  the 
knowledge  of  his  late  copartners. 
Siegfried  v.  Ludwig,  102  Pa.  St. 
547;  Fulton  v.  Central  Bank,  92 
Pa.  St.  112;  S.  C.  38  Leg.  Intel. 
355. 

Where  a  firm  had  been  in  the 
habit  of  selling  upon  credit,  and  by 
the  articles  of  dissolution  the  liqui- 
dating partners  were  given  full 
discretionary  powers  in  the  collec- 
tion of  debts,  they  ought  not  to  be 
surcharged  with  loss  arising  from 
private  sale  upon  credit  of  goods 
of  the  firm  made  without  bad  faith 
to  an  irresponsible  purchaser.  Such 
liquidating  partners  have  power  to 
make  private  sale  upon  credit. 
Petry's  Appeal,  2  Penny.  (Penn.) 
404;  S.  C.  11  Weekly  Not.  Cas.  512". 

After  the  dissolution  of  a  part- 
nership, one  partner,  though  he  is 
authorized  to  settle  the  partnership 
concerns,  has  no  right  to  receive 
goods  consigned  to  the  partnership 
for  sale  prior  to  the  dissolution; 
and  a  purchase  of  the  goods  by  a 
person  having  knowledge  of  the 
facts,  to  pay  a  debt  due  him  from 
the  partner-hip,  is  void,  Stierner- 
mann  t».  Cowing,  7  Johns.  Ch.  275. 

After  a  dissolution  each  partner 
need  not  be  put  separately  in  de- 
fault on  a  contract  made  before. 
So  any  partner  may  accept  delivery 
of  goods  sold  to  the  firm ;  and  the 
price  may  be  demanded  of  any 
partner.  White  v.  Kearney,  2  La. 
Ann.  639. 

One  who  has  power  to  wind  up 
a  partnership  in  which  he  was  con- 


VOL.  1  —  34 


529 


r*218 


EIGHTS    AND    OBLIGATIONS. 


[book  n. 


shareholders  cannot  bind  either  a  dissentient  minority  or 
absentees. 


cerned.  by  selling  the  merchandise 
belonging  to  the  firm,  has  also 
power  to  receive  payment,  unless 
.restrained  by  some  special  terms  of 
the  agency.  Lamb  v.  Salters,  3 
Brev.  130. 

The  receipt  of  property  is  not  in 
itself  a  payment  of  a  debt,  and  can 
only  become  so  by  an  agreement  to 
receive  such  property  as  payment. 
Such  an  agreement  is  a  new  con- 
tract, and  will  not  be  binding  on 
the  firm  if  made  by  a  former  part- 
ner after  the  dissolution  without 
the  assent  of  his  copartner.  Kirk 
v.  Hiatt,  2  Ind.  322. 

A  partner  who  undertakes  to 
collect  the  debts  of  the  dissolved 
firm  is  bound  to  the  diligence  of  a 
collecting  agent.  He  is  responsible 
for  all  that  it  can  be  shown  he  col- 
lected, or  might  have  collected 
with  reasonable  diligence.  Phelan 
v.  Hutchinson,  Phill.  Eq.  116; 
Pratt  v.  McHatton,  11  La.  Ann. 
£60.  See,  also,  Knox  v.  Spreecher, 
68  Pa.  St.  415. 

Although  one  partner  remains  in 
possession  of  the  books  and  papers 
of  a  firm  after  its  dissolution  he  is 
not  thereby  made  responsible  for 
debts  which  he  neglects  to  collect. 
Wilder  v.  Morris,  7  Bush,  420. 

The  sale  by  one  of  two  copart- 
ners of  all  his  interest  in  the  firm 
assets  to  the  other,  and  the  assump- 
tion by  the  latter  of  its  liabilities, 
confers  upon  the  latter  by  implica- 
tion all  the  usual  powers  of  adjust- 
ment of  claims,  and,  among  other? , 
that  of  disposing  of  them  by  arbi- 
tration. Becker  v.  Boon,  61  N.  Y. 
317. 

The  plaintiffs,  A.  and  B.,  were 


partners.  A.  suddenly  disposed  of 
all  his  property  and  sold  his  inter- 
est in  the  firm,  except  the  accounts, 
to  G.,  and  absconded  from  the 
state,  leaving  the  partnership  book 
of  accounts,  embracing  the  account 
in  suit,  in  the  hands  of  G.,  with 
directions  to  collect  them.  B. 
immediately  notified  the  defendant 
to  pay  no  one  but  himself,  and  de- 
manded the  company  books  of  G., 
who  refused  to  surrender  them  or 
give  him  a  copy  of  the  accounts. 
B.  then  brought  this  suit,  after 
which  the  defendant  paid  the  debt 
to  G.  and  took  from  him  a  release 
of  it.  G.  subsequently  informed 
A.  of  what  he  had  done,  and  A. 
approved  it.  Held,  that  G.'s  dis- 
charge of  the  debt  constitutes  no 
defense  to  this  suit.  Ayer  v.  Ayer, 
41  Vt.  346. 

A  surviving  partner  is  not  bound 
by  an  agreement  of  a  deceased 
partner  to  apply  the  company  ef- 
fects in  payment  of  his  individual 
debt,  but  which  was  not  carried 
out  before  his  decease.  Stearns  v. 
Houghton,  38  Vt.  583. 

In  respect  to  their  creditors,  co- 
partners, after  dissolution,  are  joint 
debtors  and  nothing  more.  What 
the  joint  makers  of  a  promissory 
note  may  not  do  to  enlarge,  pro- 
long or  continue  existing  liabilities, 
or  to  create  a  new  one  in  regard  to 
the  debt,  copartners,  after  dissolu- 
tion, may  not  do.  Payne  v.  Slate, 
39  Barb.  634. 

A  partner,  after  the  dissolution 
of  a  copartnership,  although  au- 
thorized to  adjust  the  debts  of  the 
firm  and  to  settle  the  partnership 
concerns,  has  no  power  to  bind  his 


530 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


-218 


Other  cases,  which  have  been  already  referred  to,  (p) 
clearly  show  that   after   the  dissolution    of  an    ordinary 


copartners  by  giving  a  promissory 
note;  and  this  is  so  even  though 
the  note  is  given  for  a  partnership 
debt.  Lusk  v.  Smith,  8  Barb.  570 ; 
Lockwood  v.  Comstock,  4  McLean, 
383;  Van  Valkenburg  v.  Bradley, 
14  Iowa,  108;  Long  v.  Story,  10 
Mo.  636 ;  Conklin  v.  Ogborn,  7  Ind. 
553;  Draper  v.  Bissell,  3  McLean, 
275;  Cunningham  v.  Bragg,  37 
Ala.  436 ;  Burr  v.  Williams,  20  Ark. 
171 ;  Chamberlain  v.  Bancroft,  24 
Ga.  310;  Richardson  v.  Moies,  31 
Mo.  430;  Lansing  v.  Gaine,  2 
Johns.  300;  Graves  v.  Merry,  6 
Cow.  701 ;  National  Bank  v.  Nor- 
ton, 1  Hill,  572 ;  Galliott  v.  Plant- 
ers', etc.  Bank,  1  McMull.  209; 
Bank  of  South  Carolina  v.  Hum- 
phreys, 1  McCord,  388;  Loomis  v. 
Pearson,  1  Harp.  470;  Foltz  v. 
Powrie,  2  Dessau.  40;  Isler  v. 
Baker,  6  Humph.  85;  Lange  v. 
Kennedy,  20  Wis.  279 ;  Woodworth 
v.  Downer,  13  Vt.  522 ;  Morrison  v. 
Perry,  18  N.  Y.  Supreme  Ct.  33; 
Bank  of  Montreal  v.  Page,  98  111. 
109;  Carlton  v.  Jenness,  42  Mich. 
110.  See,  however,  Robinson  v. 
Taylor,  4  Pa.  St.  242 ;  Petriken  v. 
Collier,  1  Pa.  St.  247, 

Although  a  partner  cannot,  after 
dissolution,  bind  his  copartner  to 
the  payment  of  a  debt  by  note,  yet 
he  may  give  a  note  as  evidence  of 
indebtedness  by  previous  account, 
as  by  so  doing  he  does  not  create  a 
debt.  McPherson  v.  Rathbone,  7 
Wend.  216;  S.  C.  11  Wend.  96; 
Ward  v.  Tyler,  52  Pa.  St.  393. 


A  note  made  during  partnership, 
but  not  delivered  until  after  disso- 
lution, does  not  bind  the  partners 
not  delivering  it.  Woodford  v. 
Dorwin,  3  Vt.  82;  Scott  v.  Ship- 
herd,  id.  108. 

A  bill  drawn  on  a  firm,  but  not 
accepted  till  after  a  dissolution 
of  the  partnership,  publicly  an- 
nounced, binds  only  the  partner 
who  accepts.  Tombeckbee  Bank 
v.  Dumell,  5  Mason,  56. 

A  partner  authorized  to  settle 
the  business  of  his  firm  after  its 
dissolution  has  no  authority  to  ac- 
cept, in  the  firm  name,  a  draft 
drawn  for  money  borrowed  by 
him  to  pay  the  debts  of  the  firm. 
Hamilton  v.  Seaman,  1  Ind.  185. 

After  dissolution,  the  partner  who 
is  authorized  to  settle  up  the  busi- 
ness of  the  partnership  cannot  re- 
new a  note  in  the  partnership 
name,  which  was  given  before  the 
dissolution,  so  as  to  bind  the  other 
partner.  Parker  v.  Cousins,  2 
Gratt.  372 ;  Myatts  v.  Bell,  41  Ala. 
222.  See,  also,  Clement  v.  Clem- 
ent, 35  N.  West.  Rep.  (Wis.)  17. 

A  surety  on  a  note,  given  by  one 
of  the  partners  after  the  dissolu- 
tion of  the  copartnership,  duly 
notified,  he  being  authorized  to 
settle  the  affairs  of  the  firm,  to  a 
creditor  of  the  firm,  in  the  part- 
nership name,  has  no  claim  to  in- 
demnity from  the  other  partner  for 
any  loss  he  may  sustain.  Palmer 
v.  Dodge,  4  Ohio  St.  21. 

One  partner  may  bind  the  others, 


(p)  Ante,  p.  215.  Especially  Kil- 
gour  v.  Finlyson,  1  H.  Blacks.  156, 
and  Abel  v.   Sutton,   3  Esp.  108. 


See,  too,  Pinder  v.  Wilks,  5  Taunt. 
611. 


531 


*219 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


[*219]  partnership,  no  *one  aware  of  the  dissolution  is  en- 
titled on  any  ground  of  implied  agency  to  hold  the 

after  dissolution,  by  a  note,  if  he  a  firm,  which  either  could  execute, 
have  express  authority  so  to  do  and  which  could  only  expire  by 
from  tiie  other  partners  standing    the  extinguishment  of  the  debts  to 


by.  Bower  v.  Douglass,  25  Ga.  714. 
The  defendant  was  a  partner  in 
several  firms  of  merchants,  which, 
upon  his  withdrawal  therefrom, 
was  largely  indebted  to  the  plaint- 


which  it  relates,  or  notice  to  the 
bank  that  he  would  no  longer  be 
bound;  and  the  taking  into  the 
firm  of  a  new  partner,  after  the 
execution  of  the  power,  in  no  re- 


iff  for  moneys  borrowed  for  the  spect  affects  the  liability  of  the 
use  of  the  tirms,  of  which  defend- 
ant, as  a  partner,  had  received  his 
proportionate  benefit.  Upona  dis- 
solution of  the  old  firms  by  the 
retirement  of  the  defendant,  the 
business  was  carried  on  by  the  other 


defendant.     Bank  of  Mobile  v.  An- 
drews, 2  Sneed,  535. 

If,  after  the  dissolution  of  a  co- 
partnership, one  of  the  partners 
give  a  note  in  behalf  of  the  former 
copartnership,  and  the  other  part- 


members  of  said   firms,  who  had    ner  pay  a  part  of  the  note,  such 


assumed  the  debts  and  notified  the 
plaintilf  thereof,  as  also  of  the 
dissolution.  Tiiey  applied  to  the 
plaintiff  for  "renewals  and  ex- 
tensions" of  the  debts,  which  the 
plaintilf  agreed  to  grant  upon  con- 
dition that  the  liability  of  the  de- 
fendant should  be  continued;  the 


payment  is  prima  facie  evidence 
of  an  existing  partnership,  or  of  an 
authority  to  give  the  note.  Eaton 
v.  Taylor,  10  Mass.  54. 

The  settling  partner  of  a  firm 
may  give  the  note  of  the  firm,  after 
its  dissolution,  to  release  their  prop- 
erty from  an  attachment  for  a  just 


defendant  thereupon  executed  and  debt,  and  a  surety  signing  such 
delivered  to  the  plaintilf  the  follow-  a  note,  with  notice,  is  responsible. 
instrument:  "The  Bank  of  Mobile  Kemp  v.  Coffin,  3  Iowa,  190. 
(the  plaintiff)  holds  certain  promis-  All  the  partners  in  a  firm  are 
sory  notes  of  E.  L.  Andrews  &  Co..  bound  by  a  note  given  by  one  of 
and  Andrews  &  Brothers,  of  which  the  partners,  after  the  dissolution  of 
firms  I  was  a  member  until  30th  the  partnership,  for  a  debt  con- 
September  last.  Tins  is  to  witness  tracted  before  the  dissolution,  if 
that  E.  L.  Andrews  and  Z.  An-  the  giving  of  notes  for  debts  of  the 
drews,  or  either  of  them,  is  author-  firm  was  customary  while  the  part- 


ized  to  sign  any  notes  with  the 
name  of  the  firm  in  liquidation  for 
the  extension  or  renewal  of  said 
obligations,  and  I  agree  to  continue 


nership  continued,  and  the  creditor 
had   no  notice  of  the  dissolution. 
Pecker  v.  Hall,  14  Allen,  532. 
After  dissolution  of  a   partner- 


my  liability  on  such  renewals  or  ship  one  partner  cannot,  without 
extensions  as  if  I  yet  continued  a  authority  from  the  others,  indorse  a 
member  of  said  firm."  Held,  that  note  belonging  to  the  firm.  Fel- 
this  instrument  is  an  unqualified  lows  v.  Wyman,  33  N.  H.  351;  San- 
personal  power,  given  to  either  of  ford  v.  Mickles,  4  Johns.  224; 
the  firms  as  individuals  and  not  as  Humphries  v.  Chastian,  5  Ga.  16G; 

632 


CH.  II,  SFC.  III.]  LIABILITY    OF   MEMBERS. 


*219 


members  of  the  late  firm  responsible  for  acts  done  by  each 
other  subsequently  to  the  dissolution ;  and  every  one  must 


White  v.  Tudor,  24  Tex.  639 ;  Bo- 
gerau  v.  Gueringer,  14  La.  Ann. 
478. 

A  valid  title  to  a  negotiable  prom- 
issory note,  payable  to  a  copartner- 
ship firm,  may  however,  be  trans- 
ferred by  an  indorsement  made  in 
the  name  of  the  firm  by  one  of  the 
copartners,  though  after  the  disso- 
lution of  the  copartnership,  if  such 
dissolution  was  unknown  to  the  in- 
dorsee. Cony  v.  Wheelock,  33  Me. 
3GG. 

A  firm  dissolved  in  May,  giving 
notice  by  publication,  and  author- 
izing T.,  as  the  liquidating  partner, 
to  use  the  firm  name  for  that  pur- 
pose. In  August,  without  the 
knowledge  of  his  fellows,  he  drew 
notes  payable  to  the  firm,  indorsed 
them  with  the  firm  name,  and  had 
them  discounted  by  bankers  with 
whom  the  firm  had  never  had  deal- 
ings. The  proceeds  of  the  notes 
passed  to  the  individual  credit  of 
J.  There  was  evidence  that  the 
proceeds  were  applied  to  firm  debts. 
Held,  that  if  the  notes  were  bona 
fids  for  liquidation,  and  the  pro- 
ceeds applied  to  payment  of  firm 
debts,  the  other  partners  would  be 
liable.  Lloyd  v.  Thomas,  79  Pa.  St. 
68. 

One  partner  cannot  bind  his  co- 
partners by  indorsing,  in  the  firm 
name,  a  note  given  after  the  disso- 
lution of  the  partnership  to  renew 
a  note  given  before  the  dissolution. 
Lumberman's  Rink  v.  Pratt,  51 
Me.  563. 

Where  one  of  two  partners,  after 
dissolution  of  the  partnership,  be- 
ing authorized  to  settle  the  affairs 
of  the  firm,  indorses,  "  without  re- 


course," in  the  partnership  name,  a 
promissory  note  payable  to  the 
firm,  such  indorsement  con  veys  the 
legal  title  to  the  note.  Waite  v. 
Foster.  33  Me.  424. 

If  a  note  made  payable  to  a  firm 
is  indorsed  by  one  of  the  partners 
after  dissolution,  and  without  au- 
thority from  the  others,  their  sub- 
sequent ratification  will  supply  the 
deficiency  of  authority.  Leonard 
v.  Wildes,  36  Me.  2G5. 

One  partner  of  a  firm,  even  after 
dissolution,  may  indorse  the  note 
of  the  firm  payable  to  himself, 
given  before  dissolution.  Temple 
v.  Seaver,  11  Cush.  314. 

Under  authority,  though  by  parol 
only,  given  to  one  partner  by  the 
others,  after  the  dissolution  of  the 
partnership,  to  sell  a  negotiable 
note  made  to  the  firm  before  dis- 
solution, he  may  indorse  such  note 
"  without  recourse,"  in  the  name 
of  the  firm.  Yale  v.  Eames,  1 
Mete.  486. 

One  of  the  members  of  a  dissolved 
partnership  may  receive  back  a 
promissory  note  which  they  have 
wrongfully  put  into  circulation 
while  the  partnership  existed,  and 
bind  the  other  partners  by  such  act. 
Torrey  v.  Baxter,  13  Vt.  452. 

Where  a  note  has  been  indorsed 
by  a  partner  in  the  partnership 
name,  one  of  the  partners  has  au- 
thority to  waive  demand  and  no- 
tice after  a  dissolution  and  before 
the  note  becomes  payable.  Dar- 
ling v.  March,  23  Me.  184. 

A  promise  made  by  a  partner, 
after  the  partnership  has  been  dis- 
solved, to  pay  a  note  on  which  the 
firm  are  indorsers,  no  notice  of  dis- 


533 


*219 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    II. 


feel  the  force  of  Lord  Kenyon's  observation  in  Abel  v.  Sut- 
ton, that,  if  the  contrary  doctrine  were  to  prevail,  a  man 


honor  having  been  given,  is  not 
binding  upon  the  other  members  of 
the  firm.  Schoneman  v.  Fegley, 
7  Pa.  St.  433. 

A  partnership,  though  dissolved, 
is  treated  as  still  in  existence  so 
far  as  respects  demand,  protest, 
and  notice  thereof ;  and  the  acts  of 
one  partner  in  such  cases  are  bind- 
ing on  all.  Fourth  National  Bank 
v.  Altheimer,  91  Mo.  190. 

A  partner,  after  dissolution  and 
publication  of  notice  thereof,  may 
therefore  waive  notice  of  demand 
and  non-payment  of  a  note  indorsed 
by  and  discounted  for  the  firm. 
Seldner  v.  Mount  Jackson  Nat.  Bk. 
66  Md.  488;  S.  C.  10  E.  R.  602. 

In  Mauney  v.  Coit,  80  N.  C.  300, 
however,  it  was  held  that  where  a 
settling  partUer,  after  dissolution 
of  the  firm,  gives  a  draft  in  payment 
of  a  partnership  debt,  he  cannot 
waive  protest  so  as  to  bind  his 
former  copartner,  especially  when 
the  latter  has  been  a  dormant  mem- 
ber. 

.  The  firm  having  indorsed  a  note, 
one.  of  the  partners  may,  after  the 
dissolution  of  the  firm,  consent  to 
the  holder's  compounding  with  and 
releasing  the  maker,  and  his  con- 
sent will  also  bind  the  other  part- 
ner, and  make  the  firm  liable  for 
the  balance  due.  Union  Bank  v. 
Hall,  Harp.  245. 

Generally  each  partner  has  the 
right  to  apply  any  of  the  partner- 
ship moneys  in  his  hands  to  the 
satisfaction  of  the  partnership 
debts.  But  the  court  may,  in  a 
proper  case,  direct  a  partner  who 
has  partnership  moneys  in  his 
hands  to  pay  the  same  into  court 


to  be  applied  to  the  payment  of  the 
debts,  and  in  his  relief  or  otherwise, 
as  may  be  just.  Carper  v.  Hawkins, 
8  W.  Va.  291. 

After  a  dissolution  and  pending  a 
liquidation  a  partner  cau  do  no  act, 
still  less  use  the  partnership  funds, 
in  a  manner  inconsistent  with  a 
just  and  proper  settlement.  Grid- 
ley  v.  Conner,  2  La.  Ann.  87. 

The  dissolution  of  a  partnership 
destroys  the  right  of  one  partner 
to  dispose  of  the  partnership  prop- 
erty absolutely,  or  otherwise  than 
according  to  the  terms  of  the  dis- 
solution. Baldwin  v.  Johnson,  11 
N.  J.  Eq.  441. 

On  January  1,  1875,  a  firm  con- 
sisting of  four  members,  two  of  the 
name  of  McPherson,  and  two  of 
the  name  of  Horton,  was  dissolved, 
and  all  the  property  divided,  ex- 
cept certain  accounts  and  an  ice- 
house, which  house  it  was  agreed 
should  be  separated  into  two  parts 
by  a  partition,  and- one-half  be  oc- 
cupied by  the  McPhersons  and  the 
other  by  the  Hortons  for  the  term 
of  one  3Tear.  The  Hortons  were  to 
collect  the  outstanding  credits,  and 
apply  them  to  the  payment  of  the 
firm  debts.  On  July  30,  1875, 
while  the  parties  were  in  the  occu- 
pation of  the  ice-house  under  this 
agreement,  one  of  the  McPhersons, 
without  the  knowledge  of  the 
Hortons,  and  without  special  au- 
thority from  either  of  the  members 
of  the  firm,  transferred  the  house 
to  the  plaintiff.  In  an  action  by 
the  plaintiff  against  the  defend- 
ants, the  Hortons,  to  recover  the 
house,  with  damages  for  its  deten- 
tion, held,   that  the  authority  of 


534 


OH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*219 


could  never  know  when  he  was  to  be  at  peace  and  freed 
from  all  the  concerns  of  the  partnership. 


McPherson  to  transfer  the  firra 
property  was  not  terminated  by 
the  dissolution  of  the  firm,  and 
that  the  plaintiff  was  entitled  to 
recover.  Van  Daren  v.  Horton,  19 
Hun,  7. 

Where  the  articles  of  copartner- 
ship provide  that,  on  the  dissolu- 
tion of  the  copartnership,  its  effects 
ehall  be  divided  among  the  part- 
ners, the  partners  become  on  such 
dissolution  merely  tenants  in  com- 
mon, and  no  one  of  them  can  set 
off  or  sell  the  share  of  the  other 
without  his  consent.  Phillips  v. 
Reeder,  18  N.  J.  Eq.  95.  See,  also, 
Hagendobler  v.  Lyon,  13  Kan. 
27G. 

Ordinarily,  during  the  existence 
of  the  partnership,  one  partner, 
acting  withing  the  scope  of  the 
partnership's  business,  may  sell 
and  dispose  of  the  entire  interest 
in  the  partnership's  effects;  but 
when  the  firm,  though  not  form- 
ally dissolved,  has  closed  its  busi- 
ness, and  reduced  all  its  assets  to 
the  shape  of  two  notes  payable  to 
the  firm,  if  one  partner  fraudu- 
lently transfers  these,  the  pur- 
chaser takes  them  subject  to  the 
other  partner's  equity.  Halstead 
v.  Shepard,  23  Ala.  558. 

After  the  dissolution  of  a  copart- 
nership, one  of  the  partners  cannot 
dispose  of  the  partnership  chose  in 
action  without  the  authority  or 
assent  of  the  other,  so  as  to  make 
him  liable  upon  any  covenants  or 
obligations  which  he  assumes  on 
6uch  transfer.  Bennett  v.  Buchan, 
53  Barb.  578. 

After  the  dissolution  of  a  copart- 
nership, one  partner  has  not  au- 


thority to  make  a  general  volun^ 
tary  assignment  of  the  effects  of 
the  partnership  for  the  benefit  of 
creditors  against  the  express  dis- 
sent of  his  copartners.  Deckert  v. 
Filbert,  3  Watts  &  S.  454. 

After  the  dissolution  of  a  part* 
nership,  one  partner,  without  the 
consent  of  the  other,  cannot  assign 
the  partnership  effects  for  the  bene* 
fit  of  preferred  creditors.  Egberts 
v.  Wood,  3  Paige  (N.  Y.),  517.  Sea 
ante.  Assignment. 

When  goods  are  consigned  to 
joint  factors,  and  the  partnership 
is  dissolved,  one  retiring  and  the 
other  remaining,  and  he  who  re- 
mains sells  the  goods  and  receives 
the  avails,  an  action  lies  against 
both.  Briggs  v.  Briggs,  20  Barb. 
477. 

During  the  existence  of  the  part- 
nership either  partner  may  make 
a  valid  assignment  of  the  goods  of 
the  firm  to  secure  debts  due  there^ 
from;  but  if  the  partnership,  by 
mutual  consent,  is  dissolved,  and 
the  debts,  accounts  and  goods 
placed  in  the  hands  of  a  third  per-: 
son  to  wind  up  and  settle  the  firm 
business,  neither  partner  can  there: 
after  make  a  valid  disposition  of 
them.  Mygatt  v.  McClure,  3  Head, 
495. 

After  the  dissolution  of  a  part- 
nership and  an  assignment  by  one 
partner  to  the  other  of  all  his  in- 
terest in  the  book  debts  and  de» 
mands  of  the  firm,  with  power  to 
collect  them  for  his  own  benefit, 
an  attempt  by  the  partner  so  as- 
signing to  control  one  of  those  de- 
mands against  himself,  and  to 
direct  that  it  should  not  be  allowed 


535 


*ai9 


RIGHTS    AND    OBLIGATIONS. 


[iJOOK    II. 


Extent  of  the  doctrine.— The  doctrine  now  in  question 
cannot,  it  is  submitted,  be  carried  further  than  this,  viz., 


in    set-off,    can    have    no    effect. 
Davis  v.  Briggs,  39  Me.  304. 

A  power  of  attorney,  executed 
on  the  dissolution  of  a  firm  by  two 
partners  to  a  third,  authorizing 
him  to  ask,  demand  and  receive 
the  debts  of  the  firm,  and  declaring 
the  appointment  irrevocable,  does 
not  operate  as  an  assignment  of 
such  debts,  and  consequently  does 
not  render  inoperative  a  release 
subsequently  executed  by  one  of 
the  other  members  of  the  firm  to 
one  of  its  debtors.  Napier  v. 
M'Leod,  9  Wend.  120. 

After  the  dissolution  of  a  part- 
nership, one  of  the  partners,  who 
has  authority  to  collect  the  debts, 
may  transfer  to  himself  a  debt  due 
to  the  firm.  Oxley  v.  Willis,  1 
Cranch,  C.  Ct.  436. 

The  implied  power  of  a  partner, 
after  dissolution,  to  settle  outstand- 
ing business  of  the  firm,  does  not 
extend  to  authorize  him  to  appear 
for  his  copartner  in  a  suit  brought 
against  the  partners,  though  upon 
a  firm  indebtedness.  Hall  v.  Lan- 
ning,  91  U.  S.  160.     See  post. 

But  where  one  member  of  a 
partnership  has,  after  dissolution 
thereof,  defended  and  appealed 
from  a  judgment  rendered  in  a 
suit  against  the  firm,  all  the  mem- 
bers are  liable  to  a  surety  on  the 
appeal  bond,  who  is  afterwards 
compelled  to  pay  the  judgment. 
Gard  v.  Clark,  29  Iowa,  189. 

After  dissolution  one  partner  can 
compromise  and  settle  a  judgment 
valid  against  the  late  firm,  and  the 
others  must  contribute  to  the 
amount  paid  though  they  did  not 
assent    to    the     compromise,    and 


claim,  but  fail  to  show,  that  they 
could  have  settled  on  better  terms. 
Bass  v.  Taylor,  34  Miss.  342. 

After  dissolution  of  the  partner- 
ship, one  partner  cannot  discharge 
the  debt  of  a  third  person  to  the 
firm  by  a  receipt  given  for  the  re- 
lease of  his  individual  indebted- 
ness to  such  person,  particularly 
where  the  debtor  had  notice  not  to 
pay  such  partner.  Sims  v.  Smith, 
11  Rich.  565. 

After  the  dissolution  of  a  part- 
nership by  agreement,  the  partner 
who  is  authorized  to  settle  the  es- 
tate may  borrow  money  on  the 
credit  of  the  firm  for  the  purpose 
of  paying  the  debts  of  the  firm; 
and  if  the  credit  is  given  in  good 
faith,  though  with  a  knowledge  of 
the  dissolution,  and  the  money  'is 
faithfully  applied  to  the  liquida- 
tion of  the  joint  debts,  the  creditor 
has  a  claim  against  the  firm,  and 
is  not  to  be  considered  as  a  creditor 
merely  of  the  partner  borrowing. 
Estate  of  Davis  &  Desauque,  5 
Whart.  530 ;  Prudhomme  v.  Henry, 
5  La.  Ann.  700. 

The  admissions  of  a  partner, 
made  after  the  dissolution  of  the 
partnership,  are  not  admissible  in 
evidence  to  bind  the  partnership. 
Bispham  v.  Patterson,  2  McLean, 
87;  Mercer  v.  Sayre,  Anth.  119; 
Barringer  v.  Sneed,  3  Stew.  201 ; 
Lansing  v.  Gaine,  2  Johns.  300; 
Burns  v.  McKenzie,  23  Cal.  101; 
Daniel  v.  Nelson,  10  B.  Mon.  316; 
Hamilton  v.  Summers,  12  id.  11 ; 
Pope  v.  Risley,  23  Mo.  185 ;  Bank  of 
Vergennes  v.  Cameron,  7  Barb.  143 ; 
Meggett  v.  Finney,  4  Strobh.  220; 
Berryhill  v.  McKee,  1  Humph.  31. 


536 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*219 


that,  notwithstanding  dissolution,  a  partner  has  implied  au- 
thority to  bind  the  firm  so  far  as  may  be  necessary  to  settle 
and  liquidate  existing  demands,  and  to  complete  transac- 


Thus  the  admission  of  one  part- 
ner as  to  the  existence  of  a  debt 
against  the  firm,  made  subse- 
quently to  the  dissolution  of  the 
partnership,  is  not  binding  on  the 
other  partners.  Wilson  v.  Torbet, 
3  Stew.  296 ;  Chardon  v.  Oliphant, 
Treadw.  Const.  685;  S.  C.  3  Brev. 
183;  Yandesv.  Lefavour,  2  Blackf. 
371;  Brady  v.  Hill,  1  Mo.  315; 
Ward  v.  Howell,  5  Har.  &  J.  60 ; 
Shelton  v.  Cocke,  3  Munf.  191; 
White  v.  Union  Ins.  Co.  1  Nott 
&  M.  55S;  Hackley  v.  Hastie,  3 
Johns.  536;  Gleason  v.  Clark,  9 
Cow.  57;  Brewster  v.  Hardeman, 
Dudley,  138;  Conery  v.  Hayes, 
19  La.  Ann.  325.  See,  however, 
Simpson  v.  Geddes,  2  Bay,  533; 
Kendrick  v.  Campbell,  1  Bailey, 
522. 

The  cases  are  not,  however,  en- 
tirely harmonious  upon  the  subject 
of  admissions.  Thus,  it  has  been 
held  that  the  admissions  of  a  part- 
ner, made  after  the  dissolution  of 
the  partnership,  are  competent 
evidence  against  the  firm  as  to  any 
contract  made  prior  to  such  disso- 
lution. Mann  v.  Locke,  11  N.  H. 
246.  See,  also,  Taylor  v.  Hillyer,  3 
Blackf.  433. 

In  Gay  v.  Bowen,  8  Mete.  100,  it 
was  held  that,  in  an  action  to  re- 
cover the  amount  of  a  draft  drawn 
on  the  plaintiff  by  partners,  and 
accepted  by  him,  the  admissions  of 
one  of  the  partners,  made  after  the 
dissolution  of  the  partnership,  that 
the  draft  was  accepted  by  the 
plaintiff  for  the  accommodation  of 


tbe  firm,  may  be  given  in  evidence 
to  charge  the  other  partner. 

The  admission  by  one  partner  of 
the  satisfaction  of  a  debt  due  to  the 
firm  has  been  held  to  bind  the 
partnership,  although  made  after 
dissolution,  unless  his  want  of  au- 
thority be  proved.  Beckam  v. 
Peay,  1  Bailey,  121. 

So,  in  Cady  v.  Shepherd,  11  Pick. 
400,  it  was  held  that  the  admissions 
of  one  partner,  made  after  the  dis- 
solution of  the  partnership,  in  re- 
lation to  a  demand  against  the 
partnership  not  barred  by  the 
statute  of  limitations,  are  com- 
petent, though  not  conclusive, 
evidence  against  a  copartner,  the 
joint  contract  being  first  proved 
aliunde. 

Entries  made  after  the  dissolution 
of  a  partnership  in  the  partnership 
books  may  be  given  in  evidence 
against  the  party  who  made  them. 
Simonton  v.  Boucher,  2  Wash.  473 ; 
Taunton  Iron  Co.  v.  Richmond,  8 
Mete.  434. 

On  the  other  hand,  in  Pringle  v. 
Leverich,  97  N.  Y.  181;  S.  C.  48 
N.  Y.  Super.  Ct.  90 ;  49  Am.  Rep. 
522,  it  was  held  that  while  the  re- 
tiring partner  is  liable  to  previous 
customers  of  the  firm  for  new  ob- 
ligations of  the  new  firm  until  no- 
tice of  the  change,  yet  he  cannot 
be  bound  by  admissions  made  after 
his  retirement  by  the  remaining 
partners  in  reference  to  such  obli- 
gations, whether  the  dealer  to 
whom  admissions  were  made  knew 
of  the  retirement  or  not.    So  held 


537 


*'220  RIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

tions  begun,  but  unfinished,  at  the  time  of  the  dissolution,  (q) 
Even  Butchart  v.  Dresser,  (r)  which  goes  further  than  any- 
other  case,  does  not  carry  the  doctrine  beyond  this.  In  that 
case  two  persons  in  partnership  as  sharebrokers  contracted 
to  buy  shares.  Before  paying  for  them  they  dissolved  part- 
nership, and  that  fact  was  known  to  their  bankers.  After 
the  dissolution  one  of  the  partners  pledged  the  shares  to 
the  bankers  for  money  to  pay  for  their  purchase,  and  au- 
thorized the  bankers  to  sell  tho  shares  to  indemnify  them- 
selves. The  other  partner  contended  that  this  was  done 
without  his  authority,  and  that  as  the  bankers  knew  of  the 
dissolution  they  could  not  retain  the  shares  against  him. 
The  vice-chancellor,  however,  held  that  the  partner  who 
pledged  the  shares  had  authority,  after  the  dissolution,  to 
complete  the  contracts  previously  made  by  the  firm;  that 
he  therefore  necessarily  had  authority  to  raise  the  funds  to 
pay  for  the  shares  in  question,  and  that  he  had  not  gone 
beyond  his  authority  in  raising  the  money  by  pledging  them 
with  the  bankers  as  he  had  done.  The  lords  justices  took 
the  same  view.  "  The  general  law,"  it  was  said,  "  is  clear 
that  a  partnership,  though  dissolved,  continues  for  the  pur- 
pose of  winding  up  its  affairs.  Each  partner  has,  after  and 
notwithstanding  the  dissolution,  full  authority  to  receive  and 
pay  money  on  account  of  the  partnership,  and  has  the  same 

authority  to  deal  with  the  property  of  the  partner- 
[*220]  *ship  for  partnership  purposes  as  he  had  during  the 

continuance  of  the  partnership.  This  must  neces- 
sarily be  so.  If  it  were  not,  at  the  instant  of  the  dissolution 
it  would  be  necessary  to  apply  to  this  court  for  a  receiver  in 
every  case,  although  the  partners  did  not  differ  on  any  one 
item  of  the  account." 

with  reference  to  entries  upon  the  (r)  10  Ha.  453,  and  4  De  G.  M.  & 
books  of  the  new  firm.  G.  452.     Re  Clough,  31  Ch.  D.  324, 

(q)  See  in  Lyon  v.  Haynes,  5  Man.     was  a  similar  case,  only  the  pledge 
&  Gr.  541,  and  in  Smith  v.  Winter,    was  for  an  old  debt. 
4  M.  &  W.  461,  462;  Pollock,  Dig. 
83,  ed,  3. 

538 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *221 

It  is  to  be  observed  that  in  Butchart  v.  Dresser  nothing 
was  done  except  for  the  purpose  of  completing  a  transac- 
tion unfinished  at  the  time  of  the  dissolution.  The  case  did 
not  require  the  statement  of  so  general  a  proposition  as  that, 
until  the  affairs  of  a  partnership  are  wound  up,  the  agency 
of  each  partner  continues  to  be  as  extensive  as  if  no  dissolu- 
tion had  taken  place.  At  the  utmost  the  case  under  con- 
sideration decides  that,  in  the  event  of  a  dissolution,  it  is 
competent  for  one  partner  to  dispose  of  the  partnership  as- 
sets for  partnership  purposes,  (s)  But  neither  Butchart  v. 
Dresser  nor  any  other  case  shows  that  a  person  who  knows 
that  a  partnership  is  dissolved  can  hold  one  partner  liable 
for  acts  of  his  late  copartners  done  subsequently  to  the  dis- 
solution and  without  authority;  and  if  in  Butchart  v.  Dres- 
ser the  money  to  pay  for  the  shares  had  been  raised  by  a 
bill,  it  could  not,  consistently  with  prior  decisions,  have 
been  held  that  the  dissolved  firm  was  liable  either  upon 
the  bill  itself  or  for  the  money  raised  by  its  means. 

Before  leaving  this  subject  it  is  necessary  to  notice  Ault 
v.  Goodrich,  (t)  which  is  sometimes  supposed  to  go  much 
further  than  it  really  does.  In  that  case,  two  persons,  Wil- 
cox the  elder,  and  Wilcox  the  younger,  partners  as  timber 
merchants,  entered  into  a  joint  speculation  with  the  plaint- 
iff and  another  in  the  purchase  and  sale  of  some  trees.  Wil- 
cox the  younger  had  the  chief  management  of  the  affair, 
and  before  the  adventure  was  closed  the  two  Wilcoxes  dis- 
solved partnership.  Wilcox  the  younger  seems  to  have 
misapplied  some  of  the  moneys  received  by  him  on  the  joint 
account,  and  it  was  considered  clear  that  Wilcox 
the  elder  was  responsible  for  the  ^dealings  and  trans-  [*221] 
actions  of  Wilcox  the  younger  during  the  continu- 
ance of  their  partnership.  It  was  also  considered  that  as 
there  was  no  evidence  of  any  new  agreement  between  any 

(s)  Qu.  if  Lewis  v.  Reilly,  1  Q.  B.     proceeded  on  it.     But  see  Smith  v. 
349,  and  mite,  p.  216,  can  be  sup-    Winter,  4  M.  &  W.  454. 
ported    on    this    principle?     Lord        (t)  4  Russ.  430. 
Denman's  judgment  seems  to  have 

539 


*221  EIGHTS    AND   OBLIGATIONS.  [BOOK    II. 

of  the  parties  upon  the  dissolution  of  partnership  between 
the  Wilcoxes,  the  other  parties  to  the  adventure  were  to  be 
treated  as  having  continued  to  rely  on  the  joint  responsi- 
bility of  the  two  Wilcoxes  in  respect  of  the  dealings  of 
Wilcox  the  younger.  Wilcox  the  elder  was  accordingly 
declared  to  bo  responsible  for  the  conduot  of  Wilcox  the 
younger  after  the  dissolution. 

Upon  this  case  it  may  be  observed,  first,  that  the  facts 
are  not  satisfactorily  stated;  and,  secondly,  that  the  judg- 
ment leads  to  the  inference  that  the  responsibility  of  Wil- 
cox the  elder  for  the  conduct  of  Wilcox  the  younger  did 
not  turn  upon  the  circumstance  that  they  were  partners, 
but  upon  the  circumstance  that  they  were  jointly  intrusted 
with  the  management  of  the  tree  speculation.  In  this  view 
of  the  case  it  was  obviously  immaterial  whether  the  Wil- 
coxes had  dissolved  partnership  or  not. 

Notice  in  case  of  retirement  of  dormant  partner.— 
What  amounts  to  notice  of  dissolution. —  It  has  been  already 
seen  that  when  a  dormant  partner  retires  he  need  give  no 
notice  of  his  retirement  in  order  to  free  himself  from  lia- 
bility in  respect  of  acts  done  after  his  retirement,  (u)  The 
reason  is  that,  as  he  was  never  known  to  be  a  partner,  no 
one  can  have  relied  on  his  connection  with  the  firm,  or  truly 
allege  that,  when  dealing  with  the  firm,  he  continued  to 
rely  on  the  fact  that  the  dormant  partner  was  still  con- 
nected therewith. 

Notice  in  case  of  retirement  of  ostensible  partner  — 
Old  customers  entitled  to  special  notice.—  But  when  an 
ostensible  partner  retires,  or  when  a  partnership  between 
several  known  partners  is  dissolved,  the  case  is  very  differ- 
ent; for  then  those  who  dealt  with  the  firm  before  a  change 
took  place  are  entitled  to  assume  that  no  change  has 
occurred  until  they  have  notice  to  the  contrary,  (x)  And 
even  those  who  never  had  dealings  with  the  firm,  and 
who  only  knew  of  its  existence  by  repute,  are  entitled  to 

(u)  Ante,  p.  213.  (#)  See  per    Lord    Selborne   in 

Scarf  v.  Jardine,  7  App.  Ca.  349. 
540 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


-ooo 


assume  that  it  still  exists  until  something  is  done  to  notify 
publicly  that  it  exists  no  longer,  (y)     An  old  cus- 
tomer, however,  is  entitled  to  a  more  •■specific  no-  [*222] 
tice  than  a  person  who  never  dealt  with  the   linn 
at  all;  (V)1  and  in  considering  whether  notice  of  dissolution 


(y)  Farkin  v.  Carruthers,  3  Esp. 
348. 

(z)  Graham  V-  Hope,  Peake,  154. 

1  Upon  dissolution,  or  where  a 
change  takes  place  in  a  firm  by 
some  members  retiring,  and  where 
the  same  firm  name  is  still  used, 
the    former    partners    or    retirin 


Zollar  v.  Janvrin.  47  N.  H.  324; 
Vernon  v.  Manhattan  Co.  17  Wend. 
521;  Ward  well  v.  Haight,  2  Barb. 
549;  Como  v.  Port  Henry  Iron  Co. 
12  id.  27;  Felbretcli  v.  Armstrong, 
5  Root.  339; "Williams  v.  Birch,  6 
Bosw.  299;  Schieffelin  v.  Stevens, 
1  V. "ins.  (N.    C.)  L.    103;  Little  v. 


members    c:m   only  relieve  them-     Clarke,   3(5  Pa.   St.    114;   White  v, 


selves  from  liability  by  giving  act- 
ual notice  of  such  fact  to  former 
creditors  who  continue  to  deal 
with  the  firm.  As  to  them  the 
partnership  is  presumed  to  con- 
tinue the  same  as  it  was  when  they 
commenced  to  deal  with  it,  until 
they  in  some  way  have  actual  no- 
tice that  a  change  has  taken  place 


Murphy,  3  R.ch.  3J9;  Hutchins  v. 
Hudson,  8  Humph.  420;  Kirk- 
man  v.  Snodgrass,  3  Head,  370; 
Tudor  v.  Wiiite.  27  Tex.  581;  Pren- 
tiss v.  Sinclair,  5  Vt.  1-19;  Deering 
V.  Flanders,  49  N.  H.  2^5 ;  Nichol- 
son v.  Moog,  05  Ala.  471;  Polk  v. 
Oliver,  50  Miss.  533;  Rose  v.  Cof- 
field,  53  Md.  18;  S.  C.  30  Am.  Rep. 


Holtgreve  V.  Wintker,  85  111.  470;     389;  Mann  v.   Clapp,    1  Tex.   App 


Stall  v.  Cassady,  57  ind.  284;  Davis 
V.  Willis,  47  Tex.  154;  Dickinson 
v.  Dickinson,  25  Gratt.  321;  Ken- 
ney  v.  At  water,  77  Penn.  St.  34; 
Carmichael  v.  Greer,  55  Ga.  110; 
Re  Krueger,  2  Lowell,  03;  Holland 
V.  Long.  57  Ga.  30;  Stewart  V. 
Sonneborn,  51  Ala.  120;  Shamburg 
v.  Ruggles,  83  Pa.  St.  148 ;  Austin 
v.  Holland,  09  N.  Y.  571 ;  Bank  of 


(Civ.)  249;  Gilchrist  v.  Brande,  58 
Wis.  184;  Backus  v.  Taylor,  84 
Ind.  503:  Meyer  v.  Krohn,  114  III. 
574;  Ewing  u.  Trippe,  73  Ga.  776; 
Spurck  v.  Leonard,  9  Biadw.  174; 
Strecker  v.  Coon,  90  Ind.  409.  See, 
however,  Vaccaru  v.  Toof,  9  Heisk. 
194. 

The   burden  of  proof   as  to  the 
withdrawal    and    notice  of  with- 


the  Commonwealth  v.  Mudgett,  44    drawal  is  upon  the  defendant.  Uhl 
N.  Y.  514;  Polk  v.  Oliver,  50  Miss.     Vm  Birigaman,  78  Ind.  365. 


566;  Denman  v.  Dosson,  19  La. 
Ann.  9 ;  Pope  v.  Risley,  23  Mo.  185 ; 
Epps  v.  Dillaye,  6  Bub.  244 ;  John- 
son v.  Totten,  3  Cal.  343 ;  Page  v. 
Brant,  18  111.  37 ;  Williams  v.  Bow- 
ers, 15  Cal.  321 ;  Ennis  v.  Williams, 
30  Ga.  691 ;  Lowe  v.  Penny,  7  La. 
Ann.  356;  Skannel  v.  Taylor,  12 
id.  773 ;  Reilly  v.  Smith,  16  id.  31 ; 


To  render  a  retiring  partner  lia- 
ble on  transactions  occurring  after 
the  dissolution,  on  the  ground  of 
want  of  notice  thereof,  the  cus- 
tomer must  have  been  either  a 
regular  or  a  recent  customer  of  the 
firm.  Bloch  v.  Price,  24  Mo.  App. 
14. 

The  notice  which  a  retiring  part- 


541 


*222 


RIGHTS    AND    OBLIGATIONS. 


[book  n. 


or  retirement  is  or  is  not  sufficient,  a  distinction  must  be 
made  according  as  the  person  sought  to  be  affected  by  no- 
tice was  or  was  not  a  customer  of  the  old  firm. 


ner  is  required  to  give  must  be  a 
reasonable  one ;  whether  such  one 
is  so  given  is  a  question  of  fact  for 
the  jury.  Strecker  v.  Conn,  90 
Ind.  469 ;  Polk  v.  Oliver,  56  Miss. 
566. 

An  old  customer  of  the  firm  is 
entitled  to  actual  notice  of  the  dis- 
solution, although  at  the  time  of 
the  dissolution  the  firm  was  in- 
debted to  him.  Elkinton  v.  Booth, 
143  Mass.  479. 

Notice  may  be  implied  from  cir- 
cumstances. Mann  v.  Clapp,  1  Tex. 
App.  (Civ.)  249.  See,  also,  Gilchrist 
v.  Brande,  supra. 

Notice  of  tbe  dissolution  of  a 
firm  may  be  inferred  from  the  nat- 
ure and  purposes  of  the  transaction 
at  the  time  the  partnership  was 
entered  into,  if  the  transaction  be 
ended  and  closed.  Williams  v.  Con- 
nor, 14  S.  C.  621. 

So,  notoriety  of  a  dissolution,  or, 
perhaps,  of  the  non-existence,  of  a 
partnership  may  be  shown  to 
charge  the  party  with  implied  no- 
tice of  the  fact,  but  not  to  charge 
a  party  residing  in  a  distant  city, 
without  proof  of  other  facts  tend- 
ing to  show  that  he  had  opportuni- 
ties of  hearing  the  common  report. 
Humes  v.  O'Bryan,  74  Ala.  64. 

Mere  fact  that  withdrawal  of  a 
partner  was  of  general  notoriety  is 
not  sufficient  as  to  one  who  had  no 
actual  notice  thereof,  no  public  no- 
tice being  given.  Strecker  v.  Conn, 
90  Ind.  469. 

Creditors  who  extend  credit  to 
the  firm  are  not  bound  to  regard 
public  rumors  of  dissolution  if  the 
partners  continue  to  use  the  part- 


nership name  and  avail  themselves 
of  the  partnership  credit.  Moline 
Wagon  Co.  v.  Rummell,  2  McCrary, 
C.  Ct.  307;  S.  C.  14  Fed.  Rep.  155; 
12  id.  658. 

Proof  of  the  mailing  of  notices 
of  dissolution  and  retirement,  prop- 
erly addressed,  to  persons  having 
had  prior  dealings  with  the  firm, 
is  prima  facie  evidence  of  the  re- 
ception of  such  notices,  but  such 
presumption  may  be  rebutted. 
Meyer  v.  Krohn,  114  111.  574;  Eck- 
erly  v.  Alcorn,  62  Miss.  228. 

In  an  action  against  the  firm 
upon  the  issue  whether  the  plaint- 
iff had  notice  of  its  dissolution,  a 
published  notice  of  dissolution  in 
connection  with  other  evidence 
tending  to  show  plaintiff  saw  and 
read  the  notice  is  competent. 
Smith  v.  Jackman,  138  Mass.  143. 

Upon  such  issue,  bills  or  state- 
ments, or  account  for  goods  sold 
and  delivered  to  one  of  the  part- 
ners by  the  plaintiff  at  various 
times  after  the  cause  of  action  had 
accrued,  are  competent  evidence  as 
to  the  question  of  notice.  Smith  v. 
Jackman,  138  Mass.  143. 

To  prove  notice  to  plaintiff  of 
withdrawal  of  C.  from  the  firm, 
letters  sent  him  by  the  remaining 
partners  headed  as  follows:  "E., 
under  firm  name  of  C,  B.  &  Co.," 
were  admissible.  Swift  v.  Carr,  5 
N.  Eng.  Rep.  (Mass.)  512. 

A  partner  who  retires  from  the 
firm  before  the  1st  day  of  May,  and 
thereafter  takes  no  part  in  the 
management  of  its  affairs  and  re- 
tains no  interest  in  its  property,  is 
not  liable  under  the  general  etat- 


542 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*222 


When  a  known  partner  retires,  or  a  partnership  is  dis- 
solved, notice  of  the  fact  is  usually  given  to  the  world  at 


utes  (ch.  11,  sec.  15)  for  a  tax  as- 
sessed on  that  day  upon  the  personal 
property  of  that  firm,  and  the  fact 
that  no  notice  is  given  by  retiring 
partner  of  the  dissolution  of  the 
firm  does  not  affect  his  liability. 
Washburn  v.  Walworth,  133  Mass. 
4y9. 

Where  a  firm  had  been  dealers 
with  a  bank  in  their  copartnership 
business,  and  their  character  as 
partners  was  known  to  the  bank, 
and  it  was  in  the  bank-book  of  the 
firm  that  a  note  was  entered  as 
having  been  discounted  on  their 
behalf,  the  signature  of  the  firm 
being  indorsed  thereon,  held,  in  a 
6uit  to  charge  the  firm  as  indorsers 
of  the  note,  that  the  relation  of  the 
firm  to  the  bank  was  such  as  to  re- 
quire notice  of  dissolution  to  be 
given  to  the  bank;  and  that  an 
advertisement  of  dissolution  in  a 
newspaper  was  not  sufficient  to  re- 
lieve one  of  the  partners  from  his 
liability  upon  the  note.  Bank  of 
the  Commonwealth  v.  Mudgett,  45 
Barb.  663. 

A  person  in  the  employment  of  a 
firm  at  the  time  of  dissolution, 
who  continues  to  serve  without 
having  notice  of  the  dissolution, 
can  hold  the  retiring  partner  liable 
for  his  compensation.  Austin  v. 
Holland,  69  N.  Y.  571.  See,  how- 
ever, Costello  v.  Nexdorff,  9  Mo. 
App.  501. 

The  fact  that  sufficient  time  to 
give  public  notice  had  not  elapsed 
between  the  dissolution  of  a  firm 
and  the  subsequent  making  of  a 
note  by  one  of  the  late  partners 
will  not  excuse  the  partners  from 
their  liability  to  pay  such  note  in 


the  hands  of  a  bona  fide  holder. 
Bristol  v.  Sprague,  8  Wend.  423. 

Want  of  notice  of  a  dissolution 
of  partnership  will  charge  the  firm 
on  a  subsequent  accommodation 
indorsement,  the  holder  having 
had  previous  dealings  with  the 
firm,  in  the  same  manner  as  if  the 
firm  continued  to  exist.  Dundass 
v.  Gallagher,  4  Pa.  St.  205. 

That  a  bank  has  discounted  notes 
bearing  the  names  of  a  partnership 
does  not  constitute  them  dealers  so 
as  to  require  actual  notice  of  dis- 
solution to  exonerate  a  retiring 
partner.  City  Bank  of  Brooklyn 
v.  McChesney,  20  N.  Y.  240;  Same 
v.  Dearborn,  id.  244.  See,  how- 
ever, Mechanics'  Bank  v.  Livings- 
ton, 33  Barb.  458. 

Upon  the  dissolution  of  a  firm, 
a  bank  with  which  it  has  kept  its 
deposits  is  entitled  to  actual  notice 
of  the  dissolution,  and  until  such 
notice  members  of  the  firm  will  be 
liable  as  partners.  National  Shoe 
&  Leather  Bank  v.  Herz,  89  N.  Y. 
629 ;  S.  C.  24  Hun  (N.  Y.j,  260. 

Where  a  small  amount  of  goods 
has  been  sold  to  a  partnership  with- 
out any  fixed  period  of  credit,  but 
not  paid  for  till  some  months  after 
the  sale,  the  vendors  of  the  goods 
are  properly  dealers  with  the  part- 
nership, and  must  receive  actual 
notice  of  the  retirement  of  a  mem- 
ber to  release  him  from  his  liability 
to  them  as  a  partner  upon  sales  to 
the  partnership  subsequent  to  his 
retirement.  Clapp  v.  Rogers,  12 
N.  Y.  283.  See,  also,  Clapp  v. 
Rogers,  1  E.  D.  Smith,  549. 

A  single  cash  sale  of  cattle  to  a 
partnership  firm  dealing  in  cattle 


543 


*222 


JJIUIITS    AND    OIJLIOATIONS. 


[BOOK    II. 


large  by  advertisement,  and  to  old  customers  by  some  spe- 
cial communication. 


does  not  make  the  seller  such  a 
dealer  as  entitles  him  to  actual 
notice  of  the  dissolution  of  the 
partnership,  or,  through  lack  of 
such  notice,  to  hold  both  partners 
on  a  sale  made  two  years  there- 
after, and  eighteen  months  after 
the  dissolution  of  the  firm,  where 
the  actual  dealings  are  had  with 
only  one  of  the  former  partners. 
Merritt  v.  Williams,  17  Kan.  287. 
The  defendants  had  been  part- 
ners previous  to  March,  1S."37,  at 
which  time  they  dissolved  partner- 
ship and  advertised  the  dissolution 
in  a  newspaper  published  in  the 
town  where  they  hail  done  busi- 
ness. The  business  was  continued 
by  one  of  the  partners,  who,  in  the 
fall  of  1857,  bought  coal  of  the 
plaintiffs,  which  the  latter  sold  with 
no  knowledge  of  the  dissolution, 
and  on  the  credit  of  the  partnei- 
ship.  The  plaintiffs  had  sold  coal 
in  one  instance  to  the  defendants 
before  the  dissolution,  which  was 
the  only  dealing  they  had  had  with 
them,  but  the  defendants  had  been 
regular  customers  of  a  firm  which 
sold  coal  at  the  same  place,  and  to 
which  the  plaintiffs  had  succeeded, 
the  former  firm  having  consisted 
of  one  of  the  plaintiffs  and  one  A., 
and  the  present  firm  of  the  same 
plaintiff  and  one  B.,  who  had  for 
some  jears  been  a  clerk  of  the 
former  firm.  Held,  that  the  plaint- 
iffs were  to  be  regarded  as  having 
had  "  former  dealings  "  with  the 
defendants,  and  that  they  could  be 
affected  only  by  actual  notice  of 
the  dissolution.  Held,  also,  that 
the  lapse  of  time  between  the  dis- 
solution and  the  purchase  of  the 


coal,  the  fact  that  the  plaintiffs 
were  doing  business  in  the  same 
town  with  the  defendants,  and  the 
fact  that  an  advertisement  of  the 
plaintiffs  stood  next  to  the  adver- 
tisement of  the  dissolution  in  the 
newspaper,  although  to  be  con- 
sidered in  determining  whether  the 
plaintiffs  had  actual  notice,  were 
of  no  avail  in  law  against  the  fact 
that  they  had  no  actual  knowledge 
of  the  dissolution.  Lyon  v.  John- 
son, 28  Conn.  1. 

It  makes  no  difference  how  notice 
is  given  of  a  change  in  the  firm, 
whether  by  the  retiring  member  or 
by  any  other  means,  so  that  actual 
notice  of  the  fact  is  brought  home 
to  the  former  correspondents. 
Holtgreve  v.  Wintker,  85  111.  471 ; 
Uhl  v.  Bingaman,  78  Ind.  365. 

No  formal  or  precise  announce- 
ment of  the  dissolution  of  a  part- 
nership, either  by  publication  or 
otherwise,  is  necessary  to  bind  a 
dealer  with  the  firm ;  but  knowl- 
edge of  any  fact,  however  acquired, 
sufficient  to  put  an  ordinarily  pru- 
dent man  upon  inquiry,  will  charge 
them  with  notice  of  whatever 
other  facts  a  reasonable  investiga- 
tion would  have  disclosed.  Persons 
who  have  dealt  with  a  partnership 
are  effected  with  notice  of  its  dis- 
solution, if  a  statement  of  the  fact 
that  they  have  dissolved  (though 
informal,  and  not  signed  by  any 
member  of  the  firm)  has  reached 
them  in  any  way  which  advised 
them  of  the  fact,  and  was  suffi- 
cient to  put  them  on  inquiry. 
Young  v.  Tibbitts,  32  Wis.  79.  See, 
also,  Ransom  v.  Loyless,  49  Ga.  471. 

In  an  action  on  a  note  signed  by 


544 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*222 


Public  notice  by  advertisement  —  Such  notice  not  in- 
dispensable.—  Public  notice  given  by  advertisement  in  the 


a  firm,  evidence  that  one  partner 
told  several  persons,  prior  to  the 
execution  of  the  note,  that  the 
firm  was  dissolved,  is  inadmissible 
to  prove  a  dissolution  when  no 
notice  is  shown  to  the  plaintiff,  the 
payee.  Pursley  v.  Ramsey,  31  Ga. 
403. 

Notice  of  dissolution  given  to  an 
agent  of  the  customer,  whose  duty 
and  authority  embraced  an  inquiry 
into  the  financial  condition  of  per- 
sons and  firms  with  whom  his 
principal  was  dealing,  and  to  as- 
certain who  were  members  of  sucb 
firms,  etc.,  is  sufficient  notice  of 
dissolution.  Miller  v.  Schneider,  2 
Tex.  App.  (Civ.)  321. 

To  charge  a  principal  with  notice 
of  the  dissolution  of  a  mercantile 
partnership,  on  the  ground  that 
notice  was  given  to  his  agent,  it 
must  be  shown  that  the  agent  was 
authorized  to  represent  his  princi- 
pal in  that  particular.  Stewart  v. 
Sonneborn,  49  Ala.  178. 

Notice  of  dissolution,  published 
in  a  newspaper  and  accidentally 
reaching  a  bank  director,  will  not 
affect  the  bank.  National  Bank  v. 
Norton,  1  Hill  (N.  Y.),  572. 

Where  goods  are  ordered  by  one 
member  of  a  firm,  and  the  other 
has  not  been  accepted  nor  the 
goods  shipped  until  after  a  notice 
of  its  dissolution,  and  the  shipment 
varies  from  the  terms  of  the  order, 
the  retiring  partner  will  not  be 
bound  by  it.  Goodspeed  v.  Wiard 
Plow  Co.  45  Mich.  322. 

Notice  of  the  dissolution  of  a 
partnership  by  publication  in  some 
newspaper  of  general  circulation 
is   sufficient  notice  to  all  persons 


Vol.  1—35 


who  have  not  had  dealings  with 
the  firm.  Shurlds  v.  Tilson,  2 
McLean,  458;  Watkinson  v.  Bank 
of  Pennsylvania,  4  Whart.  482; 
Gallicott  v.  Planters'  &  Mechanics* 
Bank,  1  McMull.  209;  Mauldin  v. 
Branch  Bank,  2  Ala.  502 ;  Lucas  ?>. 
Bank  of  Darien,  2  Stew.  280 ;  Lans- 
ing v.  Gaine,  2  Johns.  300;  Pren- 
tiss v.  Sinclair,  5  Vt.  149;  Graves 
v.  Merry,  6  Cow.  701;  Polk  v. 
Oliver,  56  Miss.  566;  Simonds  v. 
Strong,  24  Vt.  642;  Martin  v. 
Searles,  28  Conn.  43;  Martin  v. 
Walton,  1  McCord,  16;  Nicholson 
v.  Moog,  65  Ala.  471 ;  Polk  v.  Oliver, 
56  Miss.  566 ;  Backus  v.  Taylor,  84 
Ind.  503;  Meyer  v.  Krohn,  114  111. 
574;  Ewing  v.  Trippe,  73  Ga.  776; 
Strecker  v.  Conn,  90  Ind.  469.  See, 
also,  Grinman  v.  Baton  Rouge  Co. 
7  La.  Ann.  638. 

But  as  to  those  who  have  had 
dealings  it  shall  not  be  so  consid- 
ered, unless,  under  the  circum- 
stances, it  appears  satisfactory  to 
the  jury  that  it  operated  as  a  no- 
tice. Martin  v.  Walton,  1  McCord, 
supra.     See  next  note  supra. 

Such  notice  of  the  dissolution  is 
sufficient  as  is  likely  to  make  the 
fact  generally  known  in  the  locality 
concerned,  and  to  those  with  whom 
business  is  done.  Solomon  v.  Kirk- 
wood,  55  Mich.  256. 

A  current  report  is  not  admissi- 
ble to  show  partnership,  but  is 
competent  on  the  subject  of  notice 
to  the  plaintiff  of  the  partner's 
withdrawal.  Uhl  v.  Harvey,  78 
Ind.  26. 

Mere  stopping  by  retiring  part- 
ner of  a  publication  of  an  adver- 
tisement of  his  partnership,  when 


545 


*222 


RTGHTS    AND   OBLIGATIONS. 


[book  II. 


"Gazette"  is  sufficient,  not  only  against  all  who  can  be 
shown  to  have  seen  it,  but  also  as  against  all  who  had  no 


he  learned  of  it,  was  not  enough 
to  relieve  him  from  liability ;  he  is 
bound  to  publish  unequivocal  no- 
tice of  his  withdrawal.  Uhl  v. 
Harvey,  78  Ind.  26. 

Merely  dropping  the  name  of  a 
director  from  the  publishing  list  of 
the  directors  of  a  partnership  doing 
a  banking  business  is  not  sufficient 
notice  of  withdrawal.  Clark  v. 
Fletcher,  96  Pa.  St.  416 ;  S.  C.  37 
Leg.  Intel.  241. 

The  rule  that  notice  of  dissolution 
must  be  given  to  previous  dealers 
with  the  firm  does  not  require 
actual  notice  to  those  with  whom 
the  firm  has  never  dealt,  although 
such  persons  may  have  acquired  a 
knowledge  of  the  members  of  such 
partnership  as  the  clerks  or  sales- 
men of  one  with  whom  the  firm 
did  have  dealings.  Nor  does  such 
rule  require  notice  to  those  who  as 
agents  represent  the  person  with 
whom  the  firm  deals,  but  only  that 
it  be  given  to  the  principal.  Rich- 
ardson v.  Snider,  72  Ind.  425 ;  S.  C. 
37  Am.  Rep.  168. 

A  retiring  partner  is  not  required 
to  give  notice  so  as  relieve  himself 
from  liability  to  those  who  for  the 
first  time  deal  with  the  firm  after 
the  dissolution  takes  place,  unless 
he  permits  his  name  to  be  used  in 
the  transaction  of  the  business,  or 
so  conducts  himself  with  reference 
to  the  firm  transactions  as  to  in- 
duce the  belief  in  those  dealing 
with  the  firm  that  he  is  still  a 
member.  Garr  v.  Huggins,  12 
Bush,  259. 

Two  partners  of  a  firm  resided 
in  New  York,  and  the  third  resided 
in  Norwich,  in  Connecticut,  their 


usual  place  of  doing  business. 
Upon  dissolution,  notice  was  given 
for  several  weeks  successively  in 
two  newspapers,  one  printed  at 
Norwich  and  the  other  at  New 
London  in  the  vicinity  of  Norwich. 
One  of  the  New  York  partners 
afterwards  indorsed  a  bill  of  ex- 
change in  New  York  with  the 
company  name,  but  whether  the 
indorsee  had  or  had  not  actual  no- 
tice of  the  dissolution,  or  whether 
he  had  ever  been  a  correspondent 
of  the  company,  did  not  appear. 
Held,  that  these  facts  constituted 
reasonable  notice  to  him,  and  to 
every  person  not  a  correspondent 
of  the  company.  Mowatt  v.  How- 
land,  3  Day,  353. 

The  character  of  the  notice  to 
affect  subsequent  dealers  must  be 
such  as  to  advise  the  public  as  to 
the  dissolution  of  the  firm  —  as  by 
changing  the  firm  name  on  the 
sign  and  in  business  transactions, 
publication  in  a  newspaper,  or 
otherwise ;  and  a  private  notice  to 
the  former  dealers  is  not  alone  suf- 
ficient to  affect  subsequent  ones; 
and  generally  whether  the  proper 
notice  has  been  given  is  a  question 
of  fact  for  the  jury.  Polk  v.  Oli- 
ver, 56  Miss.  566. 

A.,  having  had  no  previous  deal- 
ings with  a  firm,  but  having  heard 
of  its  existence,  and  who  composed 
it,  sold  goods  to  one  of  the  part- 
ners, and  received  in  payment 
therefor  a  draft  by  him  drawn 
upon  the  firm,  and  accepted  in  his 
name.  At  the  time  of  the  transac- 
tion the  firm  was  in  fact  dissolved; 
but  A.  had  no  notice  thereof.  Held, 
that,  in  order  to  protect  a  retired 


546 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*222 


dealings  with  the  old  firm,  whether  they  saw  it  or  not.  (a) 
But  an  advertisement  in  any  other  paper  is  no  evidence 
against  any  one  who  cannot  be  shown  to  have  seen  it.  (b) 
If,  however,  it  can  be  shown  that  he  was  in  the  habit  of 
taking  the  paper,  (c)  that  is  evidence  to  go  to  the  jury  of  his 
having  seen  not  only  the  particular  paper  containing  the 
advertisement,  but  also  the  advertisement  itself;  (d)1  and 


partner  against  such  acceptance  of 
the  draft  at  the  suit  of  A.,  evidence 
tending  to  show  a  public  and  no- 
torious disavowal  of  the  continu- 
ance of  the  partnership  is  admissi- 
ble. Lovejoy  v.  Spafford,  93  U.  S. 
430. 

A  commercial  partnership  was 
dissolved  in  New  Orleans  without 
notice,  and  the  partners  under  the 
same  name  established  a  planting 
partnership  in  a  country  parish, 
where  they  resided.  They  with- 
drew wholly  from  mercantile  busi- 
ness, and  nothing  showed  that  the 
old  mercantile  name,  as  such,  was 
afterwards  used,  or  that  plaintiff, 
who  resided  near  them,  ever  dealt 
with  the  New  Orleans  firm,  or 
looked  to  it  for  his  indemnity  as 
surety  for  the  partners.  Held,  that 
he  could  not  hold  them  liable  as 
commercial  partners.  Stewart  v. 
Caldwell,  9  La.  Ann.  419. 

An  act  of  Canada  in  relation  to 
the  registration  of  notice  of  disso- 
lution of  a  firm  does  not  affect  the 
rights  of  the  Vermont  plaintiffs  in 
a  suit  brought  in  that  state  against 
members  of  a  Canada  firm  on  a 
note  payable  in  Montreal.  Wait  v. 
Brewster,  31  Vt.  516. 

(a)  Godfrey  v.  Turnbull,  1  Esp. 
371 ;  Wrightson  v.  Pullan,  1  Stark. 
375 ;  Godfrey  v.  Macauley,  1  Peake, 
N.  P.  209;  Newsome  v.  Coles,  2 
Camp.  617. 

(6)  Leeson  v.  Holt,  1  Stark.  186 ; 


Boydell  v.  Drummond,  2  Camp. 
157,  and  11  East,  144n. 

(e)  Showing  that  the  paper  circu- 
lated in  his  neighborhood  goes  for 
nothing  alone.  Norwich  and  Low- 
estoft Co.  v.  Theobald,  M.  &  M.  153. 

(d)See  Jenkins  v.  Blizard,  1 
Stark.  418,  where,  however,  the 
plaintiff  had  a  verdict ;  Rowley  v. 
Home,  3  Bing.  2. 

1  The  publication  of  the  notice  of 
dissolution  of  a  partnership  in  a 
newspaper  taken  by  the  plaintiffs 
is  a  fact  from  which  the  jury  may 
infer  actual  notice.  Treadwell  v. 
Wells,  4  Cal.  260;  Page  v.  Brant, 
18  111.  37.  See,  also,  Hutchins  v. 
Bank  of  Tennessee,  8  Humph.  418. 

A  party  will  not  be  affected  by 
notice  of  the  dissolution  of  a  part- 
nership by  the  certificate  merely  of 
the  editors  of  a  newspaper  that  a 
notice  of  the  dissolution  was  pub- 
lished in  it,  without  proof  that  the 
party  sought  to  be  affected  took  or 
read  the  paper.  Boyd  v.  McCann, 
10  Md.  118. 

Where,  in  an  action  on  a  book  ac- 
count against  two  copartners,  one 
defended  on  the  ground  of  a  disso- 
lution of  the  partnership  and  no- 
tice to  plaintiff  before  goods  bought, 
proof  of  advertisement  of  dissolu- 
tion in  a  paper  which  plaintiff  did 
not  take,  or  of  defendant's  declara- 
tions to  plaintiff  that  he  was  going 
out  of  the  firm,  but  that  his  money 
would  remain  in  it,  will  not  amount 


547 


*223  RIGHTS    AND   OBLIGATIONS.  [liOOK   II. 

if  the  jury  are  satisfied  that  he  saw  the  advertisement  that 
will  be  sufficient,  although  no  advertisement  was  inserted  in 
the  "  Gazette."  (e)  An  advertisement,  moreover,  is  not  in- 
dispensable; its  place  may  be  supplied  by  something  else. 
Thus  a  change  in  the  name  of  a  firm1  painted  on  its  count- 
ing-house, accompanied  by  a  removal  of  the  business  of 
the  old  firm  (for  the  purpose  of  winding  up),  and  coupled 
with  announcements  of  the  change  by  circulars  sent  to  the 
old  customers,  was  held  to  be  sufficient  without  any  adver- 
tisement, as  against  a  person  who  had  not  been  an  old  cus- 
tomer, and  who  was  not  proved  to  have  had  any  distinct 

notice,  (f) 
[*223]      *Special  notices.— As  against  persons  who  dealt 

with  the  firm  before  an}?-  change  in  it  took  place,  an 
advertisement  without  more  is  of  little  or  no  value,  whether 
it  be  in  the  'k  Gazette  "  or  elsewhere.  (<j)  But  if  notice  in  point 
of  fact  can  be  established,  it  matters  not  by  what  means;2 
for  it  has  never  been  held  that  any  particular  formality 
must  be  observed.  If  an  old  customer  can  be  shown  to 
have  seen  an  advertisement,  that  will  be  sufficient;  and  evi- 
dence that  he  took  in  a  certain  paper  is  some  evidence  that  he 
knew  of  a  dissolution  advertised  therein,  (h)   Again,  general 

to  notice.     Williamson  v.  Fox,  38  firm  name  is  relied  on  to  exonerate 

Pa.  St.  214.  one  who  has  been  a  partner,  such 

Proof  that  ct  the  time  of  one's  change  must  indicate  that  he  has 

withdrawal  from  a  firm  at  P.  no-  withdrawn  from  the  business,  so 

tice  thereof  was  published  in  a  P.  as  to  put  dealers  with  the  concern 

newspaper,  which  was  sent  to  a  upon  inquiry.     American,  etc.  Co. 

customer  in  another  city,  with  a  v.  Wortendyke,  24  N.  Y.  550. 

red  line  drawn  around  the  notice  (/)  M'lver  v.  Humble,   16  East, 

to  call    attention  thereto,  held,  to  169.     But  see  Gorham  v.  Thomp- 

be  insufficient  to  establish  actual  son,  1  Peake,  N.  P.  60. 

notice.      Haynes     v.    Carter,     12  (g)  Graham  v.  Hope,  Peake,  154. 

Heisk.  7.  2  It  matters  not  how  the  creditor 

Where  the  facts  are  ascertained  learns  of    the  dissolution    of    the 

it  is  a  question  of  law  whether  no-  partnership ;  and  it  is  error  for  a 

tice  of  dissolution  is  reasonable  or  judge  to  charge  in  such  a  way  as 

not.    Mo  watt  v.  Howland,  3  Day,  to  lead  the  jury  to  think  a  partic- 

353.  ular     kind     of    notice    necessary. 

(e)  Rooth  v.  Quin,  7  Price,  193.  Davis  v.  Keyes,  38  N.  Y.  94. 

1  Where  a  notice  of  a  change  of  {h)  Ante,  note  (d). 

548 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBEKS.  *223 

notoriet}7,  a  change  in  the  name  of  the  firm,  and  advertise- 
ments, coupled  with  the  execution  of  powers  of  attorney  to 
the  new  firm,  were  held  (Bolland,  B.,  dissentiente)  to  war- 
rant the  jury  in  finding  knowledge  by  an  old  customer  of 
a  change  in  the  old  firm,  (i)  So,  in  the  case  of  bankers,  a 
change  in  the  name  of  the  firm  appearing  on  the  face  of 
the  checks  used  by  their  customers  has  been  held  sufficient 
notice  to  an  old  customer  who  had  drawn  checks  in  the 
new  form.  (&) 

Stamp  on  advertisements. —  With  respect  to  advertise- 
ments, it  may  be  here  remarked  that  an  advertisement  of 
an  agreement  to  dissolve  is  not  admissible  in  evidence  un- 
less stamped,  but  that  an  advertisement  of  an  actual  disso- 
lution is  admissible  without  a  stamp.  {I) 

B.  Termination  of  liability  as  to  past  acts. 

Termination  of  partner's  liability  in  respect  of  past 
transactions. —  When  once  it  can  be  shown  that  liability 
has  attached  to  any  partner,  the  onus  of  proving  that  such 
liability  has  ceased  is  upon  that  partner  or  those  represent- 
ing him.  (m) l     The   events  which  have  to  be  considered 

(i)  Hart  v.  Alexander,  2  M.  &  W.  tract  previously  entered   into  by 

484 ;  7  C.  &  P.  746.  the     copartnership,    in    the    same 

(k)  Barfoot  v.  Goodall,  3  Camp,  manner   as  if  no   dissolution  had 

147.  taken  place.    Whiting  v.  Furranet, 

(0  May  v.    Smith,    1    Esp.    283;  1   Conn.  60.     See,  also,  Vanuxem 

Jenkins  v.  Biizard,  1  Stark.  418.  v.  Bostwick,    44    Leg.   Intel.    217; 

(m)  See  3  Mer.  619.  Mudge  v.  Treat,  57  Ala.  1 ;  Dickson 

1 A  discharge  in  bankruptcy  does  v.  Ind.  C.  M.  Co.  63  Ind.  9;  Good- 

not  release,  discharge  or  affect  any  speed  v.  Wiard  Plow  Co.  45  Mich, 

person  liable   for  the    same   debt  322. 

with  the  bankrupt,  either  as  part-        The  dissolution  of  the  firm,  one 

ner,    joint    contractor,    surety    or  partner  taking  all  the  property  and 

otherwise.     Lackey  v.  Steere,  121  assuming  all  the  indebtedness,  does 

111.  598.  not  relieve  retiring  partner  from 

If  one  partner  withdraws  from  liability  upon  previous  firm  debts, 

the  copartnership,  thereby  causing  Eagle    Mfg.    Co.    v.   Jennings,   29 

its  dissolution,  he  and  his  associ-  Kan.  657 ;  S.  C.  44  Am.  Rep.  668. 
ates  continue  liable  for  the  non-        Conversely,  the    withdrawal    of 

performance  of  an  executory  con-  one  partner  from  the  firm  does  not 

549 


*223 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    II. 


with  reference  to  this  subject  may  be  reduced  to  four  classes, 


viz.: 


1.  Events  over  which  his  creditor  has  no  control,  e.  g., 
the  death  or  bankruptcy  of  the  partner. 


relieve  one  contracting  with  the 
firm  from  his  obligation  to  perform 
his  contract  with  it.  Jones  v.  Fos- 
ter, 67  Wis.  296. 

The  dissolution  of  a  law  partner- 
ship does  not  dissolve  the  relation 
to  the  client,  and  the  client  may 
look  to  both  partners  for  the  per- 
formance of  a  duty  confided  to  the 
firm.  McCoon  v.  Galbraith,  29  Pa. 
St.  293;  Smyth  v.  Harvie,  31  111. 
62;  Waldeck  v.  Brande,  61  Wis. 
579. 

If  attorneys  who  are  copartners 
accept  a  retainer  it  is  a  joint  con- 
tract, continuing  to  the  termina- 
tion of  the  suit,  and  neither  can  be 
released  from  the  obligations  they 
have  assumed,  so  far  as  their 
clients  are  concerned,  by  a  dissolu- 
tion of  their  firm,  or  any  other  act 
or  agreement  between  themselves. 
Walker  v.  Goodrich,  16  111.  341; 
Smyth  v.  Harvie,  supra;  Morgan 
v.  Roberts,  38  111.  65;  Waldeck  v. 
Brande,  supra. 

The  members  of  a  law  firm  are 
liable,  jointly  and  severally,  to 
their  client  for  money  collected  for 
him.  And  when  such  moneys  are 
collected  after  the  dissolution  of 
the  firm  by  a  retiring  partner,  who 
has  no  authority  to  make  such  col- 
lection, the  other  partners  continue 
liable  therefor.  Bryant  v.  Haw- 
kins, 47  Mo.  410 ;  Smyth  v.  Harvie, 
Waldeck  v.  Brande,  supra. 

A.,  an  attorney  associated  with 
B.,  received  from  C.  a  demand  for 
collection.  A.  retired  from  prac- 
tice and  left  the  claim  with  B., 


who  became  a  copartner  with  D. 
B.  and  D.  brought  suit  and  recov- 
ered judgment  on  the  demand,  and 
the  sheriff  collected  the  money  on 
execution  and  paid  it  over  to  D. 
Held,  in  an  action  by  C.  against  A. 
to  recover  the  money  collected  on 
execution,  that  the  sheriff  was  jus- 
tified in  paying  the  money  to  D., 
and  that  A.  was  liable  therefor. 
Wilkinson  v.  Griswold,  20  Miss. 
669. 

A  contract  with  a  law  firm  for 
the  services  of  a  particular  partner, 
at  a  stipulated  fee,  cannot  be  broken 
by  the  client  on  the  death  of  such 
partner  without  tendering  to  the 
survivor  a  fair  compensation  for 
services  already  performed  ;  and  if 
the  surviving  partner  shall  render 
the  services  with  due  professional 
skill  and  diligence  he  is  entitled  to 
the  entire  fee.  Smith  v.  Hill,  13 
Ark.  173. 

Defendant  made  a  contract  with 
H.,  an  attorney,  for  legal  services 
at  a  stipulated  price.  H.  subse- 
quently entered  into  partnership 
with  A.,  and  the  services,  during 
its  continuance,  were  rendered  by 
the  firm,  and  after  the  dissolution 
were  continued  by  both  members 
of  the  firm.  In  an  action  for  the 
services  rendered  by  A.,  after  the 
dissolution,  it  was  held  he  was 
bound  by  the  contract  made  with 
H.  and  could  not  recover  a  quan- 
tum meruit  unless  there  was  new 
employment  of  A.  after  the  disso- 
lution, or  the  defendant  had  knowl- 
edge, or  should,  under  the  circum- 


550 


OH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


^224 


2.  Dealings  and  transactions  between  the  creditor  and 
the  partner  whose  liability  is  in  question. 

*3.  Dealings  and  transactions  between  the  cred-  [*224] 
itor  and  the  other  members  of  the  firm;  and, 

4.  Lapse  of  time. 


stances,  have  had  knowledge,  that 
A.  was  not  rendering  his  services 
under  the  contract,  but  expected 
to  be  paid  their  reasonable  value. 
King  v.  Barber,  61  la.  674. 

If  merchandise  be  consigned  to 
and  received  by  a  firm  to  sell  on 
commission  a  partner  afterwards 
retiring  cannot,  by  notice  of  that 
fact  to  the  consignor,  avoid  the 
liability  which  attached  to  him  as 
a  partner  on  receiving  the  goods ; 
and  refusing  to  admit  evidence  of 
such  notice  is  not  error  in  the  court 
trying  an  action  founded  on  such 
liability.  Dean  v.  McFaul,  23  Mo. 
76 ;  Holden  v.  McFaul,  21  Mo.  215. 
See,  also,  Briggs  v.  Briggs,  15  N.  Y. 
471. 

The  appointment  of  a  receiver  of 
a  copartnership,  and  the  transfer 
of  all  its  effects  to  him,  does  not 
operate  as  a  rescission  on  the  part 
of  the  copartnership  of  a  contract 
between  the  latter  and  an  em- 
ployee. Bird  v.  Austin,  40  N.  Y. 
Superior  Ct.  109. 

Where  partners  in  trade  take  a 
lease  of  a  store,  and  afterwards  dis- 
solve the  partnership,  the  lease  or 
the  stock  in  trade  does  not  cease  to 
be  partnership  property  as  against 
the  rent  notes.  Boone  v.  Sirrine, 
38  Ga.  121. 

The  defendants,  who  were  co- 
partners, doing  business  as  factors 
in  Charleston,  employed  the  plaint- 
iff, and  contracted  to  give  him  all 
their  draying;  they  afterwards  dis- 
solved  their  partnership,  and  the 


new  firm  did  not  employ  him. 
Held,  that  the  contract  terminated 
with  the  partnership.  Holmes  v. 
Caldwell,  8  Rich.  247. 

A  creditor  entered  into  an  agree- 
ment with  a  firm  in  respect  to  the 
management  of  the  partnership 
property,  upon  which  he  had  a  lien 
for  an  indebtedness  to  him,  and 
upon  which  indebtedness,  in  con- 
sideration of  the  agreement,  he  was 
to  extend  time  of  payment.  Held, 
that  a  dissolution  of  the  partner- 
ship by  a  withdrawal  of  one  of  the 
members,  and  the  transfer  of  his 
interest  to  the  remaining  one, 
worked  such  an  abandonment  of 
the  contract  on  the  part  of  the 
partnership  as  absolved  the  creditor 
from  further  observance  of  it  on 
his  part.  Turk  v.  Nicholson,  30 
Iowa,  407.  See,  however,  Dickson 
v.  Ind.  C.  M.  Co.  63  Ind.  9. 

Where  two  persons  form  a  part- 
nership for  a  single  venture,  mis- 
appropriation of  the  funds  by  the 
partner  borrowing  money  on  the 
credit  of  the  firm  does  not  relieve 
the  firm  from  liability.  Howe  v. 
Patterson,  53  Ala.  205. 

Three  persons  being  sued  as  part- 
ners, proof  that,  after  part  of  the 
account  sued  upon  was  created, 
and  the  partnership  dissolved,  the 
retiring  partner  paid  the  others  a 
sum  of  money  to  cover  his  respon- 
sibility for  the  firm  debts,  is  irrele- 
vant and  inadmissible.  Gooden  v. 
Morrow,  8  Ala.  486. 


551 


*225  RIGHTS    AND   OBLIGATIONS.  [liOOK    II. 

The  second  of  these  classes  of  events  does  not  require 
special  notice.  The  effect  of  bankruptcy  and  death  will  be 
examined  in  a  subsequent  part  of  this  work.  There  only 
remain,  therefore,  to  be  considered  here  the  third  and  fourth 
classes  of  events  alluded  to. 

Termination  of  joint  obligations. —  The  nature  of  an 
obligation  which  is  joint,  or  joint  and  several,  is  such  that, 
although  each  person  subject  to  the  obligation  is  responsi- 
ble for  its  performance,  yet  each  is  not  bound  to  perform  it 
without  reference  to  the  question  whether  it  has  already 
been  performed  by  the  others.  Whether  the  obligation  be 
joint,  or  joint  and  several,  it  has  only  to  be  performed  once; 
and  performance  by  any  one  of  the  persons  obliged  is  avail- 
able as  a  defense  to  a  second  demand  made  against  the 
others,  (n)  And  not  only  is  a  joint,  or  joint  and  several, 
obligation  at  an  end  when  performed  by  one  of  the  persons 
in  whom  it  resides,  but  whatever  extinguishes  the  right  to 
demand  performance  of  that  obligation  extinguishes  the 
obligation  itself  and  discharges  all  the  persons  in  whom  it 
resided,  (o)  But  an  event  which  merely  disables  a  creditor 
from  suing  one  of  several  persons  jointly,  or  jointly  and 
severally,  indebted  to  him  does  not  necessarily  extinguish 
the  debt.  For  example,  if  one  of  the  persons  indebted  be- 
comes bankrupt  and  obtains  his  discharge,  although  his 
liability  is  thereby  at  an  end,  yet  the  other  persons  indebted 
are  not  discharged  from  their  obligation  to  pay.  {p)  So  a 
covenant  by  the  creditor  not  to  sue  one  of  several  persons 
liable  jointly,  or  jointly  and  severally,  does  not  extinguish 
the  creditor's  right  to  obtain  pa3TTient,  its  effect  only  being 
to  give  the  covenantee  a  right  to  be  indemnified 
[*225]  by  the  creditor  against  the  conse*quences  of  an  ex- 

(n)  See,  as  to  payment  by  one,  235 ;  Cocks  v.   Nash,  9  Bing.  341 ; 

Watters  V.  Smith,  2  B.  &  Ad.  889 ;  Wallace  v.  Kelsall,  7  M.  &  W.  264 ; 

Thorne   v.  Smith,    10   C.    B.    659;  Nicholson  v.  Revill,  4  A.  &  E.  675. 
Beaumont  v.  Greathead,  2  id.  494.        (p)  46  and  47  Vict.  ch.  52,  §30,  cl. 

(o)  See    Cheetbam    v.   Ward,    1  4;  Crosse  v.    Smith,    7  East,  256; 

Bos.  &  P.  630;  Ex  parte  Slater,  6  Noke    v.    Ingham,    1   Wils.  89;   1 

Ves.  146 ;  Ballam  v.  Price,  2  Moo.  Wins.  Saund.  207,  a. 

552 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *225 

ercise  of  his  right,  (q)  So,  if  the  creditor  receives  from  one 
of  several  debtors  part  of  the  debt,  this  does  not  discharge 
the  others  from  their  liability  to  pay  the  residue,  (r) 

In  order  to  show  the  application  of  these  principles  to 
the  discharge  of  a  partner  from  a  liability  already  incurred 
by  him,  it  will  be  convenient  to  consider  the  effect  of  — 

1.  Payment. 

2.  Eelease. 

3.  Substitution  of  debtors  and  securities. 

4.  Lapse  of  time. 

An  examination  of  these  subjects  will  involve  an  inquiry 
into  the  mode  in  which  retired  partners  and  the  estates  of 
deceased  partners  cease  to  be  liable  to  creditors  of  the  firm 
to  which  they  belonged. 

1.  Payment. 

Payment  oy  one  partner  of  partnership  debts. —  Pay- 
ment of  a  partnership  debt  by  any  one  partner  discharges 
all  the  others,  if  the  object  of  the  partner  paying  was  to 
extinguish  the  whole  debt,  or  if  he  made  the  payment  out 
of  the  partnership  funds,  (s)1     But  if  a  firm  is  unable  to 

(q)  See  Lacy  v.  Kinaston,  1  Ld.  the  note  as  to  discharge  the  retir- 

Raym.  688;  Dean  v.  Newhall,  8  T.  ing  partner  from   his  liability  as 

R.  168 ;  Walmsley  v.  Cooper,  11  A.  surety.     Colgrove    v.    Talhnan,    2 

&  E.  216.  Lans.  97. 

(r)  See  Watters  v.  Smith,  2  B.  &  M.,  R.  and  G.,  who  were  copart- 

Ad.  889.  ners,  made  their  firm  note  on  de- 

(s)  See  the  cases  cited,  ante  page  mand  and  transferred  it  for  value. 

224,  note  (n).  Afterwards    G.   retired    from  the 

1  See  ante.  firm,  and,  with  the  consent  of  M. 

Where  two  copartners  had  dis-  and  R.,  B.  was  substituted  as  part- 
solved  partnership,  one  of  them  ner  in  his  place  and  assumed  all 
carrying  on  the  business  and  liqui-  his  debts  and  liabilities,  and  the 
dating  the  debts  of  the  old  firm,  a  note  was  entered  on  the  books  of 
receipt  given  by  him  to  a  firm  cred-  the  new  firm  as  an  indebtedness, 
itor  on  a  note,  acknowledging  the  After  this,  as  payment  of  the  pur- 
receipt  of  stocks  sufficient  to  pay  chase  price  of  property  sold  by  M. 
the  note,  and  promising  to  deliver  to  R. ,  M.  received  the  note  from  R. 
them  on  surrender  of  the  receipt,  M.  afterwards  transferred  the  note 
was  held  to  be  such  a  payment  of  to    his  son,   who   brought  action 

553 


*226  EIGHTS   AND   OBLIGATIONS.  [BOOK   II. 

pay  a  debt,  and  one  partner  out  of  his  moneys  pays  it,  but 
in  such  a  way  as  to  show  an  intention  to  keep  the  debt 
alive  against  the  firm  for  his  own  benefit,  this  payment  by 
him  will  be  no  answer  to  an  action  brought  against  the  firm 
by  the  creditor  suing  on  behalf  of  the  partner  who  made 
the  payment,  (t) 

Imputation  of  payment  made  by  one  partner  with 
money  of  firm. —  If  a  partner  is  indebted  on  his  own  ac- 
count to  a  person  to  whom  the  firm  is  also  indebted,  and 
that  partner,  with  the  moneys  of  the  firm,  makes  a  pay- 
ment to  the  creditor  without  specifying  the  account  on 
which  it  is  paid,  the  payment  must  be  taken  to  have  been 
made  on  the  partnership  account,  and  must  be  applied  ac- 
cordingly, (u) 
[*226]  ^Payment  by  new  firm  discharges  old  firm. — 
Inasmuch  as  a  payment  by  A.  of  B.'s  debt,  on  behalf 
of  B.,  inures  to  the  benefit  of  B.  if  the  creditor  accepts  the 
money  and  B.  does  not  repudiate  the  payment,  (as)  it  fol- 
lows that  if  a  firm  is  indebted,  and,  by  the  retirement  of 
the  original  partners  and  the  introduction  of  other  partners, 
a  wholly  new  firm  is  called  into  existence,  a  payment  by 
the  new  firm,  expressly  or  impliedly  on  behalf  of  the  old 

thereupon.    Held,  that,  as  between  leases  the  other  partners.     But,  if 

M.,  R.  and  G.,  G.  was,  after  the  the  paper  received  in  exchange  be 

substitution  of  B.  as  partner,  liable  forged,  then  the  transaction  is  void, 

upon  the  note  only  as  surety;  that  and  the  original  liability  of  all  the 

the  receipt  of  the  note  for  value  by  partners  revives.     Pope  v.  Nance, 

M.  operated  as  a  payment  of  the  1  Stew.  354. 

same,  and  the  liability  of  the  surety        (t)  Mclntyre  v.  Miller,  13  M.  & 

ceased,   and  that  the    subsequent  W.  725 ;  infra,  note  (y). 
transfer  to  M.'s  son  did  not  revive        (u)  Thompson  v.  Brown,  Moo.  & 

the  note  as  against  the  firm  or  R.  M.  40.    See,  also,  Nottidge  v.  Prich- 

Morss  v.  Gleason,  4  Thomp.  &  C.  ard,  2   CI.   &  Fin.    379;  affirming 

274.  Prichard  v.  Draper,  1  R.  &  M.  191. 
A  creditor  of  the  firm,  receiving        (x)  Co.  Litt.  207,  a.    See  Belshaw 

from  one  of  the  partners,  after  the  v.  Bush,  11    C.  B.  191;   Jones    v. 

firm  is  dissolved,  the  paper  of  third  Broadhurst,    9    C.    B.    193,    etc.; 

persons  in  payment  of  his  partner-  Kemp  v.  Balls,  10  Ex.  607 ;  Lucas 

ship  demand  and  in  exchange  for  v.  Wilkinson,  1  H.  &  N.  420. 
the  paper  of  the  firm,  thereby  re- 

554 


CH.  II,  SEC.  III.]  LIABILITY    OF    .MEMBERS.  *227 

firm,  of  the  debts  contracted  by  the  old  firm,  will  extin- 
guish its  debt  as  between  that  firm  and  its  creditor.  But 
if  there  are  circumstances  showing  that  the  money  was 
paid,  not  on  behalf  of  the  old  firm  and  in  discharge  of  its 
liability,  but  as  the  consideration  for  a  transfer  to  the  new 
firm  of  the  creditor's  right  against  the  old  firm,  the  right 
of  the  creditor  to  sue  the  old  firm  will  not  be  extinguished, 
but  can  still  be  exercised  for  the  benefit  of  the  new  firm,  {y) 

As  regards  discharge  by  payment  it  is  important  to  bear 
in  mind  the  general  rules  relating  to  the  appropriation  of 
payments,  and  especially  the  rule  in  Clayton's  Case.  The 
general  rules  upon  this  subject  are  as  follows:  (a) 

General  rules  as  to  appropriation  of  payments. —  1. 
Where  one  person  is  indebted  to  another  on  various  ac- 
counts the  debtor  is  at  liberty  to  pay  in  full  whichever  debt 
he  likes  first,  (a) 

2.  But  a  debtor  has  no  right  to  insist  on  paying  a  debt 
partly  at  one  time  and  partly  at  another;  (b)  although  if 
he  does  pay  a  debt  in  part,  and  the  creditor  accepts  the 
payment,  the  debt  is  extinguished  to  the  extent  of  the  pay- 
ment thus  made  and  accepted,  (c) 

3.  The  right  of  a  debtor  to  appropriate  a  payment  to 
whichever  of  several  debts  he  prefers  can  only  be  exercised 
at  the  time  of  payment,  not  afterwards,  (d) 

^General  rules  as  to  appropriation  of  payments.  [*227] 
4.  An  appropriation  by  a  debtor  at  the  time  of  pay- 
ment need  not  be  express,  but  may  be  inferred  from  the 
nature  of  the  debt  and  from  the  mode  and  circumstances 
of  payment.  (0) 

(y)  See  Lucas  v.  Wilkinson,  1  H.  (a)  Peters  v.  Anderson,  5  Taunt. 

&  N.  420;  Mclntyre    v.  Miller,  13  596;  Mitchell  v.  Cullen,  1   McQu. 

M.  &  W.  725,  where  one  partner  190. 

paid  a  debt  due  from  the  firm,  but  (b)  Dixon  v.  Clark,  5  C.  B.  365. 

had    the    debt    transferred    to    a  (c)  As  to  payments  of  so  much 

trustee  for  himself.  in  the  pound,  see  infra. 

(z)  For  more  detailed  information  (d)  Peters  v.  Anderson,  5  Taunt, 

the  reader  is  referred  to  an  article  596. 

by  the  author  in  the  Law  Magazine  (e)  Id.,  and  see  infra,  rule  8. 
for  August,  1855  (vol.  54,  p.  21). 

555 


*227 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


5.  Where  the  debtor,  having  the  opportunity  so  to  do,  {/) 
makes  no  appropriation,  express  or  tacit,  at  the  time  of  pay- 
ment, the  creditor  is  entitled  to  appropriate  the  payment  to 
whichever  debt  he  pleases,  (g) 

6.  And  the  creditor  may  exercise  this  right  at  any  time 
he  likes;  (h)  but  when  he  has  once  exercised  it,  and  given 
notice  of  such  exercise  to  the  debtor,  no  different  appropri- 
ation can  be  made,  (i) 

7.  The  creditor  may  exercise  his  right  in  appropriating  a 
payment  to  a  debt  barred  by  the  statute  of  limitations 
rather  than  to  one  that  is  not  so  barred ;  (k) l  to  a  simple 
contract  debt  rather  than  to  a  specialt}T  debt;  (I)  to  a  new 
rather  than  to  an  old  debt;  (m)  to  a  debt  not  guarantied 
rather  than  to  one  that  is;  (n)  and  to  a  debt  not  bearing 
interest  rather  than  to  one  which  does,  (o)  But  the  debt 
must  be  one  which  is,  or  if  not  barred  by  time  would  be, 


(/)  This  is  essential.  See  Walter 
v.  Lacy,  1  Man.  &  Gr.  54;  Young 
v.  English,  7  Beav.  10. 

(g)  See  Simson  v.  Ingham,  2  B. 
&  C.  65,  and  the  other  cases  cited 
in  the  next  few  notes. 

(h)  Phillpotts  v.  Jones,  2  A.  &  E. 
41 ;  Mills  v.  Fowkes,  5  Bing.  N.  C. 
455. 

(i)  Simson  v.  Ingham,  2  B.  &  C. 
65.  See,  as  to  representations  made 
by  the  creditor,  Wickham  v.  Wick- 
ham,  2  K.  &  J.  478. 

(k)  Mills  v.  Fowkes,  5  Bing.  N.  C. 
455 ;  Williams  v.  Griffiths,  5  M.  & 
W.  300 ;  Nash  v.  Hodgson,  Kay,  650. 
Such  an  appropriation,  however, 
does  not  amount  to  an  admission 
by  the  debtor  that  the  barred  debt 
is  due,  and  consequently  does  not 
take  that  debt  out  of  the  statute. 
See  the  last  three  cases. 

1  Where  one  owes  another  an  in- 
dividual and  a  partnership  account, 
and  makes  general  payments  with- 


out any  application,  without  pro- 
testation against  further  liability, 
and  the  payments  amount  to  more 
than  the  individual  account,  the 
law  will  apply  the  balance  on  the 
partnership  account,  and  such  pay- 
ment will  remove  the  bar  of  the 
statute  of  limitations,  although  the 
creditor,  without  definite  knowl- 
edge of  the  standing  of  the  two 
accounts,  gave  the  debtor  credits 
for  all  the  payments  on  his  indi- 
vidual account.  Robie  v.  Briggs, 
59  Vt.  443. 

(I)  Peters  v.  Anderson,  5  Taunt. 
596. 

(m)  Id. 

(n)  Kirby  v.  Duke  of  Marlboro',  2 
M.  &  S.  18;  Williams  v.  Rawlin- 
son,  3  Bing.  71 ;  Pease  v.  Hirst,  10 
B.  &  C.  122;  Re  Sherry,  25  Ch.  D. 
692.  Compare  Kinnaird  v.  Web- 
ster, 10  Ch.  D.  139. 

(o)  Chase  v.  Cox,  Freem.  261 ; 
Manning  v.  Westerne,  2  Vern.  606. 


556 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *228 

enforceable  by  legal  proceedings;  (p)  and  one  which  exists 
at  the  time  payment  was  made ;  {q)  and  one  which  is  then 
ascertained  in  amount;  (?')  and  one  which  is  owing  by  the 
debtor  and  not  by  other  persons,  (s) 

*8.  In  the  absence  of  evidence  to  the  contrary  an  [*22S] 
appropriation   by  the  debtor   is  inferred,  and  the 
right  of  the  creditor  to  appropriate  differently  is  excluded 
in  the  following  amongst  other  cases: 

(a)  Interest  is  presumed  to  be  paid  before  principal,  (t) 

(b)  The  earlier  items  of  one  entire  account  are  presumed 
to  be  paid  before  the  later  items  of  the  same  account,  (u) 

(c)  Money  coming  to  the  hands  of  a  creditor  by  the  real- 
ization of  a  particular  security  is  presumed  to  be  appropri- 
ated to  the  debt  thereby  secured,  (x) 

(d)  Money  belonging  to  one  person  is  presumed  to  have 
been  paid  in  discharging  his  own  and  not  another  person's 
debt;  and  where  a  person  fills  several  characters,  the  char- 
acter in  which  he  held  the  money  which  he  paid  prima 
facie  determines  the  debt  to  which  the  payment  must  be 
appropriated,  (y)1 

(p)  Wright  v.  Laing,  3  B.  &  C.  M.  40;  Bowes  v.  Lucas,  Andr.  55. 

165.  Compare  Sterndale  v.  Hankinson, 

(q)  Hammersley    v.   Knowlys,    2  1  Sim.  393,  and  Beale  v.  Caddick, 

Esp.  666.  2  H.  &  N.  326,  where  the  rule  in 

(r)  Goddart  v.  Hodges,  1  Cr.  &  M.  Clayton's  Case  also  applied. 

33.  x  Where  the  partnership  funds  of 

(s)  See  infra,  rule  8  (d).  a  firm  have  been  misapplied  by  a 

(t)  Bower  v.   Harris,    Cr.  &  Ph.  member  of  the  firm  towards  the 

351 ;  Thompson  v.  Hudson,  10  Eq.  .payment  of  a  judgment  holden  by 

497 ;  Warrant  Finance  Co.'s  Case,  the  creditor  of    the   firm   against 

4  Ch.  643.  him  for  his  individual  debt,  such 

(u)  Clayton's  Case,   1  Mer.  585,  creditor  may,  on  the  application  of 

noticed  infra.  the    other    member    of  the    firm, 

(x)  Brett  v.  Marsh,  1  Vern.  468 ;  apply  the  payment  to  his  demand 

Young  v.  English,  7  Beav.  10 ;  Pearl  against  the  firm,  and  enforce  his 

v.  Deacon,  24  Beav.  186,  and  1  De  judgment,  notwithstanding  a  re- 

G.  &  J.  461.  ceipt  given  applying  the  payment 

(if)  Burland  v.    Nash,    2  Fos.    &  on     account     of    the    judgment. 

Fin.  687 ;  Nottidge  v.  Prichard,  2  CI.  Campbell  v.  Matheus,  6  Wend.  551. 

&  Fin.  379 ;  Goddart  v.  Cox,  2  Str.  Where  R.    held  for  collection  a 

1194;  Thompson  v.  Brown,  Moo.  &  book  account  and  also  a  note  and 

557 


*229 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


(e)  A  dividend  of  so  much  in  the  pound  on  several  debts 
is  presumed  to  be  paid  in  respect  of  them  all,  and  must  be 
applied  accordingly,  (z) 

Rule  in  Clayton's  Case.—  Of  these  rules  the  most  im- 
portant with  reference  to  the  subject-matter  of  the  present 
treatise  is  that  which  is  known  as  the  rule  in  Clayton's 
Case,  (a)  that,  where  there  is  one  single  open  current 
[*229]  account  between  two  parties,  every  pay*ment  which 
cannot  be  shown  to  have  been  made  in  discharge  of 
some  particular  item,  is  imputed  to  the  earliest  item  stand- 
ing to  the  debit  of  the  payer  at  the  time  of  payment.1     If, 


mortgage  against  O.  individually, 
and  claims  against  O.  and  others  as 
partners,  and  O.  paid  R.  a  sum  in 
excess  of  the  book  account  to  be 
applied  on  his  individual  indebted- 
ness without  further  direction, 
held,  that  R.  was  bound  to  apply 
the  whole  of  the  said  payment  to 
O.'s  individual  debts  then  existing, 
and  could  not  divert  any  part 
thereof  to  the  payment  of  firm 
debts  or  to  any  indebtedness  to  be 
thereafter  contracted  by  O.  Miles 
v.  Ogden,  54  Wis.  573. 

(z)  Thompson  v.  Hudson,  6  Ch. 
320;  Hobson  v.  Bass,  id.  792; 
Raikes  v.  Todd,  8  A.  &  E.  846; 
Thornton  v.  McKewan,  1  Hem.  & 
M.  525;  Paley  v.  Field,  12  Ves.  435. 

(a)  1  Mer.  572.  See,  in  addition 
to  the  cases  cited  in  the  text  as 
illustrating  the  rule  in  question, 
Ex  parte  Randleson,  2  D.  &  Ch. 
534;  Copland  v.  Toulmin,  7  Ch  & 
Fin.  349 ;  Brown  v.  Adams,  4  Ch. 
764;  Laing  v.  Campbell,  36  Beav. 
3 ;  and  as  to  the  application  of  the 
rule  to  trust  moneys  mixed  with 
other  moneys,  Re  Hallett's  Estate, 
13  Ch.  D.  696 ;  Pennell  v.  Deff ell,  4 
De  G.  M.  &  G.  372. 
1  Kenton  Furnace  Co.  v.  McAl- 


pin,  5  Fed.  R.  237;  Pardee  v. 
Markle,  111  Pa.  St.  548;  S.  C.  17 
Weekly  Not.  Cas.  211  (overdrafts). 
A  partnership  was  dissolved,  and 
one  partner  continued  to  carry  on 
the  previous  business,  and  was  to 
settle  the  partnership  business; 
such  partner  having  subsequently 
paid  to  a  creditor  of  the  firm  the 
amount  due  from  himself  sepa- 
rately as  well  as  from  the  firm. 
Held,  that  the  retiring  partner  was 
discharged  from  the  debt,  though 
no  appropriation  was  made  at  the 
time  of  payment.  Baker  v.  Stack- 
poole,  9  Cow.  420. 

A  firm  owed  A.  There  was  a 
change  in  its  membership,  after 
which  A.  became  debtor  to  the 
new  firm.  Until  sued  by  it  A.  did 
not  claim  that  the  goods  he  got 
from  the  new  firm  were  in  satis- 
faction of  the  debt  due  him  from 
the  old  firm.  He  made  no  inquiry 
for  the  names  of  the  firm,  but 
notice  of  the  change  had  been 
published,  from  which  he  might 
have  learned  of  the  change.  Held, 
that  the  new  firm  were  authorized 
to  charge  the  goods  to  A.,  and  that 
he  had  no  just  claim  to  have  such 
goods  applied  in  satisfaction  of  his 


558 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


•229 


therefore,  a  customer  of  a  firm  of  bankers  has  funds  stand- 
ing to  his  credit  at  the  time  they  dissolve  partnership,  and 
his  account  is  continued  by  their  successors,  they  taking 
new  deposits  and  honoring  his  drafts  as  if  no  change  had 
occurred,  and  blending  the  accounts,  then  the  payments 
first  made  by  the  new  firm  will  be  deemed  to  have  been 
made  in  liquidation  of  the  earliest  item  on  the  credit  side  of 
the  customer's  account,  viz.,  the  balance  due  to  him  at  the 
time  of  the  dissolution ;  and  consequently,  if,  proceeding  on 
this  principle,  that  balance  is  liquidated,  the  customer  has 
no  claim  against  the  old  firm  in  respect  of  his  account  with 
them. 

This  doctrine  is  of  great  importance  in  questions  relating 
to  the  discharge  of  retired  and  deceased  partners. 

Effect  of  rule  in  the  case  of  retired  and  deceased  part- 
ners.—  The  application  of  the  rule  in  question  will  discharge 


older  claim  against  other  partners 
of  the  firm.  Hart  v.  Tomlinson,  2 
Vt.  103. 

Where  several  persons  formed  a 
partnership  for  the  purpose  of 
manufacturing  woolen  goods,  with 
the  understanding  that  they  were 
to  obtain  an  act  of  incorporation 
as  soon  as  practicable,  and  they 
proceeded  to  manufacture  cloth, 
and  consigned  it  to  the  orators,  a 
firm  doing  business  in  Boston,  for 
sale,  and  became  largely  indebted 
to  the  orators,  and  then  the  act  of 
incorporation  was  obtained,  and 
most,  but  not  all,  of  the  members 
of  the  partnership  became  stock- 
holders in  the  corporation,  and  the 
corporation  took  all  the  property 
and  assumed  all  the  debts  of  the 
partnership,  and  continued  the 
business  with  the  orators  as  it  had 
been  previously  transacted,  and 
the  orators  transferred  to  the  ac- 
count of  the  corporation  the  bal- 
ance due  to  them  fr<  m  '.he  partner- 


ship, and  the  corporation  from 
time  to  time  made  large  payments 
to  the  orators,  exceeding  the 
amount  of  that  balance,  and  all 
persons  concerned  in  the  partner- 
ship continued  to  act  in  the  faith 
of  the  merger  of  all  their  property 
and  liabilities  in  the  corporation, 
and  of  the  final  settlement  of  all 
the  partnership  concerns,  and  this 
was  known  to  the  orators,  or  might 
have  been  ascertained  by  reason- 
able inquiry,  and  business  was  thus 
conducted  by  the  orators  and  the 
corporation  for  nearly  twO  years, 
and  then,  upon  the  failure  of  the 
corporation,  the  orators  commenced 
a  suit  against  them,  and  took  judg- 
ment therein  for  the  entire  amount 
due  to  them,  and  there  was  no 
pretense  of  fraud  in  effecting  the 
transfer  of  this  balance  to  the 
account  of  the  corporation,  it  was 
held  that  the  orators  could  not 
revive  their  claim  against  the  part- 
nership, nor  be  allowed  to  recover 


559 


*230  EIGHTS   AND    OBLIGATIONS.  [BOOK    II. 

from  liability  the  estates  of  deceased  partners;  (I)  the  es- 
tates of  sole  traders  if  their  businesses  have  been  carried 
on  by  others  without  any  break;  (c)  and  retired  partners, 
whether  known  (d)  or  dormant.^)1  Moreover,  the  dis- 
charge of  the  deceased  or  retired  partner  being  the  conse- 
quence of  the  payment  of  his  former  creditor,  the  discharge 
does  not  depend  on  the  knowledge  of  the  creditor  of  the 
change  which  has  taken  place  in  the  firm,  (e)  It  is  true 
that  if  the  creditor  had  known  of  the  change  he  might  have 
objected  to  continue  to  deal  with  the  continuing  or  surviv- 
ing partners  unless  the  old  and  new  accounts  were  kept  dis- 
tinct; but  this  circumstance  does  not  entitle  him  to  treat 
his  old  debt  as  still  unpaid  when  he  has  in  fact  dealt  on  the 
footing  of  there  being  only  one  continuous  account,  and 
when  on  this  footing  he  has  been  paid  his  old  debt,  (f) 
[-230]  ^Application  of  rule  to  all  single  running  ac- 
counts—  Discharge  of  surety. —  The  rule  in  Clay- 
ton's Case  applies  to  all  accounts  of  the  nature  of  one  entire 

from  the  members  of  it  the  balance  creditor  to  such  items  of  the  ac- 

due  at  the  time  of  the  transfer,  count  as  he  may  choose ;  and  the 

Whitwell  v.  Warner,  20  Vt.  425.  fact  that  a  person  who  was  not  a 

(b)  As  in  Clayton's  Case,  1  Mer.  member  of  the  firm  is  a  stockholder 
572.  in  the  corporation  will  not  affect 

(c)  Sterndale  v.  Hankinson,  1  the  rule.  Allen  v.  Mining  Co.  73 
Sim.  393;  Smiths.  Wigley,  3  Moo.  Mo.  688.  See,  however,  Cornell  v. 
&  Sc.  174.  Stanhope,  14  R.  I.  97. 

(d)  Hooper  v.  Keay,  1  Q.  B.  D.  Where  one  owes  one  account  to 
178.  an  individual  partner,  and  another 

(e)  Brooke  v.  Enderby,  2  Brod.  &  to  the  firm,  and  the  individual  ac- 
Bing.  70 ;  Newmarch  v.  Clay,  14  count  is  assigned  to  the  firm,  it  is 
East,  239.  immaterial    upon  which    account 

1  See  Wiesenf  eld  v.  Byrd,  17  S.  C.  money  paid  is  applied.     Badger  v. 

106 ;  Buckell  v.  McGuire,  17  Can.  L.  Daenicke,  56  Wis.  678, 

J.  (N.  S.)  63.  See,  also,  as  to  the  application  of 

When  a  corporation    has    been  payments  where  there  has  been  a 

formed  by  the  members  of  a  firm  change    in    the    firm,    Birkett    v. 

succeeding  to  the  liabilities  of  the  McGuire,  7  U.  C.  App.  53;  S.  C.  31 

firm,  payments  made  generally  by  U.  C.  C.  P.  430;  1   Can.  L.  T.  107; 

it  on  an  account  originating  in  the  19  Can.  L.  J.  (N.  S.)  275. 

business  of  the  firm  and  continued  (/)  See  the  last  note.     The  cred- 

by  itself    may  be  applied  by  its  itors  in  those  cases  did  not  know  of 

560 


CH.  II,  SEC.  III.]  LIABILITY   OF    MEMBERS.  *230 

debit  and  credit  account,  without  reference  to  any  question 
of  partnership,  and  is  available  not  only  by  a  firm  against 
an  old  creditor,  but  also  against  a  firm  for  the  benefit  of 
its  debtors.  For  example,  where  a  person  becomes  surety 
to  a  firm  guarantying  a  debt  owing  to  it  by  a  third  party, 
then,  if  the  debt  is  an  item  in  an  account  between  this  third 
party  and  the  firm,  and  is  liquidated  by  general  payments 
with  which  he  is  credited,  the  debt  guarantied  will  be  ex- 
tinguished, and  the  surety  will  be  discharged,  although 
upon  the  whole  account  there  may  always  have  been  a  bal- 
ance owing  to  the  firm,  (g)  On  the  other  hand,  if  the  guar- 
antied debt  is  not  extinguished  by  the  rule  in  question  the 
surety  will  not  be  discharged.  (A)  Moreover,  the  rule  ap- 
plies even  as  between  persons  who  do  not  know  that  they 
are  being  affected  by  it,  and  who,  if  they  did,  might  take 
care  to  exclude  its  operation,  (i) 

Rule  applies  against  the  debtor  as  well  as  against  the 
creditor. —  Further,  as  a  creditor  has  no  right  to  take  the 
account  subsisting  between  him  and  his  debtor  backwards, 
so  as  to  make  himself  appear  a  creditor  in  respect  of  the 
earlier  rather  than  of  the  later  items  of  the  account,  so,  on 
the  other  hand,  a  debtor,  after  making  general  payments  in 
respect  of  one  entire  account,  is  not  at  liberty  to  have  those 
payments  applied  in  liquidation  of  the  subsequent  rather 
than  of  the  earlier  items,  (k) ! 

the  changes  in  the  firms  with  which  notwithstanding  the  mode  in  which 

they  dealt.     See,  also,  Merriman  v.  the  books  were  kept,  the  real  in- 

"VVard,  1  J.  &  H.  371.  tention  was  to  keep  the  second  debt 

(g)  See  Kinnaird  v.  Webster,  10  separate  from  the  others. 

Ch.  D.  139;  Bodenhamu.  Purchas,  (h)  Re    Sherry,    25    Ch.   D.   692; 

2  B.  &  A.  39;  Field  v.  Carr,  5  Bing.  Williams  v.  Eawlinson,  3  Bing.  71. 

11;  Pemberton  v.  Oakes,  4  Russ.  (i)  Ante,  note  (/);  Merriman  v. 

154;  Toulmin  v.   Copland,  3  Y.  &  Ward,    1    J.    &    H.    371;   Scott  v. 

C.  Ex.  625,  and  Copland  v.  Toul-  Beale,  6  Jur.  N.  S.  559. 

min,    7  CI.    &   Fin.   350:   Bank  of  (k)  Beale  v.  Caddick,  2  H.  &  N. 

Scotland  v.  Christie,  8  CI.  &  Fin.  329. 

214;  Medewe's  Trust,  26  Beav.  588.  i  The  intent  of  the  debtor  will 

Compare  Ex  parte  Whitworth,  2  prevail  over  that  of  a  creditor  as  to 

M.  D.  &  D.  164;  City  Discount  Co.  the  application  of  payments,  and 
v.  Maclean,  L.  R.  9  C.  P.  692,  where,  .  such  intent  may  appear  by  impli- 
Vol.  I— 86                         561 


*231  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

Effect  on  incoming  partner. —  This  has  an  important 
bearing  on  the  position  of  incoming  partners;  for  although 
they  are  not  liable  for  debts  contracted  before  they  joined 
the  firm,  still  if  such  debts  and  others  subsequently  con- 
tracted are  allowed  by  an  incoming  partner  to 
[-231]  *form  one  single  running  account,  and  payments  are 
made  generally  in  respect  of  it,  those  payments,  al- 
though made  with  the  money  of  the  new  firm,  will  be 
applied  to  the  old  debt,  and  a  balance  "will  be  left  for  which 
the  incoming  partner  will  be  liable.  (I)  But  the  rule  in 
Claytons  Case  cannot  be  insisted  on  to  the  prejudice  of  a 
new  partner  without  his  consent,  express  or  tacit.  With- 
out such  consent  a  creditor  of  the  old  firm  who  goes  on 
dealing  with  the  new  firm  has  no  right  to  appropriate  a 
payment  made  by  a  new  partner  to  a  debt  owing  by  his 
copartners,  nor  to  run  two  distinct  accounts  together,  and 
treat  a  general  payment  as  made  in  respect  of  the  earliest 
items.  Bnrland  v.  Nash  (m)  may  be  referred  to  as  an  illus- 
tration of  this.  In  that  case  A.  succeeded  B.  in  business, 
and  agreed  with  him  to  take  his  debts  upon  himself;  A. 

cation.    Thus,  one  of  the  partners  law  would  apply  it  on  the  debt  due 

succeeding  to  the  business  of  the  S.,  P.  &   EL,  that  being  the  oldest 

firm,   a    debtor    of    the    old    firm  debt.     Starr  v.  Case,  59  la.  491. 

without  notice  of  the  dissolution,  (l)  See  the    test  case,    and  also 

through  the  neglect    of  the  sue-  Scott  v-  Beale,  6  Jur.   N.  S.   559. 

cessor,  continued  to  buy  and  also  Tnis  case  is  badly  reported,  but  it 

to  make  payments  supposing  them  is  tolerably  plain  that  the  incom- 

to  apply  on  the  partnership  debt.  inS  partner  was  held  liable  to  pay, 

Held,  that  they  should  be  applied  not  the  debt  due  to  the  plaintiff 

according      to      his     supposition,  when  the  partnership  commenced, 

Roakes  v.  Bailey,  55  Vt.  542.  but  the  balance  of  moneys  due  to 

Where  the  firm  of  S.,  P.  &  H.  was  him  on  his  whole    account,    and 

dissolved  by  the  death  of  P.,  and  which  balance  consisted  of  moneys 

C.  owed  the  firm  and  also  S.  and  received  by  the  defendants  after 

H.,  and  money  came  into  the  hands  the  partnership  between  them  was 

of  S.  and  H.  to  the  credit  of  C.  created. 

from  the  sale  of  a  judgment  out  of  (m)  2  Fos.  &  Fin.  687.     Qucere, 

which  a  part  of  the  account  of  S.,  whether  the  evidence  did  not  war- 

P.    &    H.    arose,   held,  that    since  rant  the  inference  that  the  two  ac- 

neither  C.  nor  S.  and  H.  had  made  counts  had  been  run  into  one  with 

any  application  of  the  money  the  the  consent  of  the  defendant. 

502 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *232 

then  contracted  debts  of  his  own  to  one  of  B.'s  creditors, 
and  A.  afterwards  made  such  creditor  a  general  payment  on 
account;  it  was  held  that  the  creditor  could  not,  without 
A.'s  consent,  apply  this  payment  in  discharge  of  the  debt 
owing  by  his  predecessor,  B. 

Rule  inapplicable  where  there  are  distinct  accounts  — 
Right  of  appropriation  in  such  a  case. —  The  rule  in  Clay- 
ton's Case,  however,  applies  only  to  an  entire  unbroken  ac- 
count, and  has  no  application  to  cases  where  one  person  is 
indebted  to  another  in  respect  of  several  matters,  each  of 
which  forms  the  subject  of  a  distinct  account.  In  such  a 
case,  if  the  debtor  does  not  appropriate  the  pa\rment  when 
he  makes  it,  the  creditor  is  at  liberty  to  apply  the  payment 
to  whichever  account  he  thinks  proper,  (n)  Moreover,  when 
a  change  takes  place  in  a  firm  by  the  retirement  or  death  of  a 
member,  a  creditor  of  the  firm  is  under  no  obligation  to  as- 
sent to  a  carrying  over  of  his  debt  so  that  it  shall  form  the 
first  item  in  a  fresh  account  with  the  new  firm.  He  is  at 
liberty  to  keep  the  accounts  with  the  two  firms  distinct, 
and,  if  he  does  so,  pa}Tments  made  generally  by  the 
new  firm  will  not  necessarily  *go,  by  virtue  of  the  [*232] 
rule  in  Clayton's  Case,  in  liquidation  of  the  debt 
owing  by  the  old  firm.  A  remarkable  illustration  of  this  is 
afforded  by  the  well-known  case  of  Simson  v.  Ingham,,  (o) 
There  two  country  bankers  Benjamin  and  Joshua  Ingham 
gave  a  bond  to  a  London  bank  as  a  security  for  advances 
which  it  might  make  on  account  of  the  persons  constituting 
the  country  bank,  or  either  of  them,  associated  or  not  with 
any  other  persons.  Benjamin  died,  and  at  his  death  a  con- 
siderable sum  was  due  to  the  London  bank  for  advances 
made  to  the  country  bank.  The  London  bank  was  in  the 
habit  of  sending  in  monthly  accounts  to  the  country  bank. 
In  the  month  following  Benjamin's  death  the  London  bank 
received  and  paid  considerable  sums  on  account  of  the 
country  bank,  and  the  sums  were  entered  by  the  London 
bank  in  its  own  books  in  continuation  of  the  former  account 

(n)  Ante,  p.  227.  (o)  2  B.  &  C.  65. 

563 


*233  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

between  it  and  the  old  country  bank.  No  account,  how- 
ever, was  sent  to  the  country  bank  until  two  months  after 
Benjamin's  death;  and  then  two  accounts  were  sent,  one  of 
them  being  an  account  of  receipts  and  payments  prior  to 
his  death,  and  the  other  being  an  account  of  receipts  and 
payments  made  subsequently  thereto.  A  considerable  bal- 
ance was  due  to  the  London  bank  on  the  first  of  these  ac- 
counts, and  to  recover  this  balance  an  action  was  brought 
against  Benjamin's  representatives.  It  was  contended  that 
his  estate  was  discharged  by  virtue  of  the  rule  in  Clayton's 
Case,  the  London  bank  having  received  since  his  death  much 
more  than  sufficient  to  liquidate  that  balance;  but  it  was 
held  that  the  rule  in  question  did  not  apply.  The  judgment 
of  Mr.  Justice  Bayley  contains  such  an  admirable  statement 
of  the  principles  applicable  to  such  cases  that  no  hesitation 
has  been  felt  in  setting  it  out  at  length. 

"The  general  rule  is  that  the  party  who  pays  money  has  a  right  to 
apply  that  payment  as  he  thinks  tit.  If  there  are  several  debts  due 
from  him  he  has  a  right  to  say  to  which  of  those  debts  the  payment 
shall  be  applied.  If  he  does  not  make  a  specific  application  at  the  time 
of  payment,  then  the  right  of  application  generally  devolves  on  the 
party  who  receives  the  money.  But  there  is  a  third  rule,  viz.,  that, 
where  one  of  several  partners  dies,  and  the  partnership  is  in  debt,  and 

the  surviving  partners  continue  their  dealings  with  a  particular 
[*233]  creditor,  and  the  latter  joins  the  transactions  of  the  old  *and  new 

firms  in  one  entire  account,  then  the  payments  made  from  time 
to  time  by  the  surviving  partners  must  be  applied  to  the  old  debt.  In 
that  case  ;t  is  to  be  presumed  that  all  the  parties  have  consented  that  it 
should  be  considered  as  one  entire  account,  and  that  the  death  of  one  of 
the  partners  has  produced  no  alteration  whatever.  In  this  case  the 
partner  died  in  September,  1814.  If  in  the  ordinary  course  of  business 
a  monthly  account  had  been  sent  in,  stating  the  transactions  before  and 
after  the  death  of  the  partner  as  forming  part  of  one  entire  account, 
and  the  balance  is  due  from  the  survivors,  in  that  case  the  creditor 
would  have  been  precluded,  and  would  have  had  no  right  to  have  said 
that  the  payments  made  subsequently  to  the  death  of  the  partner  should 
be  applied  to  any  but  the  old  account.  In  fact,  the  bankers  in  London 
did  not  send  in  any  account  after  the  death  of  the  partner  until  Novem- 
ber, and  then  they  sent  in  two  distinct  accounts  —  one  made  up  to  the  day 
of  the  death  of  the  partner,  and  the  other  commencing  from  that  period. 
At  that  time,  therefore,  the  bankers  in  London  expressed  their  dissent 

564 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  ':f23i 

from  making  the  whole  one  entire  account.  It  has  been  insisted  that 
at  that  period  of  time  they  had  no  right  so  to  do,  because  they  were 
precluded  by  the  entries  which  they  had  already  made  in  their  own 
books  in  the  intermediate  space  of  time.  If,  indeed,  a  book  had  been 
kept  for  the  common  use  of  both  parties  as  a  pass-book,  and  that  had 
been  communicated  to  the  opposite  party,  then  the  party  making  such 
entries  would  have  been  precluded  from  altering  that  account;  but 
entries  made  by  a  man  in  books  which  he  kept  for  his  own  private  pur- 
poses are  not  conclusive  on  him  until  he  has  made  a  communication  on 
the  subject  of  those  entries  to  the  opposite  party.  Until  that  time  he 
continues  to  have  the  option  of  applying  the  several  payments  as  he 
thinks  fit.  For  these  reasons  I  am  of  opinion  that  the  plaintiffs  were 
not  precluded  from  applying  the  payments  to  the  new  account,  and 
therefore  this  award  is  right." 

Right  to  blend  accounts.—  The  case  of  Slmsoji  v.  Ing- 
ham was  decided  upon  the  principle  that  a  creditor  of  a 
firm  has  a  right,  when  a  change  occurs  in  the  firm,  to  de- 
cide for  himself  whether  the  sum  due  to  him  from  the  old 
firm  shall  or  shall  not  form  an  item  in  his  account  with  the 
new  firm.  This  principle  is  further  illustrated  by  the  case 
of  Jones  v.  Mound,  (p)  There  three  persons,  A.,  13.  and 
C.j  were  partners,  and  D.  was  indebted  to  them  in  a  sum 
secured  by  a  covenant  and  a  mortgage.     A.  and  B.  died; 

C.  retired,  and  assigned  her  interest  to  E..  who,  with  F., 
continued  the  business  of  the  old  firm  under  the  old  name. 

D.  continued  to  deal  with  the  new  firm,  and  he  made  it 
several  payments,  more  than  sufficient  to  liquidate  the  debt 
above  mentioned  if  appropriated  thereto.  The  mortgage 
had  been  realized,  and  the  sum  arising  from  it  had 

been  applied  in  part  discharge  of  *the  debt  secured  [*234] 
by  it.  There  was  nothing  to  show  that  D.'s  debt 
had  been  made  an  item  in  the  account  between  him  and  the 
new  firm,  and  it  was  consequently  held  that  D.  had  no  right 
to  insist  that  the  payments  made  by  him  generally  to  the 
new  firm  should  be  applied  to  the  balance  due  from  him  on 
his  covenant.  (^) 

(p)  3  Y.  &  C.  Ex.  347.  port,  it  was  held  that  the  balance 

(g)  The  case  was  decided  on  de-    due  on  the  covenant  could  not  be 

murrer,  and,  according  to  the  re-    considered  as  liquidated  unless  it 

5G5 


*235  EIGHTS    AND   OBLIGATIONS.  [BOOK   II. 

Transfer  of  debt  from  one  account  to  another.— It 

should  be  borne  in  mind  with  reference  to  cases  of  this  de- 
scription that  one  partner  can  bind  the  firm  by  assenting 
to  a  transfer  of  a  debt  due  to  or  by  it  from  one  account  to 
another.  (.9)  l 

Rule  in  Clayton's  Case  inapplicable  where  it  defeats 
the  intentions  of  the  parties.—  The  rule  in  Clayton- 8  Case, 
viz.,  that  in  current  accounts  it  is  presumably  the  sum  first 
paid  in  that  is  first  drawn  out,  or,  in  other  words,  that  pre- 
sumably it  is  the  first  item  on  the  debit  side  of  the  account 
which  is  discharged  or  reduced  by  the  first  item  on  the 
credit  side,  is  a  rule  based  on  the  presumed  intention  of  the 
parties,  (t)  It  is  not,  as  is  sometimes  represented,  a  rule 
of  law  obtaining  independently  of  their  will;  and  conse- 
quently, if  it  can  be  shown  that  some  other  appropriation 
was  intended,  the  rule  ceases  to  be  applicable.  An  inten- 
tion to  appropriate  a  payment  to  a  later  rather  than  to  an 
earlier  item  in  the  account  may  be  inferred  from  the  usual 
course  of  business  between  the  parties;  (it)  from  the  source 
from  which  the  money  was  obtained;  (x)  from  the  security 
to  meet  which  the  payment  was  made;  (y)  from  the  fact 
that  the  earlier  item  was  secured  and  intended  to  be 
["'235]  kept  separate  from  the  ^others;  (3)  from  the  fact 

could  be  shown  that  it  hail,  with  (t)  Re  Hallett's  Estate,  13  Ch.  D. 
C.'s  assent,  been  made  an  item  in  696;  Wilson  v.  Hurst,  4  B.  &  Ad. 
the  account  between  D.  and  the  767,  per  Lord  Denman.  In  Cop- 
new  firm.  But  quaere,  what  C.  had  land  v.  Toulmin,  7  CI.  &  Fin.  319, 
to  do  with  it,  she  having  assigned  there  was  evidence  to  show  an 
all  her  interest  in  the  debt  to  the  agreement  for  a  different  appro- 
new  firm?  Did  she  not  thereby  priation,  but  it  was  not  deemed 
authorize  the  new  firm  to  deal  with  sufficient  to  exclude  the  rule. 
the  debt  as  it  liked?  See  Pember-  (u)  Taylor  v.  Kymer,  3  B.  &  Ad. 
ton  v.  Oakes,  4  Kuss.  154.  320;  Lysaght  v.  Walker,  5  Bli.  N. 

(s)Ante,  pp.   230,  231;   Bealc  v.  S.  1. 

I  Jaddick,  2  11.  &  N.  326.  (x)  Stoveld  v.  Eade,  4  Bing.  151; 

1  As  to  the  duty  of  the  court  to  Thompson  v.  Brown,  Moo.  &  M.  40. 

correct   improper    transfer   of  ac-  (y)  Newmarch  v.  Clay,   14  East, 

counts  against  third  persons  to  the  240. 

l>ooka  of  a  new  firm,  see  McCall  v.  (z)  City  Discount  Co.  v.  Maclean, 

Moss,  1 12  111.  493.  L.  R.  9  C.  P.  692.     See  ante,  p.  230. 

560 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *235 

that  the  payment  was  a  dividend  on  all  debts;  (a)  from 
the  representations  of  the  parties;  (!>)  and  from  other  cir- 
cumstances, (c) 

An  instructive  case  on  this  head  is  Wickham  v.  Wick- 
ham,  (d)  which  in  substance  was  as  follows:  A  firm  of 
Finch  &  Sons,  as  agents  of  the  plaintiffs,  supplied  goods  to 
the  firm  of  Smith  &  Willey  upon  the  terms  that  the  latter 
should  become  debtors  to  the  plaintiff  in  respect  of  such 
goods.  Finch  &  Sons  also  supplied  Smith  &  Willey  with 
other  goods  on  their  own  behalf.  In  the  accounts  between 
Finch  &  Sons  and  Smith  &  Willey  no  distinction  was  made 
between  goods  supplied  by  Finch  &  Sons  on  their  own  be- 
half and  those  which  they  supplied  as  agents  of  the  plaint- 
iffs. Smith  &  Willey  made  payments  generally  on  account ; 
and,  applying  the  rule  in  Clayton's  Case,  nothing  was  due 
from  Smith  &  Willey  in  respect  of  the  goods  supplied  to 
them  on  behalf  of  the  plaintiffs.  However,  Edward  Finch 
was  a  partner  in  both  firms,  and  representations  were  made 
to  the  plaintiffs  by  the  firm  of  Finch  &  Sons  to  the  effect 
that  a  large  debt  was  due  to  the  plaintiffs  from  the  firm  of 
Smith  &  Willey,  and  Finch  &  Sons  undertook  that  Edward 
Finch  should  use  his  influence  as  a  partner  in  the  firm  of 
Smith  &  Willey  to  secure  the  reduction  of  such  debt.  Upon 
the  faith  of  this  representation  and  undertaking,  the  plaint- 
iffs forebore  to  sue  Smith  &  Willey.  It  was  held  that  the 
firm  of  Smith  &  Willey  was  precluded  from  treating  its 
debt  to  the  plaintiffs  as  liquidated  by  the  payments  made 
by  it  to  the  firm  of  Finch  &  Sons;  for  it  was  not  competent 
to  the  two  firms  so  to  arrange  their  accounts  as  to  liquidate 
a  debt  which  a  person  who  was  a  partner  in  both  firms 
represented  to  the  plaintiffs  as  still  owing  to  them. 

(a)  Ante,  p.  228.  B.  792.     Compare  Be  Boys,  10  Eq. 

(6)  Wickham   v.  Wickham,  2  K.     467. 
&  J.  478;  Meniman  v.  Ward,  1  J.        (d)  2  K.  &  J.  478.     See,  too,  Mer- 
&  H.  371.  riman  v.  Ward,  1J.  &  H.  371. 

(c)  See  Henniker  v.  Wigg,  4  Q. 

567 


*236  EIGHTS   AND    OBLIGATIONS.  [BOOK   II. 

Application  of  the  rule  in  cases  of  fraud. —  Upon  the 
same  principle,  viz.,  that  the  rule  in  Clayton's  Case  is  founded 
on  the  presumed  intention  of  the  parties,  it  follows  that 

it  cannot  be  applied  as  against  a  person  who  is  a 
[*236]  ^creditor  in  respect  of  a  fraud  committed  on  him  and 

of  which  he  is  ignorant.  This  in  fact  was  deter- 
mined in  Clayton's  Case  itself.  For  Clayton,  in  addition  to 
the  claim  which  was  held  to  have  been  discharged  by  the 
operation  of  the  rule  noticed  above,  (e)  had  another  claim 
upon  Devaynes'  estate,  arising  out  of  a  breach  of  trust 
committed  by  a  fraudulent  sale  of  some  exchequer  bills,  and 
of  which  sale  he  was  kept  in  ignorance.  The  payments 
made  to  Clayton  since  Devaynes'  death  were  more  than 
sufficient  to  satisfy  both  claims;  but  it  was  held  that  the 
claim  arising  out  of  the  concealed  sale  of  the  bills  wras  not 
affected  by  those  payments.  (/)  So  if  one  partner  fraudu. 
lently  overdraws  his  account  with  the  firm  and  keeps  pay- 
ing money  in  and  drawing  money  out,  so  that  his  fraudulent 
overdrawing  is  never  discovered,  it  will  not  be  treated  as 
having  been  made  good  so  long  as  there  is  a  balance  against 
him.  {y) 

Imputation  of  payment  where  debts  are  owing  to  a  firm 
and  to  a  member  of  it. —  Before  leaving  the  subject  of  ap- 
propriation of  payments  it  may  be  as  well  to  advert  to  a 
question  of  some  difficulty  which  arises  when  a  person  in- 
debted to  a  firm,  and  also  to  an  individual  member  of  it, 
pays  him  a  sum  of  money  under  such  circumstances  that  it 
cannot  be  ascertained  on  account  of  which  debt  the  pay- 
ment was  made.  In  such  a  case  ought  the  payment  to  be 
applied  in  liquidation  of  the  debt  due  to  the  partnership  or 
of  that  due  to  the  individual  member?  Pothier  (A)  says  that 
good  faith  requires  that  the  partner  receiving  the  money 
should  apply  it  proportionally  to  both  demands.     The  wrriter 

(e)  Ante,  p.  228.  (g)  Lacey  v.  Hill,  4  Oh.  D.  537. 

(/)  See  Clayton's   Case,  1   Mer.        (/i)  Pothier,  "  Societe,"  §  121. 
572-580. 

568 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS. 


•237 


is  not  aware  of  any  decision  on  this  subject,  but  he  appre- 
hends that,  as  between  the  partner  and  the  debtor,  the  pay- 
ment might  be  applied  to  either  debt  at  the  option  of  the 
partner,  whilst,  as  between  the  partner  and  his  copartners, 
good  faith  would  require  that  the  payment  should  be  ap- 
plied wholly  to  the  partnership  debt,  (i)1 


f2.  Release. 


[-237] 


Belease  of  one  partner  is  a  release  of  the  firm  —  Cov- 
enant not  to  sue  has  a  different  effect. —  A  release  of 
one  partner  from  a  partnership  debt  discharges  all  the 
others;  {J&)%  for,  where  several  persons  are  bound  jointly, 


(i)  See  Thompson  v.  Brown,  Moo. 
&  M.  40,  and  Nottidge  v.  Prichard, 
2  CI.  &  Fin.  379. 

1  Upon  the  general  subject  of 
appropriation  of  payments,  Mr. 
Greenleaf  in  his  valuable  work  on 
Evidence,  volume  2,  section  529, 
says:  "  In  regard  to  the  ascription 
or  appropriation  of  payments,  the 
general  rule  of  law  is  that  a  debtor 
owing  several  debts  to  the  same 
creditor  has  a  right  to  apply  his 
payment,  at  the  time  of  making  it, 
to  which  debt  he  pleases.  But  this 
rule  applies  only  to  voluntary  pay- 
ments, and  not  to  those  made  under 
compulsory  process  of  law.  If  he 
makes  a  general  payment  without 
appropriating  it  the  creditor  may 
apply  it  as  he  pleases.  And  where 
neither  party  appropriates,  the  law 
will  apply  it  according  to  its  own 
view  of  the  intrinsic  justice  and 
equity  of  the  case." 

Respecting  the  exceptions  to  the 
right  of  appropriation  by  the  cred- 
itor, where  the  debtor  makes  none, 
the  same  author,  in  section  531a, 
says:  "The  principle  on  which 
these  and  other  exceptions  [stated 


in  section  531]  are  founded  seems  to 
be  this :  That  the  debtor,  by  waiving 
his  right  of  appropriation  in  favor 
of  the  creditor,  could  not  have  in- 
tended that  it  should  be  exercised 
to  his  own  injury ;  but,  on  the  con- 
trary, that  he  relied  on  the  cred- 
itor's making  an  appropriation  to 
which  he  could  not  reasonably  or 
justly  object.  The  creditor,  there- 
fore, never  acquires  the  right  to 
apply  a  payment  with  a  view 
merely  to  his  own  interest  or  con- 
venience, unless  the  debtor  has  had 
an  opportunity  to  direct  its  appli- 
cation by  having  the  money  pass 
through  his  own  hands  or  under 
his  own  control." 

(k)  Bower  v.  Swadlin,  1  Atk. 
294;  Ex  parte  Slater,  6  Ves.  146; 
Cheetham  v.  Ward,  1  Bos.  &  P. 
630;  Cocks  v.  Nash,  9  Bing.  341. 

2  See  Gray  v.  Brown,  22  Ala.  262; 
Williamson  v.  McGinnis,  11  B. 
Mon.  74;  Tudarman  v.  Newhall,  17 
Mass.  581 ;  American  Bank  v.  Doo- 
little,  14  Pick.  126;  Brown  v. 
Marsh,  7  Vt.  327;  Willings  v.  Con- 
sequa,  Pet.  C.  C.  307 ;  United  States 
v.  Thompson,  Gilpin,  614;  Benson 


569 


'237 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


or  jointly  and  severally,  a  release  of  one  is  a  release  of 
them  all.  (I)  But  in  this  respect  a  covenant  not  to  sue  dif- 
fers from  a  release;  for  although,  where  there  is  only  one 
debtor  and  one  creditor,  a  covenant  by  the  latter  never  to 
sue  the  former  is  equivalent  to  a  release,  it  has  been  de- 


v.  Kincaid,  3  Pa.  St.  57.  See,  how- 
ever, Grant  v.  Holmes,  75  Mo.  109 ; 
Williams  v.  Hitchings,  10  Lea,  326. 
The  Code  of  Civil  Procedure  of 
New  York  permits  joint  debtors  to 
compound  separately  a  joint  debt 
in  all  cases  except  where  a  partner- 
ship exists  not  dissolved,  and  does 
not  require  a  strict  common-law 
release,  but  is  satisfied  by  any  in- 
strument which  exonerates  the 
compounding  debtor  alone  from 
liability.  Marx  v.  Jones,  8  N.  Y. 
Civ.  Proc.  49. 

Release  of  surviving  solvent 
partner  possessed  of  partnership 
property  held  to  release  the  repre- 
sentative of  the  deceased  partner 
from  liability  by  reason  of  the 
partnership.  Murray  v.  Fox,  39 
Hun  (N.  Y.),  108. 

On  the  other  hand  it  has  been 
held  that  the  discharge  of  the  es- 
tate of  the  deceased  partner  neither 
affects  the  liability  of  the  survivor 
nor  changes  the  character  of  the 
debt  as  a  partnership  liability. 
Espy  v.  Comer,  76  Ala.  501. 

An  indenture  releasing  and  dis- 
charging an  outgoing  partner  from 
all  sums  in  which  he  is  individually 
indebted  to  the  partnership  con- 
strued in  Lathrop  v.  Page,  129 
Mass.  19. 

A  parol  agreement  to  release  one 
partner  does  not  operate  to  dis- 
charge a  debt  as  against  the  other. 
To  have  that  effect  it  must  be 
under  seal.  Evans  v.  Carey,  29 
Ala.  99;  ShotweUr.   Miller,  Coxe, 

5 


181 ;  Walker  v.  McCulloch,  4  Mo. 
421 ;  Shaw  v.  Pratt,  22  Pick.  305 ; 
Harrison  v.  Clare,  2  John.  449; 
Rowley  v.  Stoddard,  7  id.  207; 
Catskill  Bank  v.  Messenger,  9  Cow. 
37;  De  Zeng  v.  Bailey,  9  Wend. 
336 ;  Lunt  v.  Stevens,  24  Me.  534. 

A  partner  cannot  avail  himself 
of  a  promise  by  a  creditor  of  his 
firm  to  release  him  from  his  liabil- 
ity if  he  has  paid  the  creditor 
nothing,  and  has  not  parted  with 
any  security,  or  acted  upon  the 
faith  of  the  promise.  Fagg  v.  Ham- 
bel,  21  Iowa,  140. 

A  creditor  who  has  accepted  his 
proportion  of  an  assignment  made 
by  a  firm,  and  given  the  firm  a  re- 
lease, has  no  right  of  action  against 
a  former  partner  of  the  firm  who 
retired  before  the  assignment  was 
made,  and  received  from  the  firm 
a  bond  of  indemnity  against  all 
debts.  Bank  of  Wilmington  v. 
Almond,  1  Whart.  169. 

Where  a  firm  debt  is  contracted 
in  Pennsylvania,  and  judgment 
therefor  is  recovered  in  that  state 
against  one  partner  alone,  and 
afterwards  a  release  is  executed  to 
the  other  partner  in  another  state, 
the  effect  of  the  release  upon  the 
judgment  is  to  be  determined  by 
the  law  of  Pennsylvania.  Green- 
wald  v.  Raster,  85  Pa.  St.  45. 

(I)  See  the  last  note ;  and  as  to 
joint  and  several  obligations,  Co. 
Litt.  232,  a;  Lacy  v.  Kinaston,  1 
Ld.  Raymond,  690;  Kiffinr.  Evans, 
4  Mod.  379. 
r,0 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


237 


cided  on  several  occasions  that  a  covenant  not  to  sue  does 
not  operate  as  a  release  of  a  debt  owing  to  or  by  other  per- 
sons besides  those  who  are  parties  to  the  covenant,  (m) 

Releases  in  form  held  to  be  covenants  not  to  sue. —  If 
a  release  is  so  drawn  as  to  show  that  it  was  intended  to 
inure  only  for  the  benefit  of  the  releasee  personally,  and 
not  to  avail  even  him  in  an  action  by  the  releasor  against 
the  releasee,  jointly  with  other  people,  then  persons  jointly 
liable  with  him  in  respect  of  the  debt  released  will  not  be 
discharged  therefrom.  In  such  a  case  the  deed  will  itself 
show  that  it  was  not  in  fact  intended  to  operate  as  a  re- 
lease.1 


(m)  Clayton  v.  Kyuaston,  2  Salk.     signed  all  his  property  to  the  in- 


573 ;  Lacy  v.  Kynaston,  1  Ld.  Ray- 
mond, 6S8,  and  2  Salk.  575;  Hut- 
ton  v.  Eyre,  6  Taunt.  289 ;  Dean  v. 
Newhall,  8  T.  R.  168;  Walmesley 
v.  Cooper,  11  A.  &  E.  216.  And 
see  Price  v.  Barker,  4  E.  &  B.  760. 

lSee  Greenwald  v.  Kaster,  85 
Pa.  St.  45;  Parmelee  v.  Lawrence, 
44  111.  (Callaghan  &  Co.'s  ed.)  405 
and  note;  Seymour  v.  Butler,  8 
Iowa,  304;  Kirby  v.  Taylor,  6 
John.  Ch.  242;  Clagett  v.  Salmon, 
5  Gill  &  John.  351;  Lysaght  v. 
Phillips,  5  Duer,  116;  Wiggin  v. 
Tudor,  23  Pick.  444 ;  R.  M.  Charlt. 
267;  Gardner  v.  Baker,  25  Iowa, 
343 ;  Bank  of  Chenango  v.  Osgood, 
4  Wend.  607 ;  Hosack  v.  Rogers,  8 
Paige,  229;  Couch  v.  Mitts,  21 
Wend.  424;  Chandler  V.  Herrick, 
19  John.  129;  Shed  v.  Pierce,  17 
Mass.  623;  Goodnow  v.  Smith,  18 
Pick.  416 ;  Mason  v.  Jonett,  2  Dana, 
107;  McClellanu.  Cumberland  Bk. 
24  Me.  566. 

The  payee  of  a  bill  of  exchange, 
drawn  by  a  firm  of  which  he  was 
a  member,  indorsed  the  same  to 
his  creditor  in  trust  to  pay  certain 
other  creditors.    He  afterwards  as- 


dorsee  for  the  benefit  of  all  his 
creditors,  with  a  stipulation  for  a 
release  from  them.  The  assignee, 
in  his  private  capacity,  executed 
such  release  to  the  debtor.  Held, 
that  this  did  not  i-elease  his  claim 
upon  the  other  members  of  the 
partnership  as  indorsee  of  the  bill. 
Hazelhurst  v.  Pope,  2  Stew.  &  P. 
259. 

The  plaintiff  and  defendant  were 
partners,  and  the  defendant,  hav- 
ing received  money  on  the  part- 
nership account,  mingled  it  with 
money  held  by  him  and  A.  in  trust, 
and  allowed  it  to  pass  into  A.'s 
hands.  The  plaintiff  afterwards, 
having  been  wrongfully  kept  in 
ignorance  by  the  defendant  of  the 
receipt  and  disposition  of  the 
money,  released  A.  Held,  that  the 
defendant  was  accountable  to 
plaintiff  for  the  money  so  received, 
notwithstanding  the  release  to  A. 
Mumford  v.  Murray,  6  Johns.  Ch. 
452. 

Where  a  partnership  closed  up 
its  business,  and  all  the  goods,  ef- 
fects and  credits  were  left  with  P., 
one  of  the  partners,  for  the  pur- 


571 


*238  EIGHTS   AND   OBLIGATIONS.  [BOOK    II. 

In  Solly  v.  Forles,  (n)  the  defendants  Forbes  and  Eller- 
man  were  partners,  and  were  indebted  to  the  plaintiffs, 
and  had  stopped  payment.  In  consideration  of  a  sum  paid 
by  Ellerman,  the  plaintiffs  released  him  from  all  further 
demands,  but  it  was  declared  in  the  release  (to  which,  how- 
ever, Forbes  was  not  a  party)  that  nothing  therein  con- 
tained should  affect  the  plaintiffs'  rights  against  Forbes, 
either  separately  or  as  partner  with  Ellerman,  or  against 
the  joint  estate  of  the  two;  and  that  it  should  be  lawful  for 
the  plaintiffs  to  sue  Ellerman,  either  jointly  with 
[*23S]  Forbes,  or  separately,  for  the  purpose  of  obtaining 
satisfaction  of  their  debt,,  either  out  of  the  joint  es- 
tate of  the  two  or  from  Forbes.  In  an  action  brought  by. 
the  plaintiff  against  Forbes  and  Ellerman  to  recover  the 
debt  owing  by  them  it  was  held  that  this  deed  was  no  bar 
to  the  action. 

Again,  in  Hartley  v.  llanton,  (o)  where  a  bill  was  drawn 
by  a  firm  on,  and  was  accepted  by,  one  partner,  it  was  held 
that  a  release  of  the  drawers  did  not  discharge  the  acceptor, 

pose  of  paying  off  the  debts,  and  paid  by  one  of  several  partners, 

this  partner  entered  into  an  agree-  upon  a  compromise  made  by  him 

rnent  with  some  of  the  creditors  for  his  release  from  a  debt  owing 

that  they  should  take  P.'s  notes,  by  the  firm  under  the  New  York 

indorsed  by  R.,   who  was  not  a  act  of  1838,  authorizing  an  individ- 

member    of    the    firm,    for    forty  ual  member  of  a  partnership  to 

cents  on  the  dollar  of  their  indebt-  compromise  his  individual  liability 

edness,  and  the  creditors  thereupon  in  case  of  a  dissolution,  was  taken 

released  to  P.  all  right  to  resort  to  out    of    the   copartnership    funds 

any  of  the  goods  and  effects,  and  which  he  had  in  his  hands,  will 

the  goods  were  mortgaged  to  R.  to  not  make  such    release   inure  to 

secure  his  indorsement,  and  a  cov-  the  benefit  of  the  other  members 

enant  was  entered  into  by  the  cred-  of  the  firm,  or  deprive  the  creditor 

itors    not  to    sue    P.   for    twenty  of  the  protection  of  the  statute, 

years,  and  P.  and  R.  afterwards  Stitt  v.  Cass,  4  Barb.  92. 
disposed  of  the  goods,  held,  that        (n)  2  Brod.  &  Bing.  38.    See,  too, 

the  other  partners  were  liable  to  Price   v.  Barker,  4  E.  &   B.  760 

the  creditors  to  the  amount  of  the  Thompson  v.  Lack,  3  C.  B.  540 

partnership  indebtedness  to  them,  Willis  v.  De  Castro,  4  C.  B.  N.  S.  216 

less  the  notes  for  forty  per  cent.  Bateson  v.  Gosling,  L.  R.  7  C.  P.  9. 
Roberts  v.  Strang,  38  Ala.  566.  (o)  5  Q.  B.  247. 

The  fact  that  the  consideration 

572 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *238 

the  object  of  the  release  being  to  discharge  the  joint  liabil- 
ity of  the  firm,  but  not  to  affect  the  several  liability  of  the 
accepting  partner. 

Recitals  of  releases. —  In  construing  releases  particular 
attention  must  be  paid  to  the  recitals;  for,  however  gen- 
eral the  operative  words  of  the  deeds  may  be,  they  will  be 
confined  so  as  to  not  affect  more  than  the  parties  appear 
from  the  deed  itself  to  have  contemplated,  (p) 

Removing  seal. —  If  several  persons  are  bound  by  a  bond 
jointly,  or  jointly  and  severally,  and  their  creditor  removes 
the  seal  of  one  of  them  from  the  bond,  all  the  others  are  dis- 
charged ;  but  if  the  obligors  are  only  bound  severally,  then 
the  removal  of  the  seal  of  one  of  them  does  not  affect  the 
liability  of  the  others,  (q) 

Arrest. —  Before  arrest  for  debt  was  abolished  (as  it  now 
is  except  in  a  few  special  cases)  an  arrest  of  a  debtor,  fol- 
lowed by  a  discharge  of  him  by  the  arresting  creditor,  was 
equivalent  to  a  release  b}r  the  creditor  of  his  debt;  whence 
it  followed  that  if  a  creditor  of  a  firm  obtained  judgment 
against  it,  and  arrested  the  partners,  and  then  let  one  of 
them  go,  the  others  were  entitled  to  be  discharged  from  cus- 
tody, (r) l 

Composition  in  bankruptcy. —  If  a  creditor  accepts  a 
composition  in  bankruptcy  in  respect  of  a  joint  debt  he  is 
not  precluded  from  suing  one  of  the  debtors  who  may  be 
separately  liable  to  him  in  respect  of  the  same  debt,  (s) 2 

(p)  See,    for  illustration   of  this  the  ground  that  such  partner  had 

rule,  Lindo  v.  Lindo,  1  Beav.  496 ;  fraudulently  disposed  of  firm  prop- 

Payler  v.   Honiersham,  4  M.  &  S.  erty  with  the  intent  to  defraud  its 

423;  Simons  v.  Johnson,  3  B.  &  Ad.  creditors.     Hanover  Vulcanite  Co. 

175;  Boyes  v.   Bluck,  3  C.  B.  652;  v.  Nathanson,  38  Hun  (N.  Y.),  488. 

Lampon  v.  Corke,  5  B.  &  A.  606.  (s)  Simpson  v.  Henning,  L.  R.  10 

(q)  See  Collins  v.  Prosser,  1  B.  &  Q.  B.  406 ;  Megrath  v.  Gray,  L.  R. 

C.  682.  9  C.  P.  216.     Wilson  v.  Lloyd,  16 

(r)  Ballam  v.  Price,  2  Moo.  235.  Eq.  60,  contra,  must  be  considered 

1  See  Abel  v.  Forgue,  1  Root,  502.  as  overruled  on  this  point.    Cragoe 

An  order  for  the  arrest  of  one  v.  Jones,  L.  R.  8  Ex.  81,  was  a  case 

partner  may  be  granted  in  a  suit  of  a  surety. 

by  a  creditor  against  the  firm,  upon        2  See  Hill  v.  Trainer,  47  Wis.  537. 

573 


*239  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

[*239]       "Receipt  in  full. —  A  receipt  given  to  one  partner 
in  satisfaction  of  all  demands  against  him  will  not 
discharge  his  copartners  unless  that  also  was  intended,  (t) 

3.  Substitution  of  debtors  and  securities. 

A  liability  which  is  originally  joint,  or  joint  and  several, 
may  be  extinguished  by  being  replaced  by  a  liability  of  a 
different  nature;  and  this  may  happen  in  one  of  two  ways, 
viz.,  either  by  an  agreement  to  that  effect  come  to  between 
the  parties  liable  and  the  person  to  whom  the}7  are  liable,  (u) 
or  by  virtue  of  the  doctrine  of  merger,  independently  of  any 
such  agreement. 

(a)  Of  substitution  by  agreement. 

Extinction  of  liability  by  substitution  of  debtors. —  In 

order  that  one  liability  may  be  extinguished  by  being  re- 
placed by  another  by  agreement,  it  is  essential  that  the 
person  in  whom  the  correlative  right  resides  should  be  a 
party  to  the  agreement,  or  should,  at  all  events,  show  by 
some  act  of  his  own  that  he  accedes  to  the  substitution.  If 
A.,  being  indebted  to  B.,  transfers  his  liability  to  C.,and  B. 
does  not  assent  to  the  transfer,  his  rights  are  wholly  un- 
affected; he  will  neither  acquire  any  right  against  C.  nor 
lose  his  former  right  against  A.  As  regards  B.,  the  agree- 
ment between  A.  and  C.  is  res  inter  alios  acta,  and  it  does 
not  in  any  way  benefit  or  prejudice  him.  But  if  B.  assents 
to  the  arrangement  come  to  between  A.  and  C,  and  adopts 
C.  as  his  debtor  instead  of  A.,  then  A.'s  liability  to  B.  is  at 
end,  and  B.  must  look  for  pa}7ment  to  C,  and  to  him 
alone,  (x) l 

(t)  Ex  parte  Good,  5  Ch.  D.  46,  word,    1   Ch.  D.   322,  per  James, 

where  one  partner  was  a  nominal  L.  J. 

partner,  and  not,  therefore,  liable        (x)  See  per  Euller,  J.,  in  Tatlock 

to  indemnify  the  others.  v.  Harris,  3  T.  R.  180. 

(«)  Sometimes    called    novation,        JSee  ante;    Hayes  v.  Knox.  41 

but   nothing  is  really  gained    by  Mich.  529;  Rawson  v.   Taylor,  30 

using  this  word.     See,   as  to  this  Ohio  St.  389 ;  Rice  v.  Wolff,  65  Wis. 

574 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*239 


Agreement  between  partners  does  not  affect  creditors. 

To  apply  this  to  cases  of  partnership,  let  it  be  supposed  that 
a  firm  of  three  members,  A.,  B.  and  C,  is  indebted  to  D. ; 


1;  In  re  Stewart,  62  la.  614;  Lisso 
V.  Navra,  34  La.  Ann.  1111 ;  Laucks 
v.  Martin,  8  Cent.  Rep.  (Pa.)  420, 
and  the  cases  cited  below. 

When  a  partnership  is  dissolved 
by  the  retirement  of  one  of  the 
partners,  and  is  succeeded  in  busi- 
ness by  a  new  partnership,  com- 
posed pertly  of  the  remaining  part- 
ners, the  retiring  partner  is  not 
discharged  from  liability  for  the 
debts  of  the  old  partnership,  in  the 
absence  of  an  agreement,  express 
or  implied,  with  the  creditors;  and 
neither  the  failure  of  a  creditor  to 
demand  payment  of  him,  for  a  pe- 
riod of  time  less  than  that  pre- 
scribed as  a  bar  by  the  statute  of 
limitations,  nor  a  demand  of  pay- 
ment from  the  new  firm,  nor  the 
receipt  of  interest,  or  even  a  par- 
tial payment  of  his  debt  from  the 
new  firm,  nor  all  these  facts  com- 
bined, necessarily  establish  such  an 
agreement ;  though  they  are  proper 
evidence  to  be  submitted  to  the 
jury,  under  appropriate  instruc- 
tions from  the  court,  as  relevant  to 
the  question  whether  such  agree- 
ment in  fact  existed.  Hall  v.  Jones, 
56  Ala.  493.  See,  also,  Knox  v. 
Hayes,  2  N.  W.  Rep.  (N.  S.)  670. 

"Where  one  member  of  a  firm,  by 
way  of  renewal,  gives  his  individ- 
ual obligation  and  takes  up  the 
firm  notes,  this  does  not  extinguish 
the  firm  debts  evidenced  by  such 
notes,  such  not  being  the  intention 
of  the  parties.  Loveridge  v.  Larned, 
7  Fed.  Rep.  294. 

As  to  the  renewal  of  partnership 
notes   with    corporate    paper,   see 


McLellan  v.  Detroit  File  Works,  56 
Mich.  579. 

In  an  action  against  the  retiring 
partner  by  a  creditor  of  the  old  co- 
partnership, the  onus  is  on  the 
defendant  to  prove  his  discharge 
either  by  express  agreement  or  by 
facts  from  which  an  agreement  will 
be  implied.  Hall  v.  Jones,  56  Ala. 
493. 

Such  an  agreement  need  not  be 
in  writing.  Hopkins  v.  Carr,  31 
Ind.  260;  Schwindler  v.  Euell,  45 
How.  Pr.  33. 

The  promise  of  one  partner  to 
pay  a  debt  for  which  he  is  already 
bound  is  no  consideration  for  agree- 
ment to  release  the  other  partner. 
Early  v.  Burt,  68  la.  716. 

A.,  of  London,  gave  a  letter  of 
credit  to  B.  &  C,  of  Boston,  who 
thereupon  drew  bills  on  A.,  which 
he  accepted  and  paid.  B.  had  other 
accounts  with  A.,  in  which  C.  had 
no  concern;  C.  had  funds  in  the 
hands  of  B.,  and  requested  B.  to 
remit  to  A.  and  close  the  account 
of  B.  &  C.  B.  afterwards  made  a 
remittance  to  A.,  and  advised  him 
by  letter  of  other  forthcoming  re- 
mittances, and  requested  him  to 
apply  the  sum  which  was  actually 
remitted  to  B.'s  account  generally, 
and  place  the  bills  which  A.  had 
accepted  and  paid  for  B.  &  C.  to 
B.'s  debit.  This  letter  was  shown 
to  C.  before  it  was  forwarded  to  A. 
A.  replied  that  he  had  received  B.'s 
letter  and  "noted  the  contents." 
This  letter  was  also  shown  to  C. 
Before  this  letter  was  received  B. 
failed,    being  largely  indebted  to 


575 


*240 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


that  A.  retires,  and  B.  and  C,  either  alone  or  to- 

[-240]  gether  with  a  *new  partner,  E.,  take  upon  themselves 

the  liabilities  of  the  old  firm.     D.'s  right  to  obtain 


C. ;  and  in  about  seventy  days  after 
the  letter  was  written  A.  suspended 
payment,  not  having,  in  his  corre- 
spondence, again  alluded  to  B.'s  re- 
quest to  debit  with  him  the  bills 
accepted  and  paid  for  B.  &  C. 
About  four  and  a  half  months  after 
said  letter  was  written  A.  for- 
warded his  account  against  B.  & 
C,  and  it  was  put  in  suit.  Held, 
that  A.  had  not,  by  the  terms  of 
his  letter  to  B.,  agreed  to  discharge 
C,  and  look  for  payment  to  B. 
alone ;  that  there  was  no  consider- 
ation for  such  agreement  if  it  had 
been  made;  and  that  A.  was  en- 
titled to  recover  of  B.  &  C.  Wildes 
v.  Fessenden,  4  Mete.  12. 

Defendant  O.,  a  commission  mer- 
chant of  Milwaukee,  received  from 
plaintiff,  a  resident  of  Minnesota, 
a  quantity  of  wheat  and  grass  seed 
on  consignment,  with  directions  to 
hold  in  store,  to  sell  when  ordered, 
and  to  account  for  the  proceeds, 
after  deducting  the  usual  commis- 
sion chax-ges  and  advances  made 
thereon.  Before  any  order  for  a 
sale  was  given  the  defendant  P. 
became  a  partner  in  the  business 
with  O.  Notice  of  this  fact  was 
thereupon  given  to  plaintiff  both 
by  the  firm  and  by  P.  in  person, 
and  plaintiff  was  given  to  under- 
stand and  made  to  believe  by  ac- 
counts rendered  in  the  name  of  the 
firm  from  time  to  time,  and  other- 
wise, by  the  defendants,  that  the 
account  between  him  and  O.,  to- 
gether with  the  property  which 
was  the  subject  of  the  consignment, 
had  been  transferred  to  the  firm, 


and  that  the  latter  was  holding  and 
carrying  it  for  him  under  the  orig- 
inal instructions  given  to  O.  Re- 
lying upon  this  state  of  facts,  be- 
lieved to  be  true,  plaintiff,  from  the 
receipt  of  the  notice  of  the  partner- 
ship, ceased  to  regard  O.  as  his  fac- 
tor in  respect  to  the  consignment, 
and  ever  afterwards  looked  to  and 
treated  the  firm  as  alone  occupying 
that  relation  in  place  of  O.  Trust- 
ing to  the  responsibility  of  the  firm 
alone,  he  withheld  any  order  for  a 
sale  for  some  months,  when,  upon 
giving  it,  he  was  informed  for  the 
first  time  by  P.  that  O.  had  then 
become  insolvent,  and  that  the  firm 
had  then  become  insolvent,  and 
that  the  firm  had  never,  in  fact, 
taken  possession  of  the  wheat  as 
represented,  but  that  it  had  been 
converted  by  O.  to  his  own  use 
prior  to  the  formation  of  the  co- 
partnership. Held,  in  an  action 
against  the  defendants  for  a  con- 
version of  the  wheat  as  copartners, 
that  they  were  both  estopped  from 
denying  the  truth  of  the  facts  thus 
falsely  represented,  upon  the  faith 
of  which  the  plaintiff  had  acted. 
Coleman  v.  O'Neil,  1  N.  W.  Rep. 
846. 

The  fact  that  one  member  of  a 
partnership  which  has  executed  its 
promissory  note  has,  with  the  con- 
sent of  the  payee,  retired  from  the 
firm,  and  has  transferred  his  inter- 
est to  the  other  members,  who 
have  assumed  the  firm  debts,  does 
not  relieve  him  from  liability  on  the 
note.    Clark  v.  Billings,  59  Ind.  508. 

"Where  a  partnership  is  dissolved, 


576 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS. 


*240 


payment  from  A.,  B.  and  C.  is  not  affected  by  the  above 
arrangement,  and  A.  does  not  cease  to  be  liable  to  him  for 
the  debt  in  question,  (y)     But  if,  after  A.'s  retirement,  B. 


and  the  partner  continuing  the 
business  assumes  the  liabilities  of 
the  firm,  and  publishes  notice  that 
he  will  pay  them,  the  other  part- 
ners are  nevertheless  liable  to  a 
creditor  who  did  not  present  his 
claim  in  the  manner  directed  by 
the  notice.  TJmburger  v.  Plume, 
26  Barb.  461. 

A.  and  B.  dissolved  partnership, 
and  by  the  agreement  of  dissolu- 
tion A.  was  to  pay  the  debts  of 
the  concern.  "C,  a  creditor  of  the 
firm,  assented  to  this  arrangement, 
and  promised  to  give  up  the  part- 
nership note  and  take  that  of  A. 
alone,  but  this  was  not  done.  Held, 
that  B.  was  not  released.  Fren- 
tress  v.  Markle,  2  G.  Greene,  553. 

On  the  dissolution  of  a  partner- 
ship it  was  agreed  between  the 
partners  that  one  of  them  should 
assume  and  pay  the  partnership 
debts.  A  creditor,  on  being  after- 
wards informed  of  the  arrange- 
ment, replied  that  he  was  satisfied 
with  it.  Held,  that  such  reply  was 
not  such  evidence  as  would  war- 
rant the  jury  in  finding  that  he 
had  discharged  the  other  partner. 
Chase  v.  Vaughan,  30  Me.  412. 

Where,  after  the  dissolution  of 
a  partnership  between  W.  and  C, 
a  creditor  of  the  firm  stated  an  ac- 
count in  which  they  were  charged 
with  certain  goods  purchased  by 
them,  and  at  the  same  time  stated 
a  separate  account  of  his  dealings 
with  W.,   who  had   assumed  the 


adjustment  of  the  partnership  con- 
cerns, in  which  account  W.  alone 
was  charged  with  another  partner- 
ship debt,  held,  that  C.  was  not 
discharged  from  such  other  part- 
nership debt  thereby:  but  that, 
whether  he  was  discharged  or  not, 
no  one  but  C.  could  avail  himself 
thereof;  and  a  note  given  by  C, 
either  by  way  of  security  or  satis- 
faction of  such  debt,  would  be 
founded  on  a  good  consideration. 
Averill  v.  Lyman,  18  Pick.  346. 

A.  and  B.  were  partners,  and, 
upon  the  dissolution  of  the  firm, 
B.  retained  the  assets  and  agreed 
to  pay  the  debts  of  the  firm.  A. 
alleged  that,  by  an  agreement  be- 
tween him  and  the  agent  of  the 
creditor,  a  judgment  rendered 
against  the  firm  was  to  be  in  his 
control  for  the  purpose  of  collect- 
ing it  from  the  property  of  B. 
Held,  that  A.  had  the  burden  to 
sustain  the  agreement,  and  that, 
under  the  facts  of  the  case,  A.'s 
property  would  be  liable  for  the 
satisfaction  of  the  judgment. 
Aiken  v.  Thompson,  43  Iowa,  506. 

The  plaintiff  was  employed  by 
the  firm  of  A.  &  B.  to  procure  or- 
ders for  certain  machinery,  of 
which  they  were  manufacturers, 
upon  the  agreement  that  he  should 
have  a  certain  commission  on  the 
amount  of  all  orders  procured 
through  him.  The  plaintiff  com- 
menced negotiations  with  D.  for  a 
sale  to  him  of  such  machinery,  and 


(y)  Smith    v.    Jameson,  5  T.    R. 
601;  Rodgers  v.   Maw,  4  Dowl.  & 
L.  66 ;  Dickenson  v.  Lockyer,  4  Ves. 
Vol.  I  — 37  5 


36;    Cummins  v.    Cummins,  8  Ir. 
Eq.  723. 


77 


*240 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    IT. 


accepts  as  his  sole  debtors  B.  and  C,  or  B.,  C.  and  E.  (if  E. 
enters  the  firm),  then  A.'s  liability  will  have  ceased  and  D. 
must  look  for  payment  to  B.  and  C.  or  to  B.,  C.  and  E.,  as 


while  they  were  pending  A.  and  B. 
dissolved  partnership,  and,  by- 
agreement  between  them,  A.  as- 
sumed (for  his  sole  benefit)  per- 
formance of  all  copartnership 
engagements  theretofore  entered 
into  by  the  firm  and  remaining 
unperformed.  Subsequently  A. 
formed  a  partnership  with  C,  and 
the  firm  of  A.  and  C.  obtained 
from  D.  an  order  for  machinery  in 
consequence  of  the  original  nego- 
tiations of  the  plaintiff  with  him. 
Held,  that  the  plaintiff  was  entitled 
to  his  commissions  on  the  order,  and 
could  maintain  an  action  against 
A.  therefor;  that  the  fact  that  A. 
had  associated  another  person  in 
the  business  with  him  had  no  ef- 
fect on  his  liability,  and  that  he 
was  liable  to  the  same  extent  as  if 
he  had  gone  on  alone  in  the  busi- 
ness. Sinclair  v.  Galland,  8  Daly, 
508. 

Under  statutes  of  1865,  chapter 
IIS,  a  creditor's  proof  of  his  claim 
and  acceptance  of  a  dividend  under 
an  order  distributing  among  the 
joint  and  several  creditors  alike  the 
estate  in  insolvency  of  a  partner, 
who,  on  the  dissolution,  had  agreed 
to  pay  the  partnership's  outstand- 
ing debts,  bars  any  right  of  action 
on  the  debt  against  the  other  part- 
ner, although,  after  the  dissolution, 
he  has  changed  his  domicile  to  the 
creditor's  state.  Bucklin  v.  Buck- 
lin,  97  Mass.  256. 

Where  one  partner  sells  his  share 
in  the  partnership  stock  to  a  stran- 
ger, and  receives  payment  there- 
for, and  ,  the  purchaser  becomes  a 


partner  in  the  concern,  such  pur- 
chase and  payment  will  not  have 
the  effect  to  relieve  the  share  of 
the  stock  of  the  remaining  partner 
from  liability  for  the  debts  of  the 
old  firm.  Nixdorf  v.  Smith,  16 
Pet.  132. 

A.  and  B.,  as  copartners,  gave  a 
note  to  C,  and  afterwards  the 
copartnership  was  dissolved,  B. 
agreeing  to  pay  all  the  debts,  and 
B.  and  C.  formed  a  copartnership. 
Held,  that  this  did  not  operate  as 
an  extinguishment  of  the  note, 
unless  it  was  so  expressly  agreed 
between  B.  and  C.  at  the  time 
their  copartnership  was  formed, 
and  although  it  was  alleged  that 
this  note  was  to  form  a  part  of  C.'s 
stock  in  the  firm.  Mitchell  v.  Dob- 
son,  7  Ired.  Eq.  34. 

Where  the  individual  debts  of 
one  partner  are  assumed  by  the 
firm  (being  insolvent),  proof  beyond 
controversy  will  be  required  that 
the  transaction  was  honest,  for  a 
valuable  consideration,  and  for 
the  benefit  of  the  partnership. 
Even  then  the  power  is  doubtful. 
Keith  v.  Fink,  47  111.  272. 

A  judgment  was  confessed  by 
D.,  in  favor  of  a  firm  consisting  of 
A.,  B.  and  C,  to  secui-e  future  ad- 
vances. Three  years  afterwards  C. 
withdrew  from  the  firm,  A.  and  B. 
purchasing  his  interest.  The  new 
firm  continued  to  make  advances, 
charging  them  and  giving  credit 
for  payments,  etc.,  as  before,  no 
change  being  made  in  the  books. 
The  judgment  was  entered  up  by 
A.  and  B.,  and  was  the  first  lien  on 


578 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *240 

the  case  may  be.  "When,  therefore,  a  partner  has  retired, 
and  a  creditor  of  the  firm  continues  to  deal  with  the  con- 
tinuing partners  and  such  other  persons,  if  any,  as  may 
have  become  associated  with  them  in  partnership,  it  is  of 
great  importance  to  ascertain  whether  the  creditor  has  or 
not  accepted  the  new  firm  as  his  debtors  in  lieu  of  the  old 
firm.  If  he  has,  the  retired  partner's  liability  will  have 
ceased,  whilst  if  he  has  not,  it  will  still  continue. 

Liability  not  got  rid  of  by  transferring  share. — Nothing 
used  to  be  more  common  than  for  promoters  of  companies 
to  put  forward  a  prospectus  in  which  it  was  said  that  all 
liability  on  the  part  of  a  shareholder  would  cease  on  a 
transfer  of  his  share ;  but  the  hope  thus  held  out  was  as 
false  and  delusive  as  that  intended  to  be  raised  by  the  as- 
sertion that  the  liability  of  the  shareholders  would  be  lim- 
ited to  the  amount  of  their  shares,  (z)  It  cannot  be  too 
often  repeated  that,  merely  by  retiring,  a  partner  or  a 
shareholder  gets  rid  of  no  liability  as  to  past  transactions, 
unless  there  is  some  statutory  enactment  applicable  to  his 
case;  and  the  same  observation  applies  to  a  total  dissolution. 
To  use  the  words  of  Mr.  Justice  Heath,  "  when  a  partner- 
ship is  dissolved,  it  is  not  dissolved  with  regard  to  things 
past,  but  only  with  regard  to  things  future.     With  regard 

D.'s  land.  Held,  that  the  judgment  should  not  be    excluded    on    the 

secured  the  advances  made  by  the  ground    that    the    plaintiff    must 

old  and  the  new    firm.     Shenk's  prove  an  acknowledgment  of  in- 

Appeal,  33  Pa.  St.  371.  debtedness  on  the  part  of  the  de- 

In  an  action  by  a  surviving  part-  fendant ;  and  that  it  was  competent 

ner.  where    the    declaration  con-  for  the  jury  to  find  from  the  facts 

tained  the  usual  common  counts,  proved  whether  there  was  an  as- 

in  the  form  prescribed  by  the  act  signment  or    transfer  of  the    ac- 

of  1856,  chapter  112,  and  a  special  counts  from  the  old  firm  to  the 

count  on  an  agreement,  the  evi-  new,  and  whether  the  defendant 

dence    consisted    of  accounts   be-  assented  to  it,  and  promised,  ex- 

tween    the    original    firm  of    the  pressly  or  -impliedly,   to  pay  the 

plaintiff  and  its  successors,  acting  balance  to  the  plaintiff.     Stewart 

as  agents  of  the  defendant,  and  the  v.  Rogers,  19  Md.  98. 

defendant,  and  the  written  agree-  (z)  See    Blundell    v.    Winsor,    8. 

ment.     Held,  that    the     accounts  Sim.  613. 

579 


*2il  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

to  things  past  the  partnership  continues,  and  always  must 
continue."  (a) 

The  cases  which  bear  upon  the  question  of  discharge  by 

virtue  of  a  substitution  by  a  creditor  of  one  debtor 

[*241]  for  another  *will  be  found,  notwithstandiag  some 

conflict  between  them,  to  be  all  professedly  based 

on  the  foregoing  principles  and  on  a  few  simple  rules,  the 

most  important  of  which  are  as  follows: 

Creditors  not  presumed  to  discharge  outgoing  part- 
ners.—  1.  There  is  no  d  priori  presumption  to  the  effect 
that  the  creditors  of  a  firm  do,  on  the  retirement  of  a  part- 
ner, enter  into  any  agreement  to  discharge  him  from  lia- 
bility, (b) 

Creditor  may  agree  to  look  only  to  continuing  part- 
ners.—  2.  An  agreement  by  a  creditor  of  several  persons, 
liable  to  him  jointly,  to  discharge  one  or  more  of  them  and 
look  only  to  the  others,  is  not  necessarily  invalid  for  want 
of  consideration,  (c) 

Effect  of  doctrine  that  a  release  of  one  partner  is  a  re- 
lease of  all. —  3.  Except  under  special  circumstances,  a 
creditor  who  releases  one  partner  discharges  all.  (d)  Con- 
sequently, if  a  creditor  discharges  a  retired  partner  and  ac- 
quires no  fresh  right  to  obtain  payment  from  the  others, 
either  alone  or  with  a  new  partner,  the  creditor  will  be  alto- 
gether remediless.  One  test,  therefore,  by  which  to  deter- 
mine whether  a  retired  partner  has  been  discharged  is  to  see 
whether  the  creditor  has  obtained  a  new  right  to  demand 
payment;  for  if  he  has  not,  no  discharge  can  possibly  be 
made  out  b}^  any  evidence  which  fails  to  establish  an  ex- 
tinguishment of  the  creditor's  demand  altogether. 

(a)  Wood  v.   Braddick,  1  Taunt.  Roebuck,  7  Taunt.  157 ;  Graham  v. 

104.     Therefore,  partners  continue  Whichelo,  1  Cr.  &  M.  188. 

liable  on  the  covenants  entered  into  (b)  Such  an  agreement  must  be 

by  them  in  a  lease  of  the  partner-  proved.     See  Benson  v.  Hadfield,  4 

ship  premises,  although  the  firm  Ha.  37. 

may  have  been  dissolved  since  the  (c)  Lyth  v.  Ault,  7  Ex.  669. 

lease  was  granted.     See  Hoby  v.  (d)  Ante,  p.  237. 

580 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *242 

Classification  of  cases. —  It  is  proposed  now  to  examine 
the  cases  relating  to  the  liability  of  retired  partners  for 
debts  incurred  before  their  retirement.  They  may  be  con- 
veniently classified  thus: 

A.  Cases  in  which  a  retired  partner  has  not  been  discharged; 

(a)  No  new  partner  having  been  introduced  into  the  firm. 
(i>)  Although  a  new  partner  has  been  introduced  into  the  firm. 

B.  Cases  in  which  a  retired  partner  has  been  discharged. 

After  these  cases  have  been  examined,  the  analogous  cases 
relating  to  the  discharge  of  the  estate  of  a  deceased  partner 
will  be  noticed. 

*Class  A  a. —  Cases  in  which  a  retired  partner  [*242] 

HAS  NOT  BEEN  DISCHARGED,  NO    NEW  PARTNER  HAV- 
ING BEEN  INTRODUCED  INTO  THE  FIRM. 

Promise  to  look  only   to  continuing  partners. —  The 

strongest  cases  of  this  class  are  Lodge  v.  Dicas  (e)  and  David 
v.  Ellice.  (/)  In  each  of  these  a  partnership  had  been  dis- 
solved, one  member  retiring  and  the  other  continuing  the 
business  and  agreeing  to  pay  the  debts  of  the  old  firm.  In 
each  case  the  plaintiff  knew  of  the  arrangement,  and  his 
debt  was  transferred  with  his  consent  to  the  books  of  the 
new  firm.  In  each  case,  moreover,  there  was  strong  evi- 
dence to  show  that  the  plaintiff  had  agreed  to  discharge  the 
retired  member,  and  to  look  only  to  the  others.  But  in 
each  it  was  held  that  the  retired  partner  continued  liable, 
and  that  the  plaintiff  had  done  nothing  to  discharge  him; 
and  the  fact  that  no  person  had  become  liable  to  the  plaint- 
iff who  was  not  so  originally  was  relied  upon  by  the  court 
as  showing  that  there  was  no  consideration  for  the  alleged 
discharge,  (g) 

Observations  on  these  cases.— These  two  cases  have 
been  much  criticised,  (A)  and  they  certainly  went  too  far; 

(e)  3  B.  &  A.  611.  (g)  See,  too,  Thomas  v.  Shillibeer, 

(/)  5  B.  &  C.  196,  and  1C.&P.     1  M.  &  W.  124. 
369.  (h)  See  5  B.  &  Ad.  933 ;  2  Cr.  &  M. 

623;  2  M.  &  W.  493. 
581 


#243  EIGHTS    AND    OBLIGATIONS.  [BOOK   II. 

for  the  proposition  that  a  creditor  of  a  firm  cannot,  for 
want  of  consideration,  abandon  his  right  against  a  retiring 
partner  and  retain  it  against  the  others,  unless  they  give 
some  fresh  security,  has  been  shown  to  be  erroneous  and  is 
now  exploded ;  0")  and  there  can  be  little  doubt  that  if  similar 
cases  were  to  arise  again,  and  the  jury  found  for  the  defend- 
ant, the  verdict  would  not  be  disturbed. 

This  appears  from  Thompson  v.  Percival.  (k)  In  that  case 
the  defendants,  Charles  Percival  and  James  Percival,  had  as 
partners  become  indebted  to  the  plaintiff.  The  partnership 
was  dissolved,  and  it  was  agreed  that  the  business  should  be 
carried  on  by  James,  and  that  he  should  receive  and  pay  all 
debts,  and  assets  sufficient  to  pay  debts  of  the  firm  were  left 

in  his  hands.  The  plaintiff,  on  applying  to  James 
[*243]  for  pay*ment,  was  told  that  he  must  look  to  him, 

James,  alone,  and  the  plaintiff  accordingly  drew  a 
bill  on  James,  and  the  bill  was  accepted  by  him.  The  bill 
being  afterwards  dishonored,  the  plaintiff  sued  both  James 
and  Charles  for  the  original  debt  and  obtained  a  verdict 
for  the  full  amount ;  but  the  defendants  had  leave  to  move 
for  a  nonsuit  if  the  court  should  be  of  opinion  that  Charles 
had  been  discharged.  The  court,  without  deciding  that 
point,  held  that  the  question  ought  to  have  been  left  to  the 
jury,  and  a  new  trial  was  therefore  directed.  The  court 
held  that  the  facts  proved  raised  a  question  for  the  jury 
whether  it  wTas  agreed  between  the  plaintiff  and  James 
that  the  former  should. accept  the  latter  as  his  sole  debtor, 
and  should  take  the  bill  of  exchange  accepted  by  him  alone 
by  way  of  satisfaction  for  the  debt  due  from  both.  If  it 
was  so  agreed  the  court  thought  that  the  agreement  and 
receipt  of  the  bill  would  be  a  good  answer  on  the  part  of 
Charles  by  way  of  accord  and  satisfaction.  (I) 

(<)  Ante,  p.  241,  note  (c).  122,  a  retiring  partner  was  held 

(k)  5  B.  &  Ad.  925.  discharged  on  the  ground  here  re- 

(Z)  In    Evans    v.   Drummond,   4    ferred  to.     See  post,  p.  247. 
Esp.  89,  and  Reed  v.  White,  5  id. 

582 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBEKS.  *244 

Effect  of  the  above  cases. —  It  is  not  unusual  to  represent 
Lodge  v.  Dicas  and  David  v.  Ellice  as  altogether  overruled 
by  Thompson  v.  Percival  and  other  cases.  This,  however, 
is  not  quite  correct.  The  three  cases  together  establish 
(J)  that  a  creditor  who  treats  the  continuing  partners  as 
his  debtors  does  not  necessarily  abandon  his  right  to  resort 
to  a  retired  partner  for  payment ;  (2)  that  whether  he  does 
or  does  not  is  a  mixed  question  of  law  and  fact,  which  ought 
to  be  submitted  to  a  jury ; 1  and  (3)  that  their  verdict  will 
not  be  disturbed  by  the  court  upon  the  grounds  acted  on  in 
Lodge  v.  Dicas  and  David  v.  Ellice. 

Treating  continuing  partners  as  debtors. —  That  a  cred- 
itor who  treats  the  continuing  partners  as  his  debtors  does 
not  without  more  discharge  a  retired  partner  is  shown  by 
other  cases,  and  especially  by  those  in  which  the  continu- 
ing partners  have  paid  interest  on  the  old  debt  at  a  rate,  or 
in  a  manner,  differently  from  that  previously  adopted.2 

An  old  case  on  this  head,  and  one  often  referred  to,  is 
Heath  v.  Percival,  (m)  in  which  two  partners  indebted  to  the 
plaintiff  on  a  bond  dissolved  partnership.  One  of 
them  continued  to  *carry  on  the  business,  and  took  [*244] 
upon  himself  the  partnership  debts,  and  public  notice 
was  sriven  that  the  creditors  of  the  firm  were  either  to  come 
in  and  be  paid  their  debts  or  to  look  for  payment  to  the 
continuing  partner  only.  The  plaintiff  came  in,  but  instead 
of  being  paid  off  he  kept  the  bond,  receiving,  interest  at  61. 
instead  of  51.  per  cent.  It  was  held  that  he  did  not  thereby 
discharge  the  retired  partner  from  his  liability  to  pay  the 
bond  with  interest  at  51.  per  cent. 

Taking  a  new  security  from  them. —  Moreover,  if  the 
continuing  partners  give  a  new  security  for  the  old  debt, 
this  will  not  operate  to  discharge  the  retired  partner,  unless 
the  creditor  intended  that  such  should  be  the  case,  or  unless 
the  new  security  is  of  such  a  nature  as  to  merge  the  original 

*See  Knox  v.   Hayes,  2  N.  W.     Hawk  v.  Johnston,  5  Cent.   Rep. 
Rep.  (N.  S.)  670;  also  infra,  note.     468;  S.  C.  6  Atl.  Rep.  725. 
2  See  Hall  v.  Jones,  56  Ala.  493 ;        (m)  1  P.  Wins.  682,  and  1  Str.  403. 

583 


•244 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


debt.1     In  Bedford  v.  Deahin,  (n)  three  partners  were  in- 
debted to  the  plaintiff  on  bills  of  exchange.     They  dissolved 


1 A  promise  by  vendor  of  goods 
to  a  firm  to  release  the  retiring 
partner  from  further  liability  and 
to  look  to  the  other  partner  alone 
for  payment  must,  in  order  to  be 
binding,  be  founded  on  some  new 
consideration ;  and  where  it  was 
made  after  the  dissolution,  and  not 
as  an  inducement  to  or  in  consider- 
ation of  it,  and  no  new  partner  is 
introduced  into  the  firm  or  as- 
sumes liability  for  the  debt,  and 
no  additional  or  different  security 
therefor  is  given,  and  the  evidence 
of  the  debt  is  not  taken  up  and  new 
paper  given,  and  no  change  is  made 
in  the  firm,  terms  or  time  of  the 
debt,  and  no  other  fact  appears 
than  the  dissolution  and  agreement 
between  the  partners,  the  promise 
is  a  mere  nudum  pactum.  Eagle 
Mfg.  Co.  v.  Jennings,  29  Kan.  657 ; 
S.  C.  44  Am.  Rep.  668.  See,  also, 
Walstrom  v.  Hopkins,  103  Pa.  St. 
118 ;  S.  C.  13  Weekly  Not.  Cas.  461 ; 
40  Leg.  Intel.  172 ;  Wood  v.  Franks, 
67  Cal.  32:  Laucks  v.  Martin,  9 
Atl.  Rep.  279;  Bowyerv.  Knapp, 
15  W.  Va.  278 ;  Warren  v.  Farmer, 
100  Ind.  593 ;  Ludington  v.  Bell,  77 
N.  Y.  138 ;  Bays  v.  Conner,  105  Ind. 
415. 

A  partner  who  receives  an  as- 
signment of  firm  assets  and  enters 
into  an  agreement  with  his  retiring 
partner  to  assume  and  pay  partner- 
ship debts  is  not  liable  upon  a  debt 
from  the  firm  to  a  creditor  without 


evidence  of  an  express  or  implied 
assent  by  him  to  pay  the  same  to 
the  creditor  as  his  private  debt. 
Wild  v.  Dean,  3  Allen,  579;  Fowle 
v.  Torrey,  131  Mass.  289.  See, 
however,  Warren  v.  Farmer,  100 
Ind.  593. 

Where  the  survivors  form  a  new 
firm,  taking  the  assets  of  the  old 
firm  and  assuming  its  liabilities,  a 
specific  agreement  to  accept  the 
new  firm  to  the  exclusion  of  the 
representative  of  the  deceased  part- 
ner must  be  satisfactorily  proven, 
and  there  is  no  presumption  at  law 
favoring  it.  Fogarty  v.  Cullen,  49 
N.  Y.  Super.  Ct.  397. 

Mere  knowledge  and  approval 
of  the  disssolution  of  a  firm  by 
firm  creditor,  continued  dealings 
with  successor,  apparently  ignor- 
ing existence  of  retiring  partner, 
rendition  of  the  accounts  of  the  old 
firm  and  the  new,  making  the 
items  designating  them  as  separate 
liabilities,  will  not  discharge  retir- 
ing partner.  Birkett  v.  McGuire, 
7  U.  C.  App.  53 ;  S.  C.  31 U.  C.  C.  P. 
430;  1  C.  L.  T.  107;  19  Can.  L.  J. 
(N.  S.)  275. 

The  pleadings  and  papers  in  an 
action  of  attachment  against  a  new 
partnership  are  admissible  to  show 
the  intention  to  release  a  member 
of  a  prior  dissolved  partnership. 
Baura  v.  Fryrear,  85  Mo.  151. 

Where  a  defendant  is  sued  as  an 
individual,  recoverv  cannot  be  had 


(n)  2  B.  &  A.  210.  See,  too,  Swire 
v.  Redman,  1  Q.  B.  D.  536,  where 
the  plaintiff  had  not  expressly  re- 
served his  rights  against  the  re- 
tired partner.     See,  also,  Feather- 


stone  v.  Hunt,  1  B.  &  C.  113; 
Spenceley  v.  Greenwood,  1  Fos.  & 
Fin.  297.  Compare  Evans  v.  Drum- 
mond,  4  Esp.  89,  noticed  infra, 
p.  247. 


584 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*244 


partnership  and  arranged  between  themselves  that  one  of 
them  should  pay  the  plaintiff.     The  plaintiff  was  informed 


against  him  as  a  partner ;  and  if  he 
set  up  a  contract  with  plaintiffs 
whereby  they  agreed  for  a  consid- 
eration to  relieve  him  from  liability 
and  look  to  the  firm  for  payment 
of  his  indebtedness  to  them,  it  can- 
not be  replied  in  a  suit  against  him 
individually  that  he  was  a  member 
of  that  partnership.  Champion  v. 
Wilson,  64  Ga.  184. 

An  agreement  between  a  retiring 
partner  and  his  copartners  that  the 
latter  continue  the  business,  assum- 
ing the  old  firm  debts  and  taking 
all  their  assets  to  be  used  in  paying 
such  debts,  constitutes  the  new 
firm  trustee  of  the  assets  for  the 
benefit  of  the  creditors  of  the  old 
firm,  and  the  interest  of  the  new 
firm  and  their  creditors  is  confined 
to  what  remains,  if  anything,  after 
payment  of  those  debts.  Such 
agreement  constitutes  an  express 
trust,  and  the  statute  of  limitations 
does  not  apply.  Bowman  v.  Spald- 
ing, 2  S.  W.  Rep.  911. 

A  note  given  by  one  partner, 
after  dissolution,  for  a  debt  of  the 
firm,  is  not  an  extinguishment  or 
satisfaction  of  the  original  debt,  so 
as  to  discharge  the  other  partner, 
unless  such  was  the  agreement 
when  the  note  was  given ;  and  this 
is  a  fact  for  the  determination  of  a 
jury.  Ellswanger  v.  Coleman,  7 
Mo.  App.  583;  Mason  v.  Wicker- 
.  sham,  4  Watts  &  S.  100 ;  Bernard 
V.  Torrance,  5  Gill  &  John.  383; 
Davis'  Estate  v.  Desauque,  5  Whart. 
530;  Leabo  v.  Goode,  67  Mo.  126; 
Folk  v.  Wilson,  21  Md.  538.  See, 
also,  Tyner  v.  Stoops,  11  Ind.  22; 
Bowyer  v.  Knapp,  15  W.  Va.  278; 
In  re  Parker,  19  Nat.  Bank.  Reg. 


340;  Hill  v.  Marcy,  49  N.  H.  265; 
Townsends  v.  Stevenson,  4  Rich. 
59;  Landolfo  v.  Appleton,  40  N.  Y. 
533.  See,  however,  Harris  v.  Lind- 
say, 4  Wash.  98,  271 ;  Arnold  v. 
Camp.  12  John.  409,  where,  how- 
ever, the  firm  note  was  surren- 
dered. 

The  rule  is  the  same  even  though 
such  note  is  signed  by  a  surety. 
Varnell  v.  Anderson,  14  Miss.  619. 
Where  the  creditor  of  a  firm 
takes  the  notes  of  the  surviving 
partners  for  the  amount  of  his 
claim,  or  a  judgment  against  them 
for  the  same,  he  does  not  release 
the  estate  of  the  deceased  partner, 
unless  it  is  so  agreed  at  the  time. 
Collier  v.  Leach,  29  Pa.  St.  404; 
Titus  v.  Todd,  25  N.  J.  Eq.  458. 

The  onus  of  showing  that  it  is  an 
extinguishment  lies  upon  those 
who  allege  it ;  and  it  is  not  neces- 
sary for  them  to  show  a  special 
contract  to  that  effect,  or  that  the 
joint  note  was  given  up ;  and  even 
where  that  is  the  case,  the  pre- 
sumption may  be  rebutted  by 
countervailing  proof.  Estate  of 
Davis  v.  Desauque,.  supra. 

To  convert  a  partnership  into  a 
partner's  separate  debt  the  inten- 
tion so  to  do  must  clearly  appear. 
There  must  be  a  deliberate  and 
mutual  assent  of  creditor  and 
debtor.  The  creditor  may  take  the 
partner's  separate  liability  without 
necessarily  extinguishing  that  of 
the  firm.  Montross  v.  Byrd,  6  La. 
Ann.  519. 

The  taking  of  a  renewal  note 
from  one  who  had  dormant  part- 
ners when  the  original  was  given, 
after  the  termination  of  the  part- 


585 


>2U 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


of  this  arrangement,  and  took  from  one  of  the  partners  his 
separate  promissory  note,  indorsed  by  a  third  party,  for  the 


nership,  and  without  any  intention 
to  discharge  the  dormant  part- 
ners, does  not  discharge  the  claim 
against  the  copartnership.  Parker 
v.  Canfield,  37  Conn.  250. 

Where  the  new  notes  are  signed 
like  those  first  given,  and  the  cred- 
itor is  ignorant  of  any  change  in 
the  partnership,  no  agreement  to 
discharge  can  be  inferred.  Bernard 
v.  Torrance,  supra. 

"When,  however,  such  is  the 
agreement,  the  taking  of  the  indi- 
vidual note,  draft,  etc.,  of  one  part- 
ner, with  or  without  security,  oper- 
ates as  a  discharge  of  the  original 
debt.  See  the  cases  first  above 
cited ;  also,  Dages  v.  Lee,  20  W. 
Va.  584 ;  Ricker  v.  Adams,  59  Vt. 
154 ;  10  East.  Rep.  102 ;  S.  C.  3  N. 
Eng.  Rep.  823;  Bower  v.  Knapp, 
15  W.  Va.  278;  Field  v.  Fisher,  9 
West.  Rep.  (Ind.)  305;  Bank  v. 
Green,  40  Ohio  St.  431 ;  Luding- 
ton  v.  Bell,  77  N.  Y.  138;  revers- 
ing S.  C.  43  N.  Y.  Super.  Ct.  557 ; 
Rusk  v.  Gray,  83  Ind.  589;  Espy 
V.  Coiner.  80  Ala.  333;  S.  C.  76 
id.  501.  See,  also,  Mair  v.  Cana- 
van,  8  Daly,  272. 

Such  agreement  may  be  implied 
from  the  acts  of  the  parties.  Bank 
v.  Green,  40  Ohio  St.  431. 

Where,  after  the  dissolution  of  a 
firm,  and  with  notice  thereof,  a 
creditor  accepted  the  individual 
drafts  of  one  of  the  partners  for  a 
firm  debt,  and  extended  the  time  of 
payment  without  the  knowledge 
or  consent  of  the  retiring  partner, 
held,  that  the  latter  was  thereby 
released  from  such  debt.  Louder- 
back  v.  Lilly,  75  Ga.  855. 
The   onus  to  show  that  a  new 


note  is  taken  from  a  new  firm  as 
a  substitute  for  and  in  discharge 
of  a  joint  debt  of  the  old  firm  is 
upon  the  joint  debtor  who  claims 
it.  Kirnberly's  Appeal,  5  Cent.  R. 
460;  S.  C.  7  Atl.  Rep.  75. 

Where  a  creditor  of  the  firm  of 
F.  &  S.  had,  after  its  dissolution, 
refused  to  accept  the  paper  of  S. 
and  discharge  F.,  his  receiving  and 
retaining  what  purported  to  be  the 
paper  of  the  late  firm  of  F.  &  S., 
without  knowing  that  it  was 
signed  by  S.  alone  in  the  firm 
name  without  authority,  is  not 
such  an  acceptance  and  discharge, 
when  he  had  not  accepted  any 
paper  as  payment  nor  unduly  de- 
layed enforcing  his  claim.  Adler 
v.  Foster,  39  Mich.  87. 

A  new  promissory  note  given  by 
a  new  firm  upon  taking  up  a  note 
of  the  old  firm,  comprising  mem- 
bers not  in  the  new  firm,  operates 
as  payment  upon  condition  that 
the  note  proves  to  be  productive; 
and  if  the  creditor  makes  an  abso- 
lute sale  and  transfer  of  the  note 
or  of  a  judgment  upon  it,  without 
the  assent  of  the  old  firm,  and  then 
treats  it  as  his  own,  he  must  be 
deemed  to  have  elected  to  take  it 
as  payment,  even  if  he  receive  less 
than  the  amount  clue  upon  it.  Hill 
v.  Marcy,  49  N.  H.  265. 

A.  and  T.  were  partners.  It  was 
claimed  that  the  firm  had  been  virt- 
ually dissolved,  but  there  was  no 
evidence  of  the  cancellation  of  the 
partnership  agreement,  nor  any 
sufficient  evidence  of  public  or  pri- 
vate notice  of  its  dissolution  to  per- 
sons trading  with  T.  T.  gave  to  S. 
his    individual   note,  upon   which 


586 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*24J 


amount  of  the  debt,  but  expressly  reserved  his  right  to  look 
to  all  three  partners  for  payment,  and  the  plaintiff  retained 


this  action  against  A.  was  brought. 
It  was  in  evidence  that  A.  recog- 
nized the  existence  of  a  liability 
upon  him  for  the  debt,  he  having 
repeatedly  promised  to  pay  the 
whole  debt,  and  having,  partly 
with  his  own  and  partly  with 
means  of  the  firm,  paid  nearly  half 
of  it,  and  having  appropriated  to 
his  own  use  a  portion  of  the  pro- 
ceeds of  the  cattle,  which  were  the 
consideration  upon  which  the  note 
was  given.  Held,  that  the  note  was 
given  and  accepted,  not  merely  as 
the  individual  promissory  note  of 
T.,  but  was  meant  as  an  obligation 
for  and  on*  behalf  of  the  firm  for 
the  price  of  the  cattle,  and  that  its 
acceptance  did  not  exonerate  A.  by 
merging  the  firm  liability  in  the 
note  of  the  individual  partner. 
Smith  v.  Turner,  9  Bush,  417. 

Pending  the  dissolution  of  a  part- 
nership a  creditor  received  the 
notes  of  the  several  partners  for 
their  respective  portions  of  a  part- 
nership debt  standing  on  an  open 
account,  agreed  to  release  each 
partner  from  any  other  portion  of 
the  debt  than  that  covered  by  his 
note,  and  accepted  the  notes  as  a 
full  discharge  of  each  partner  from 
the  lesidue  of  the  account.  Held, 
that  the  contract  was  binding  on 
the  creditor,  and  that  he  could  not 
maintain  a  suit  on  the  account 
against  a  partner  who  had  paid  the 
note  so  accepted  for  his  share  of 
the  debt.  Maxwell  v.  Day,  45  Ind. 
509;  Crooker  v.  Crooker,  52  Me. 
267;  Luddington  v.  Bell,  77  N.  Y. 
138;  Bowyer  v.  Knapp,  15  W.  Va. 
278. 

As  between  a  copartnership  and 


a  creditor  thereof,  a  note  given  in 
the  firm  name,  without  authority, 
by  one  partner,  after  dissolution, 
for  a  debt  of  the  firm,  the  parties 
to  the  note  intending  to  bind,  and 
believing  the  note  was  binding  on, 
the  firm,  will  not  extinguish  the 
firm  debt.  Gardner  v.  Conn,  34 
Ohio  St.  187.  See,  also,  Turnbow 
v.  Broach,  12  Bush,  455. 

As  between  the  partners  them- 
selves, such  transaction  will  not 
discharge  the  non-consenting  part- 
ner from  liability  to  make  contri- 
bution to  the  partner  paying  the 
debt.     Gardner  v.  Conn,  supra. 

Where  a  retiring  partner  sur- 
rendered all  the  assets  of  the  firm 
at  its  dissolution  to  the  continuing 
partner,  under  an  agreement  that 
the  latter  should  pay  the  debts  of 
the  firm,  and  notified  the  creditors 
of  the  firm  of  such  dissolution 
and  agreement,  held,  that  he  was 
thereafter  liable  for  the  firm  debts 
only  as  security,  and  that  a  firm 
creditor  who  accepted  from  the 
remaining  partner  his  individual 
notes  for  a  portion  of  his  debt  dis- 
charged the  retiring  partner  from 
further  liability  for  the  debt.  Mair 
v.  Canavan,  8  Daly,  272.  See,  also, 
Thurber  v.  Corbin,  51  Barb.  216; 
Thurber  v.  Jenkins,  36  How.  Pr.  66, 
post. 

Where  a  partnership  liability  for 
a  debt  is  once  fixed,  the  giving  of  a 
note  in  renewal  by  one  partner 
alone,  with  the  same  sureties  as  on 
the  original  debt,  who  sign  such 
renewal  as  sureties  on  the  faith  of 
representations  that  it  is  necessary 
in  the  business  of  the  firm,  and  on 
the  promise  by  him  that  his  copart- 


587 


*244 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


the  bills  already  in  his  possession.     The  notes  when  clue 
were  taken  np  by  other  bills,  and  they  in  their  turn  were 


ner  will  also  sign  as  a  principal, 
does  not,  as  against  such  sureties, 
operate  as  a  payment  of  the  orig- 
inal debt:  and  upon  payment  of 
such  renewal  note  by  the  sureties 
they  may  recover  against  the  part- 
ners although  such  copartner  did 
not  sign  such  renewal  note.  Mc- 
Kee  v.  Hamilton,  32  Ohio  St.  7. 

Prior  and  up  to  September  23, 
1850,  the  firm  of  Evans,  Davis  & 
Lownd  owed  plaintiff  $14,069.38, 
for  money  advanced  to  it,  and  for 
which  he  held  their  notes.  That 
firm  dissolved  that  day,  and  Evans 
and  Davis  formed  a  new  firm  with 
Dodge  under  the  name  of  Davis, 
Evans  &  Dodge.  Plaintiff  gave  up 
the  notes  of  the  old  firm  and  took 
two  new  notes  of  $7,500,  dated 
September  23,  1850,  payable  "on 
demand  after  date,"  one  of  which 
was  signed  by  Evans,  and  the  other 
by  Davis,  of  the  firm  of  Evans, 
Davis  &  Lownd. 

Plaintiff  signed  the  partnership 
agreement  of  Davis,  Evans  & 
Dodge  ;  that  stated  that  the  amount 
of  $15,000,  due  to  the  plaintiff  from 
the  old  firm,  "  is  to  remain  in  the 
new  concern  during  the  continu- 
ance of  the  copartnership,"  he  re- 
ceiving interest  at  the  rate  of 
seven  per  cent,  per  annum.  Un- 
der the  same  date,  Davis,  Evans  & 
Dodge  and  the  plaintiff  signed  a 
paper  stating  they  received  from 
plaintiff  $15,000,  "being  the 
amount  contributed  by  him  as  spe- 
cial partner  to  the  concern  of 
Davis,  Evans  &  Dodge."  Davis, 
Evans  and  plaintiff  signed  another 
paper  of  same  date,  stating  that 
they  had  formed  a  limited  partner- 


ship under  the  name  of  Davis, 
Evans  &  Dodge,  the  nature,  of  its 
business,  the  residence  of  the  part- 
ners, that  plaintiff  is  the  special 
partner,  and  as  such  has  contrib- 
uted $15,000  cash,  and  that  Davis, 
Evans  &  Dodge  were  the  general 
partners.  Enough  was  not  done  to 
create  a  limited  partnership.  The 
new  firm  failed,  and  was  dissolved 
within  a  year,  and  before  this  suit 
was  brought,  owing  some  $30,000 
more  than  it  could  pay.  This  suit 
is  upon  the  $7,500  note  given  by 
Davis  to  plaintiff  when  the  new 
firm  was  formed.  On  that  note, 
and  also  on  the  other  note  for  a 
like  sum  given  by  Evans,  there  is 
indorsed:  "This  note  is  given  as 
security  to  Levi  Brown  (the  plaint- 
iff) for  one-half  of  the  $15,000  ad- 
vanced to  Davis,  Evans  &  Dodge. 
Robert  Davis."  Held:  1.  The 
plaintiff  never  discharged  Davis 
and  Evans  from  liability  for  the 
amount  the  firm  of  Davis,  Evans 
&  Lownd  owed  him,  but  took  the 
note  of  each  for  one-half  that  sum. 
2.  Though  that  sum  was  continued 
in  the  assets  which  represented  it 
as  a  loan  to  the  firm  of  Davis, 
Evans  &  Dodge,  it  was  not  placed, 
as  between  themselves,  at  the  risk 
of  its  business,  nor  lent  on  an 
agreement  to  look  solely  to  the  new 
firm  for  payment.  3.  The  note  in 
suit  became  due  on  demand  of  pay- 
ment made  after  the  new  firm  had 
actually  dissolved,  and  plaintiff 
could  sue  on  the  note  without  first 
having  sued  and  exhausted  his 
remedies  by  action  against  the  new 
firm.  4.  The  evidence  given  is  in- 
sufficient to  establish  an  intent  of 


588 


OH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*244 


several  times  renewed.     Ultimately  the  plaintiff  sued  all 
the  three  partners  on  the  original  bills,  and  he  was  held  en- 


Davis,  Evans  &  Dodge  and  of  the 
plaintiff,  by  an  arrangement  in  re- 
spect to  a  limited  partnership,  to 
defraud  the  public,  or  that  they 
knew  their  acts  were  invalid,  or 
that  they  were  done  with  an  im- 
proper motive.  5.  The  plaintiff  is 
entitled  to  a  judgment  on  the  ver- 
dict. Permitting  such  a  recovery 
will  not  withdraw  from  the  legal  or 
equitable  process  of  the  courts  any 
property  which  should  be  appro- 
priated to  the  creditors  of  the  new 
firm,  though  held  to  be  composed 
of  Davis,  Evans,  Dodge  and  the 
plaintiff,  as  general  partners.  A 
judgment  by  such  creditors  against 
the  four,  and  appropriate  ulterior 
proceedings,  will  reach  all  the  in- 
dividual property  of  each  as  well 
as  all  the  effects  of  the  new  firm. 
Brown  v.  Davis,  6  Duer,  549. 

Where  a  partnership  was  dis- 
solved and  a  new  firm  was  formed, 
consisting  in  part  of  the  same  mem- 
bers, a  creditor  of  the  old  firm  with 
notice  of  the  dissolution,  taking  in 
liquidation  of  his  claim  drafts  of 
the  old  firm  upon  the  new,  ac- 
cepted by  the  latter  and  drawn  by 
a  member  of  both,  cannot,  upon 
failure  of  the  new  firm,  claim  pay- 
ment of  the  members  of  the  old, 
unless  he  can  show  their  assent  to 
the  making  of  the  drafts.  Patter- 
son v.  Camden,  25  Mo.  13. 

"Where  a  creditor  of  the  former 
partnership  drew  on  those  persons 
who  continued  the  social  style  of 
the  late  firm  for  account  of  a  bal- 
ance due  him  by  the  former  part- 
nership, and  his  drafts  were  pro- 
tested for  non-payment,  and  paid 
by    the    drawer    supra  protest,   a 


member  of  the  former  partnership, 
who  is  sued  for  such  balance,  can- 
not maintain  that  there  was  a  no- 
vation of  the  debt ;  the  drafts  are 
to  be  held  as  having  been  drawn 
on  his  agents  by  his  authority. 
Skannel  v.  Taylor,  12  La.  Ann. 
773. 

A.  and  B.,  being  partners,  pur- 
chased goods  of  C.  for  the  partner- 
ship, and  gave  each  his  separate 
note,  with  his  separate  surety,  for 
a  moiety  of  such  goods.  A.  after- 
wards went  out  of  the  concern,  and 
B.  agreed  to  pay  both  notes.  A.'s 
was  therefore  canceled,  and  B. 
gave  a  new  note,  with  the  surety 
who  was  on  his  other  note.  Sub- 
sequently, B.,  failing  to  pay  these 
debts,  received  the  surety  on  his 
note  into  partnership  in  the  busi- 
ness, and  entered  into  articles  of 
agreement  with  him,  by  which  the 
surety  was  to  receive  all  debts  due 
to  B.  and  the  former  partnership, 
and  all  produce  taken  in  discharge 
of  debts ;  and  the  surety  agreed  to 
appropriate  the  same  to  the  pay- 
ment of  the  "debt  originally  con- 
tracted by  A.  and  B.  with"  C. 
Held,  that  this  applied  to  both  the 
original  notes  and  the  note  substi- 
tuted for  A.'s.  Gordon  v.  Joslin,  4 
Hayw.  115. 

A.  drew  a  bill  on  B.,  C.  &  Co., 
which  was  accepted,  and  by  him 
negotiated  to  a  bank.  At  maturity 
the  draft  was  paid  by  a  like  bill 
drawn  on  B.  alone,  the  firm  in  the 
mean  time  having  been  dissolved, 
which  last  bill  A.,  as  indorser,  was 
compelled  to  take  up.  Held,  that 
he  could  not  maintain  an  action 
against  the  firm  to  reimburse  the 


589 


*244 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


titled  so  to  do,  never  having  discharged  any  of  them  either 
intentionally  or  otherwise. 

Liability  same  in  equity  as  at  law. —  Nor  was  there  any 
difference  in  such  cases  as  these  between  the  liability  of  a 
retired  partner  at  law  and  in  equity.  In  Oalcford  v.  Euro- 
pean and  American  Steam  Ship  Company \  (o)  a  partner  re- 
tired, and  the  continuing  partners  indemnified  him  against 
all  claims  that  might  be  made  against  him  as  a  member  of 
the  firm.  Disputes  afterwards  arose  between  the  continu- 
ing partners  and  a  company  respecting  a  contract  entered 

Springer  v. 


amount    thus    paid. 
Shirley,  11  Me.  204. 

"Where  one  of  the  partners  takes 
the  firm  assets  and  agrees  to  pay 
the  firm  debts,  partnership  cred- 
itors may  prove  against  his  estate 
in  bankruptcy  and  share  par  i  passu 
with  the  separate  creditors.  In  re 
Lloyd,  22  Fed.  Rep.  88. 

Creditors  of  a  firm  consisting  of 
three  consented  to  give  them  an 
extension  on  condition  that  one 
partner  should  retire  from  the 
firm.  When  the  dissolution  took 
place  the  sum  of  $1,198  stood  on 
the  partnership  books  to  the  credit 
of  the  retiring  partner,  but  noth- 
ing was  said  at  the  time  as  to  this 
claim.  Held,  that  it  was  not  prov- 
able against  the  estate  of  the  con- 
tinuing partners  on  their  insolv- 
ency. In  re  White,  4  U.  C.  App.  416. 

An  agreement  by  a  creditor  of  a 
firm  to  release  the  retiring  partner 
from  liability  on  a  firm  debt,  and 
look  to  the  continuing  partner  for 
payment,  will  not  be  binding  on  the 
firm  creditor,  where  it  was  pro- 
cured by  a  fraudulent  concealment 
of  facts  which,  if  known,  would 
have  prevented  the  granting  of 
such  release.  Clark  v.  Taylor,  27 
N.  W.  R.  493. 

Liability  of  the  partner  continu- 


ing the  firm  business  on  dissolution 
upon  accommodation  notes  exe- 
cuted to  a  firm  of  which  the  out- 
going partner  was  a  member,  in 
pursuance  of  the  agreement  of  dis- 
solution, determined  in  Morrison's 
Appeal,  93  Pa.  St.  326. 

Contract  by  retiring  partner  to 
pay  or  secure  his  proportion  of  the 
losses  construed,  and  the  considera- 
tion thereof  and  complaint  thereon 
considered.  Lee  v.  Davis,  70  Ind. 
464. 

A.,  B.  and  C.  being  partners,  and 
all  believing  the  firm  to  be  solvent, 
C.  withdraws,  A.  and  B.  paying 
him  a  certain  sum  as  his  capital 
and  continuing  the  business.  A. 
and  B.  borrowed  money  of  a  bank 
on  the  notes  of  the  new  firm,  part 
of  which  was  used  to  pay  C,  and 
then  failed,  owing  the  money  so 
borrowed.  The  old  firm  was  in- 
solvent at  the  time  of  its  dissolu- 
tion, and  C.  contributes  towards 
the  discharge  of  its  liabilities  and 
amount  in  excess  of  the  capital 
drawn  out  by  him.  In  a  suit  in 
equity  by  the  bank  to  charge  the 
old  firm  with  the  money  loaned  to 
the  new  firm,  held,  that  the  old 
firm  was  not  liable.  Pennsylvania 
Bank  v.  Furness,  114  U.  S.  376. 

(o)  1  Hem.  &  M.  182. 


590 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *245 

into  before  the  retirement.  These  disputes  were 
*partly  adjusted.  Those  unadjusted  were  referred  [*245] 
to  arbitration  pursuant  to  a  clause  in  the  contract. 
The  reference  was  afterwards  revoked ;  and  an  action  upon 
the  contract  was  then  brought  against  the  continuing  part- 
ners and  the  retired  partner.  The  retired  partner  sought 
to  have  this  action  restrained  by  injunction,  upon  the  ground 
that  his  retirement  and  indemnit}'"  had  placed  him  in  the 
position  of  a  surety  only  for  the  due  performance  of  the 
contract;  and  that  what  had  taken  place  since  the  retire- 
ment which  was  known  to  the  company  had  discharged 
him.  But  it  was  held  that  his  liability  continued,  and  his 
bill  was  dismissed,  with  costs. 

Position  of  dormant  partners. —  The  principle  of  the 
above  cases  applies  to  dormant  partners  even  more  strongly 
than  to  others;  for  a  creditor  who  has  a  security  of  which 
he  is  unaware  cannot  intentionally  give  up  that  security. 
Therefore,  if  A.  and  B.  are  partners,  and  the  two  become 
indebted  to  a  creditor  who  knows  only  of  A.,  and  then  B., 
the  dormant  partner,  retires,  no  dealings  between  the  cred- 
itor and  A.  will  discharge  B.  from  his  liability  to  be  sued 
when  discovered,  unless  those  dealings  extinguish  the  orig- 
inal debt,  not  only  as  against  B.,  but  also  as  against  A.  (p) 

Class  A  b. —  Cases  in  which  a  retired  partner  has  not 

BEEN  DISCHARGED,  ALTHOUGH  A  NEW  PARTNER  HAS  BEEN 
INTRODUCED  INTO  THE  FIRM. 

Effect  of  introduction  of  new  partner  on  the  liability 
of  a  retired  partner.—  The  introduction  of  a  new  partner 
has  no  effect  on  the  liability  of  a  retired  partner,  unless  the 
liability  of  the  former  is  substituted  by  the  creditor  for 
that  of  the  latter,  which  cannot  be  the  case  unless  the  cred- 
itor can,  as  of  right,  hold  the  new  partner  liable  for  the  old 
debt.  This,  moreover,  he  cannot  do  by  virtue  of  any  agree- 
ment between  the  partners  themselves;  and  even  if  the 

(p)  Robinson  v.  Wilkinson,  3  Price,  538. 

591 


*245 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


new  firm  adopts  the  old  debt  and  pays  interest  on  it,  this 
is  prima  facie  only  in  pursuance  of  some  agreement  be- 
tween the  partners  themselves ;  and  a  creditor  who  does 
no  more  than  allow  the  partners  to  carry  out  that  agree- 
ment does  not  debar  himself  of  his  right  to  look  for  pay- 
ment to  those  originally  indebted  to  him.1 

the  new  firm,  and  instructs  them 
to  sell  the  goods  and  remit  the  pro- 
ceeds, this  fact,  unexplained,  ab- 
solves the  old  firm  from  liability 
for  this  portion  of  the  goods,  but 
not  for  the  residue.  Hall  v.  Jones, 
56  Ala.  493. 

The  practice  of  the  old  firm  "  to 
make  monthly  reports  or  returns 
to  persons  consigning  goods  to 
them  "  does  not  legitimately  tend 
to  show  notice  to  the  plaintiff,  a 
creditor  of  the  old  firm,  of  the 
changes  in  the  partnership;  but 
business  letters  written  to  him  by 
the  new  firm  are  admissible  evi- 
dence for  that  purpose.  Hall  v. 
Jones,  56  Ala.  493. 

A  firm  consisting  of  two  persons 
was  dissolved  and  a  new  firm  or- 
ganized with  the  addition  of  J. 
The  new  firm  gave  a  trust  deed 
of  property  acquired  partly  with 
money  contributed  by  J.,  to  secure 
an  indebtedness  of  both  firms  to  a 
bank,  with  the  understanding  that 
J.'s  interest  should  be  applied  to 
secure  the  indebtedness  of  the  new 
firm.  Held,  that  equity  would  en- 
force this  intention  for  the  benefit 
of  the  creditors  of  the  new  firm. 
Day  v.  Wetherby,  29  "Wis.  363; 
Smith  v.  Peters,  20  How.  Pr.  121. 

Where  a  partnership  was  dis- 
solved and  a  new  firm  was  formed, 
including,  with  one  exception,  the 
members  of  the  former  concern, 
held,  that,  as  between  the  latter 
firm   and  the  retiring  partner,  it 


1  See  ante. 

G.  and  S.  were  partners.  G.  re- 
tired from  the  firm,  and  S.  there- 
upon formed  a  new  copartnership 
with  E.  S.  then  agreed  with  E. 
that  all  the  property  of  the  old  firm 
should  be  transferred  to  the  new, 
and  that  the  new  firm  should  as- 
sume and  pay  all  of  the  debts  of  the 
old  firm.  Held,  that  it  was  a  valid 
agreement  founded  on  a  good  con- 
sideration, and  although  not  in 
writing  was  not  within  the  statute 
of  frauds.  Schindler  v.  Euell,  45 
How.  Pr.  33.  See,  also,  Hopkins 
v.  Carr,  31  Ind.  200. 

To  a  suit  upon  a  promissory  note 
made  to  the  plaintiff  by  the  de- 
fendants, J.,  one  of  them,  severs 
and  pleads  that  soon  after  making 
said  note  they  dissolved  partner- 
ship; that  T.,  the  other  defendant, 
assumed  the  debts  of  the  firm, 
gave  his  note  to  J.  for  the  stock, 
with  the  plaintiff  as  his  security 
for  its  pay  ment,  and  that  the  plaint- 
iff immediately  after  said  dissolu- 
tion became  a  partner  with  T.,  the 
other  defendant,  in  similar  busi- 
ness. On  demurrer,  held,  that 
the  facts  stated  in  the  plea  did  not 
show  a  release  from  liability  on 
the  note,  and  that  the  plea  was  not 
good  in  bar  of  the  action.  Gulick 
v.  Gulick,  16  N.  J.  L.  186. 

If  the  plaintiff,  having  consigned 
goods  for  sale  to  the  old  partner- 
ship, is  notified  that  a  portion  of 
his  goods  has  been  turned  over  to 


592 


CH.  II,  SEC.  III.]  LIABILITY   OF   MEMBERS.  *246 

*A  leading  case  on  this  head  is  Kirwan  v.  Kir-  [*246] 
wan.  (q)  There  three  partners,  C,  M.  and  K,  were 
indebted  to  the  plaintiff.  C.  retired,  and  M.  and  N.  con- 
tinued in  partnership  together  and  agreed  to  discharge  the 
debts  of  the  old  firm.  M.  afterwards  retired,  and  N.  took 
in  a  new  partner.  The  plaintiff's  account  was  transferred 
from  the  books  of  the  old  to  the  books  of  the  new  partner- 
ship, and  interest  was  paid,  and  accounts  were  rendered  to 
him  as  before.  The  plaintiff  was  informed  of  the  dissolu- 
tion, and  had  stated  to  one  of  the  retired  partners  that  he 
was  aware  he  had  no  further  claim  upon  him.  But  it  was 
held  that. the  three  original  partners  remained  liable,  as 
there  was  nothing  to  show  that  the  security  of  the  new  firm 
had  been  substituted  for  that  of  the  old,  and  the  statement 
above  referred  to  could  not  be  regarded  as  an  agreement  to 
discharge  the  retired  partner. 

In  Gough  v.  Davies,  (r)  three  persons  were  partners  as 
bankers,  and  were  indebted  to  the  plaintiff.  One  of  the 
partners  retired;  a  new  partnership  was  formed  between 
the  continuing  partners  and  other  persons;  the  plaintiff's 
debt  was  transferred  to  the  books  of  the  new  firm,  and  he 
assented  to  such  transfer.  Moreover,  the  plaintiff  continued 
to  deposit  money  with  the  new  firm,  and  was  paid  by  it  in- 
terest on  the  old  debt  and  new  deposits,  as  if  they  all 
formed  one  debt.  But  it  was  held  that  there  was  nothing 
in  all  this  to  show  any  agreement  by  the  plaintiff  to  dis- 
charge the  retired  partner,  and  he  was  consequently  held 
liable  for  the  old  debt. 

Blew  v.  Wyatt  (s)  is  another  case  to  the  same  effect.  A 
clerk  lent  money  to  his  employers,  who  were  in  partnership 
as  brewers,  and  took  an  acknowledgment  for  it.  Several 
changes  took  place  in  the  firm,  one  of  the  original  partners 

would  not  be  presumed  that  debts        (g)  2  Cr.  &  M.  617. 
of  the  latter  firm  were  contracted        (r)  4  Price,  200. 
for  payment  of  debts  of  the  former        (s)  5  Car.  &  P.  397. 
one.     Chaffin  v.  Chaffin,  2  Dev.  & 
B.  Eq.  255. 

Vol.  I  — 38  593 


*2-±7  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

retiring  and  other  persons  from  time  to  time  coming  in  and 
going  out.  The  clerk  remained  in  the  employ  of  the  firm 
notwithstanding  these  changes,  and  was  aware  of  them, 
and  was  always  paid  interest  by  the  firm  for  the  time  being. 
He  was  nevertheless  held  entitled  to  sue  the  two  original 
partners  for  the  money  he  had  lent  them. 
Right  to  sue  new  firm  wot  inconsistent  with  right  to 

sue  the  old  firm. —  Whether  in  these  cases  of  Kir- 
[*24Y]  wan  v.  Kirwan,  Gough  v.  *Davies,  and  Blew  v.  Wyatt, 

the  creditor  could  have  sued  the  new  firm  may  per- 
haps be  open  to  doubt,  (t)  If  he  could  not,  it  would  be 
absurd  to  contend  that  the  liability  of  the  new  firm  was 
substituted  for  that  of  the  old;  whilst  if  he  could,  the  evi- 
dence was  not  sufficient  to  show  an  intention  on  his  part 
to  deprive  himself  of  the  security  afforded  by  the  undoubted 
liability  of  the  original  firm  before  any  change  in  it  took 
place.  It  by  no  means  follows  that  a  creditor  who  assents 
to  an  arrangement  by  which  a  new  person  becomes  liable 
to  him  consents  to  abandon  his  hold  on  another  person 
clearly  liable  to  him  already;  and,  unless  a  substitution  of 
liability  can  be  established,  the  old  liability  remains,  (w) 

Class  B. —  Cases   in  which  a  retired   partner  has  been 

DISCHARGED. 

In  all  these  cases  it  will  be  found  that  the  court  or  a  jury 
has  come  to  the  conclusion  that  the  creditor  has  in  fact, 
either  expressly  or  impliedly  from  his  course  of  dealing 
with  the  continuing  partners,  adopted  them  as  his  sole 
debtors,  and  thereby  in  fact  discharged  the  retired  part- 
ner, (a?) 

(t)  See  per  Bolland,  B.,  2  Cr.  &  there  is  nothing  to  prevent  a  firm 

M.  628 ;  Daniel  v.  Cross,  3  Ves.  277 ;  from  stipulating  with  any  creditor 

Fergusson  v.   Fyffe,  8  CI.  &  Fin.  that  he  shall  look  only  to  the  mem- 

121.  bers  of  the  firm  for  the  time  being. 

(u)  See  Harris  v.  Farwell,  15  Beav.  Dig.  30,  ed.  3.     See  Hort's  Case  and 

31.  Grain's  Case,  1  Ch.  D.  307. 

(aj)  Mr.    Pollock  says  truly  that 

594 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *248 

Retired  partner  may  be  discharged  though  no  new  part- 
ner comes  in. —  That  a  retired  partner  may  be  discharged 
by  the  creditor's  adoption  of  the  other  partners  as  his  sole 
debtors,  although  no  new  partner  has  been  introduced  into 
the  firm,  is  clear  from  the  case  of  Thompson  v.  Percival,  (y) 
already  noticed. 

In  Evans  v.  Drummond,  (s)  a  firm  of  two  partners  gave 
a  partnership  bill  for  goods  supplied  them.  One  of  the 
partners  retired,  and  the  bill  when  due  was  not  paid,  but 
was  renewed  by  another  bill  given  by  the  partner  who  con- 
tinued the  business.  The  creditor  took  this  bill  knowing  of 
the  change  in  the  firm.  Lord  Kenyon  held  that  by  so 
doing  the  creditor  had  relied  on  the  sole  security  of 
the  continuing  partner,  and  had  discharged  the  [*248] 
other.  Reed  v.  White  (a)  is  a  similar  case  and  to 
the  same  effect. 

Effect  of  introduction  of  new  partner. —  The  inference 
that  a  retired  partner  has  been  discharged  is  greatly  facili- 
tated by  the  circumstance  that  a  new  partner  has  joined 
the  firm  and  become  liable  to  the  creditor  in  respect  of  the 
debt  in  question,  (b)  But  this  is  not  necessarily  conclusive, 
for  there  may  be  circumstances  showing  that  such  was  not 
the  intention  of  the  parties,  (c)  At  the  same  time,  in  the 
absence  of  any  such  evidence,  the  acceptance  by  the  cred- 
itor of  the  liabilit}'"  of  a  new  partner  will  practically  pre- 
clude him  from  afterwards  having  recourse  to  the  retired 
partner,  (d) 

In  Hart  v.  Alexander,  (e)  the  plaintiff,  an  officer  in  the 

(y)  5  B.  &  Ad.  925 ;  ante,  p.  242.  new  security  when  no  new  partner 

(z)  4  Esp.  89.     Compare  Bedford  comes  in,  see  ante,  p.  244. 

v.  Deakin,  2  B.  &  A.  220,  noticed  (e)  7  C.  &  P.  746,  and  2  M.  &  W. 

ante,  p.  244.  484.     See,   also,  Wilson  v.  Lloyd, 

(a)  5  Esp.  122.  16  Eq.  60 ;  Oakeley  v.   Pasheller,  4 

(p)  See,  as  to  this,  ante,  p.  205  CI.    &    Fin.    207,    noticed    infra, 

et  seq.  p.  251.    Compare  Commercial  Bank 

(c)  See  infra,  p.  254,  and  Keay  v.  Corp.  of  India  and  the  East,  16. 
Fen  wick,  1  C.  P.  D.  745.  W.  R.  958,  and  Ex  parte  Gibson,  4 

(d)  As  to  the  effect  of  taking  a    Ch.  662. 

595 


*249  EIGHTS    AND    OBLIGATIONS.  [BOOK   II. 

East  India  Company's  service,  had  in  1813  opened  an  ac- 
count with  the  bouse  of  Alexander  &  Co.,  of  Calcutta,  which 
failed  in  1832.  The  defendant  retired  from  the  firm  in 
1S22,  when  a  new  partner  was  introduced,  and  since  that 
time  other  changes  had  taken  place,  some  of  the  old  part- 
ners retiring  and  new  ones  coming  in.  The  defendant's 
retirement  was  advertised,  and  there  was  evidence  to  show 
that  the  plaintiff  was  aware  of  the  fact.  The  new  firms 
from  time  to  time  accounted  with  the  plaintiff  and  paid  him 
interest,  sometimes  at  one  rate  and  sometimes  at  another. 
On  the  bankruptcy  of  the  firm  in  1832  the  plaintiff  proved 
the  amount  of  his  debt  against  its  joint  estate.  The  plaint- 
iff afterwards  sued  the  defendant;  and  the  case  was  tried 
before  Lord  Abinger,  who  is  reported  to  have  said  to  the 

jury: 

"  To  ask  you  if  there  was  an  agreement  by  the  plaintiffs  to  discharge 
the  defendant  is  to  put  the  case  upon  a  false  issue  —  the  agreement,  if 
any,  being  an  agreement  raised  by  construction  of  law ;  the  true  ques- 
tion being  whether  the  plaintiff  did  not  go  on  dealing  with  the  new 
firm,  and  making  up  fresh  accounts  with  them,  so  as  to  discharge  the 
defendant.  I  take  the  law  to  be  this :  Where  a  debtor  who  is  a  partner 
in  a  firm  leaves  that  firm,  and  any  person  trading  with  the  firm 
[*249]  has  notice  of  it,  and  he  goes  on  dealing  *with  the  firm  and  mak- 
ing fresh  contracts,  that  discharges  the  retiring  partner,  though 
no  new  partner  comes  in.  So  it  is  if  the  creditor  draws  for  part  of  his 
balance  and  sends  in  more  goods ;  so,  if  the  creditor  strike  a  fresh  bal- 
ance with  the  new  partners  for  a  different  rate  of  interest ;  so,  if  a  new 
partner  comes  in  and  the  creditor  accept  an  account  in  which  the  new 
partner  is  made  liable  for  the  balance  —  that  discharges  the  old  firm,  as 
both  firms  cannot  be  liable  at  once  for  the  same  debt.  This  is  the  law 
as  laid  down  in  several  cases,  in  which  indeed  there  is  some  contra- 
diction; however,  I  believe  that  what  I  have  stated  is  the  result  of 
them."  (/) 

The  jury  found  for  the  defendant.  A  new  trial  was 
moved  for  on  the  ground  that  there  was  no  evidence  to  go 
to  the  jury  to  show  that  the  plaintiff  had  agreed  to  dis- 
charge the  defendant  from  his  liability,  but  the  court  {g) 

(/)    The     learned     judge     was        (g)  Bolland,  B.,  dissentiente. 
scarcely  warranted  by  those  cases 
in  going  so  far  as  he  did. 

596 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  *250 

thought  that  there  was  abundant  evidence  to  show  that  the 
plaintiff  knew  of  the  defendant's  retirement,  and  a  new 
trial  was  refused. 

To  this  class  of  cases  also  belong  those  already  noticed, 
in  which  the  joint  liability  of  old  and  new  partners  has 
been  substituted  for  that  of  the  old  partners  only,  (h) 

Release  by  estoppel.— A  creditor  may  so  conduct  him- 
self as  to  be  estopped  from  saying  that  a  retired  partner  is 
still  liable  to  him.  But  it  is  not  often  that  this  can  be  es- 
tablished. A  settlement  by  partners  of  their  accounts  on 
the  footing  that  one  of  them  only  is  liable  to  a  creditor 
will  not  affect  him  unless  he  has  been  guilty  of  some  fraud, 
or  has  done  some  act  or  made  some  statement  in  order  to 
induce  the  partners,  or  one  of  them,  to  settle  their  accounts 
on  the  faith  that  one  of  them  is  no  longer  liable,  (i) 

Discharge  of  estate  of  deceased  partner.—  Closely  al- 
lied to  the  subject  which  has  just  been  discussed  is  that 
which  relates  to  the  discharge  of  the  estate  of  a  deceased 
partner  from  the  liabilities  to  which  he  was  subject  as  a  part- 
ner at  the  time  of  his  death.  The  position  of  the  estate  of  a 
deceased  partner,  with  reference  to  the  question  of  discharge 
by  reason  of  a  creditor's  dealings  with  the  surviving 
*partners,  is  very  similar  to  the  position  of  a  retired  [*250] 
partner.  The  same  principles  are  applicable  to  both, 
and  the  authorities  which  are  in  point  as  regards  the  one 
are  so  also  as  regards  the  other.  The  parallel  between  the 
two  would  be  complete  were  it  not  that  before  the  Judica- 
ture Acts  the  estate  of  a  partner  who  died  in  the  life-time 
of  his  copartners  was  liable  for  the  joint  debts  of  the  firm 
in  equity  only ;  (k)  and  there  might  have  been  circumstances 
to  induce  a  court  of  equity  to  hold  that  estate  discharged, 

(h)  Ex  parte  Whitmore,  3  Deac.     1  B.  &  C.  113,  a  case  of  alleged 
365 ;  Rolfe  v.  Flower,  L.  R.  1  P.  C.     fraud. 
27,  noticed  ante,  pp.  208,  209.  (fc)  As  to  the  nature  of  this  liar 

(t)  See  Davison  v.  Donaldson,  9    bility,  see  ante,  p.  194. 
Q.  B.  D.  633 ;  Featherstone  v.  Hunt, 

597 


*250 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


although  the  same  circumstances  would  not,  in  the  case  of 
a  retiring  partner,  have  operated  as  a  discharge  at  law,  {I) 
and  vice  versa,  (m) 

It  has  been  decided  in  equity  that  if  a  creditor  of  a  firm 
knows  of  the  death  of  one  of  the  firm  and  continues  to 
deal  as  before  with  the  survivors,  he  does  not  lose  the 
remedy  which  he  had  against  the  estate  of  the  deceased 
partner,  unless  there  is  evidence  showing  an  intention  to 
abandon  the  right  of  having  recourse  thereto  for  pay- 
ment; (n)  and  an  attempt  by  the  creditor-to  obtain  payment 
from  the  survivors  is  not  sufficient  evidence  of  such  an  in- 
tention. Thus,  if  he  sues  the  survivors,  and  obtains  judg- 
ment against  them,  this  will  not  necessarily  deprive  him  of 
his  right  to  obtain  payment  out  of  the  estate  of  the  de- 
ceased, (o) l  So,  proving  in  bankruptcy  against  the  estate 
of  the  new  firm  is  not,  per  se,  sufficient  to  preclude  the  cred- 
itor from  afterwards  having  recourse  to  the  assets  of  the 


(Z)  See  Ex  parte  Kendall,  17  Ves. 
522  and  525. 

(m)  Jacomb  v.  Harwood,  2  Ves. 
Sr.  2G5. 

(n)  Winter  v.  Innes,  4  M.  &  Cr. 
101.     And  see  Devaynes  v.  Noble, 


the  heir  is  bound  by  judgment 
against  the  executor  of  the  de- 
ceased partner  and  the  surviving 
partner,  upon  a  bill  filed  to  subject 
the  partnership  land  to  the  satis- 
faction of  the  judgment;  and  he 


Sleech's  Case,  1  Mer.  539 ;  Clayton's    cannot  require  the  plaintiff  to  re- 


Case,  id.  579;  Palmers  Case,  id. 
623 ;  Braithwaite  v.  Britain,  1  Keen, 
206. 

(o)  Jacomb  v.  Harwood,  2  Ves.  Sr. 
265;  and  mite,  p.  195,  and  infra, 
p.  257. 

1  A  judgment  against  the  surviv- 
ing member  of  a  firm  does  not  con- 
clude the  representatives,  real  or 
personal,  of  the  deceased  partner. 
Buckingham  v.   Ludlum,  37  N.  J. 


establish  the  debt  unless  by  direct 
proceeding  the  judgment  is  at- 
tacked on  the  ground  of  fraud,  ac- 
cident or  mistake,  sufficient  to 
avoid  it.  Logan  v.  Greenlaw,  25 
Fed.  Rep.  299. 

As  to  the  effect  of  a  judgment  of 
the  supreme  court  determining  the 
right  of  a  party  to  share  ratably 
with  individual  creditors  of  the 
decedent  in  the  assets  of  the  estate 


Eq.  137 ;  Bennett  v.  Cram,  41  Hun,     in  the  surrogate  court,  which  were 
183.  insufficient  to  pay  both  the  firm 

It  results  from  the  equitable  doc-  creditors  and  the  individual  cred- 
trine  or  conversion  of  partnership  itors  in  full,  see  Lockwood  v. 
real    estate  into    personalty,   that    Carr,  4  Dem.  (N.  Y.)  515. 

598 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS.  *251 

dead  partner,  (p)     Still  less  will  any  dealing  with  the  sur- 
viving partner  if  induced  by  his  fraud,  (q) 
Liability  not  discharged  by  dealing  with  new  persons. 

Even  where  a  new  partner  has  been  introduced,  a  creditor 
of  the  old  firm  who  continues  to  deal  with  the  new  firm 
as  he  dealt  with  the  old,  and  is  paid  interest  by  the 
new  firm  *as  if  the  debt  was  its  own,  does  not  thereby  [*251] 
deprive  himself  of  his  right  to  be  paid  out  of  the 
estate  of  a  deceased  member  of  the  old  firm.  (/•)  In  Harris 
v.  Harwell,  (s)  a  banking  firm  consisting  of  three  partners 
became  indebted  to  a  customer  on  a  deposit  note ;  one  of 
them  died,  and  the  survivors  took  his  son  into  partnership 
with  them.  The  new  partnership  paid  interest  on  the  note 
for  some  time,  and  then  became  bankrupt.  The  plaintiff 
proved  against  the  new  firm  for  the  amount  of  his  debt,  and 
was  paid  a  dividend  out  of  its  estate.  It  was  held  that  he 
had  done  nothing  which  precluded  him  from  having  re 
course  to  the  estate  of  the  deceased  partner. 

Effect  of  administering  the  estate.—  On  the  other  hand, 
if,  after  the  death  of  a  partner,  a  creditor  of  the  old  firm 
knows  of  the  death  and  does  not  take  any  steps  to  obtain 
payment  from  the  estate  of  the  deceased,  if  the  creditor  lies 
by  and  allows  that  estate  to  be  administered  as  if  he  had  no 
claim  upon  it,  and  if  he  continues  to  deal  with  the  surviv- 
ing partners  as  if  they  and  they  alone  were  his  debtors,  in 
that  case  the  creditor  will  not  be  allowed  to  resort  to  the 
assets  of  the  deceased.1  Oakeley  v.  Pasheller  and  Brown 
v.  Gordon  may  be  referred  to  as  illustrating  this  doctrine. 

( p)  Sleech's    Case,    1   Mer.    570 ;  tomer  first  knew  of  the  change  in 

Harris  v.   Ear  well,    15    Beav.    31.  the  firm.     Compare  Bilborough  v. 

But  compare  Brown  v.  Gordon,  16  Holmes,  5  Ch.  D.  255,  a  somewhat 

Beav.     302,    and     Bilborough    v.  similar  case,  where  the  estate  of  jthe 

Holmes,     5    Ch.    D.     255,    infra,  deceased  partner  was   held  to  be 

note  (s)  discharged.     The  proof,  however, 

(q)  As  in  Plunier  v.  Gregory'  18  there  was  for  money  lent  to  the 

Eq.  621.  new  firm. 

(r)  Daniel  v.  Cross,  3  Ves.  277.  1  A    partnership    creditor,    after 

(s)  15  Beav.  31.  It  does  not  ap-  the  death  of  one  partner,  may  con- 
pear  from  the  report  when  the  cus-  tinue  to  deal  with  the  survivor,  and 

599 


*252  EIGHTS   AND    OBLIGATIONS.  [BOOK    II. 

In  Oalteley  v.  Pasheller,  (t)  two  partners,  A.  and  B.,  exe- 
cuted three  joint  and  several  bonds  to  the  plaintiff  to  secure 
repayment  of  money  lent.  A.  died,  and  B.  took  in  C.  as  a 
partner  with  him.  An  agreement  was  come  to  between  A.'s 
executors  and  B.  and  C.  that  the  latter  should  take  the 
assets  and  liabilities  of  the  old  firm,  and  indemnify  A.'s 
estate  from  those  liabilities.  Of  this  the  plaintiff  had  no- 
tice, (w)  He  was  paid  interest  on  his  bond  by  the  new  firm, 
and  received  accounts  from  it  in  which  the  old  debt  and  the 

debts  contracted  by  the  new  firm  were  blended  to- 
[*252]  gether.     On  two  occasions  the  plaintiff  *had  agreed 

to  give,  and  had  given,  the  new  firm  considerable 
further  time  to  pay  the  bonds,  but  A.'s  executors  had  no 
notice  of  this.  Ultimately  the  plaintiff  took  from  B.  and  C. 
an  assignment  of  some  policies  as  a  collateral  security  for 
payment  of  the  bonds,  expressly  reserving  his  rights  against 
A.'s  estate.  It  was,  however,  held  that  A.'s  estate  had  been 
discharged  from  its  liability  from  what  had  previously 
taken  place.  The  court  thought  that  A.'s  estate  had  be- 
come, as  it  were,  surety  only  for  payment  of  the  debt,  and 
that  it  had  bsen  discharged  by  the  long  indulgence  granted 
by  the  plaintiff  to  the  other  debtors,  (a?)1     The  true  ratio 

receive  partial  payments  from  him,  marginal  note  states  that  he  had 

without  prejudice  to  his  right  to  not. 

resort  to  the  assets  of  the  deceased  (x)  This  guasi-suretyship  is  surely 
partner ;  an  J  he  does  not  lose  this  a  false  analogy  unless  the  creditor 
right  by  delay  in  calling  upon  the  has  assented  to  such  a  change  in 
Burvivor  for  payment.  Hamersley  his  debtor's  position.  See,  on  this 
v.  Lambert,  2  Johns.  Ch.  508.  point,  Oakford  v.  European,  etc. 
See  ante.  Ship  Co.  1  Hem.  &  M.  182,  ante, 
(Q  10  Bli.  N.  S.  548,  and  4  CI.  &  p.  244;  Swire  v.  Redman,  1  Q.  B. 
Fin.  207.  See  on  it,  Swire  v.  Red-  D.  537.  See,  also,  Rodgers  v.  Maw, 
man,  1  Q.  B.  D.  543.  In  Wilson  v.  4  Dowl.  &  L.  66. 
Lloyd,  16  Eq.  60,  this  case  was  fol-  1  Where  a  creditor  of  a  partner- 
lowed,  though  no  new  partner  ship,  after  dissolution  thereof, 
joined  the  firm,  but  Wilson  v.  knowing  that  one  or  several  of  the 
Lloyd  cannot  be  relied  upon.  See  copartners  have  agreed  with  the 
Simpson  v.  Henning,  L.  R.  10  Q.  B.  others  to  assume  and  pay  the  debts 
406.  of  the  firm,  takes  the  negotiable 
(ti)  See  4  CI.  &  Fin.  212.      The  notes  of  those  who  should  pay  in 

600 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS. 


*252 


decidendi,  however,  was  that  the  plaintiff  had  accepted  B. 
and  C.  as  his  sole  debtors. 

In  Brown  v.  Gordon,  {if)  the  plaintiff  deposited  money 
with  a  banking  firm  consisting  of  three  partners,  A.,  B.  and 
C. ;  D.  afterwards  became  a  partner.  A.  died,  having  made 
a  will  containing  a  trust  for  payment  of  his  debts.  After 
A.'s  death,  his  son,  who  was  also  bis  executor  and  residuary 
devisee  and  legatee,  became  a  partner  in  the  bank.  Some 
time  afterwards  B.  and  C.  died.  The  bank  had  been  con- 
tinued, first,  by  B.,  C,  D.,  and  A.'s  son;  then  by  D.,  C,  and 
A.'s  son,  and  lastly  by  D.  and  A.'s  son ;  but  it  ultimately 
stopped  payment,  and  the  two  surviving  partners  were  ad- 
judged bankrupts.  Interest  had  been  paid  to  the  plaintiff 
by  the  successive  firms,  and  the  plaintiff's  debt  was  proved 
in  the  bankruptcy  court.     On  a  bill  filed  for  the  purpose  of 


payment  of  his  debt,  and  thus  ex- 
tends the  time  of  payment,  he 
thereby  discharges  the  other  part- 
ners. Millerd  v.  Thorn,  56  N.  Y. 
402;  Stone  v.  Chamberlain,  20  Ga. 
259;  Dodd  v.  Dreyfus,  infra; 
Hoopes  v.  McCan,  19  La.  Ann. 
201. 

The  dissolution  of  the  partner- 
ship and  the  retirement  of  one 
partner,  together  with  the  assump- 
tion by  the  other  partners  of  the 
debts  of  the  old  firm,  constitutes 
such  retiring  partner  merely  a 
surety  for  the  payment  of  such 
debts;  and  the  extension  of  the  time 
for  the  payment  of  such  debts, 
made  by  creditors  with  a  knowl- 
edge of  all  the  circumstances,  and 
without  the  consent  of  the  retired 
partner,  has  the  effect  of  discharg- 
ing him  from  liability  therefor. 
Dodd  v.  Dreyfus,  57  How.  Pr.  319; 
S.  C.  17  Hun,  600.  See,  also,  ^Etna 
Ins.  Co.  v.  Peck,  28  Vt.  93. 

"Where  such  a  debt  is  a  note,  and 
the  payee  has  received  from  the 


new  firm  a  chattel  mortgage  of  the 
partnership  property,  sufficient,  if 
applied,  to  satisfy  the  debt,  he 
may,  with  the  assent  of  the  retir- 
ing partners,  release  the  mortgage, 
and  return  the  property  or  its 
avails  to  the  new  firm,  without  im- 
pairing his  rights  against  all  the 
joint  obligors  on  the  note,  even 
though  he  had  such  notice  of  the 
subsequent  contract  between  the 
partners.  Rawson  v.  Taylor,  30 
Ohio  St.  389. 

A  partner,  to  whom  a  note  due 
the  firm  was  assigned  by  the  other 
partner  on  a  dissolution  of  the 
partnership,  subsequently  took  a 
new  note  of  the  debtor,  payable  in 
twelve  months.  Held,  that  the 
other  partner  was  thereby  dis- 
charged from  all  liability  as  surety 
for  the  payment  of  the  note.  "Wilde 
v.  Jenkins,  4  Paige,  481. 

(y)  16  Beav.  302 ;  Bilborough  v. 
Holmes,  5  Ch.  D.  255,  a  similar 
case,  but  not  so  strong.  See  ante, 
note  (s). 


601 


•*253  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

obtaining  payment  out  of  A.'s  estate,  it  was  held  that  the 
plaintiff,  by  neglecting  for  sixteen  years  to  make  any  claim 
against  the  assets  of  the  deceased,  and  by  treating  the  suc- 
cessive firms  as  his  debtors,  had  discharged  the  estate  of  the 
deceased,  and  that  he  could  not  be  considered  as  a  creditor 
of  the  deceased,  so  as  to  avail  himself  of  the  trust  in  the  will . 
for  payment  of  debts. 

Cases  of  fraud. —  In  whatever  way  a  creditor  may 

[*253]  have  dealt  with  the  surviving  ^partners,  he  cannot 

be  held  to  have  adopted  them  as  his  sole  debtors  in 

respect  of  a  demand  arising  out  of  a  fraudulent  transaction, 

of  which  he  has  been  constantly  kept  in  ignorance,  (z) 

Recapitulation.— Before  leaving  this  subject  it  may  be 
useful  shortly  to  review  the  effect  of  the  numerous  cases 
which  have  been  noticed  in  the  preceding  pages.  Those 
cases  establish  that  — 

1.  An  express  agreement  by  the  creditor  to  discharge  a 
retired  partner,  and  to  look  only  to  a  continuing  partner,  is 
not  inoperative  for  want  of  consideration;  for  Lodge  v. 
Diaas  (a)  has,  as  to  this  point,  been  overruled  by  Thomjjson 
v.  Percival.  (b) 1 

(z)  See  Clayton's  Case,  1  Mer.  579 ;  should  assume  certain  debts,  and 

ante,  pp.  235,  236.  also  to   divide  and  dispose  of  the 

(a)  3  B.  &  A.  611.  firm  assets;  to  which  submission  a 

(b)  5  B.  &  Ad.  925.      •  creditor  assented,  and  agreed  to  be 
i  Where  M.   and  B.,  copartners,  bound  by  the  award,  which  was 

ordered  a  certain  piece  of  work  of  that  one  party  should    take    the 

C,  held,  that  an  agreement  made  assets  and  pay  all  the  debts.  Held, 

between  C.  and  M.,  after  the  disso-  that    the   surrender  by  the  other 

lution  of  the  copartnership,  that  M.  partner  of  his  interest  in  the  assets, 

should  be  released  from  his  liability  and  the  consent  of  the  creditor  to 

for  the   work  already  performed,  the  submission,  was  a  considera- 

was  void  for  want  of  consideration,  tion  for  his  promise,  and  that  the 

B.  not  having  promised  to  assume  copartner    was    released    thereby 

the  liability.      Otherwise  had  B.  from  the  claim.     Backus  v.  Fobes, 

so  promised,  one  debt  being  substi-  20  N.  Y.  204. 

tuted  for    the  other.      Collyer  v.        Where,  upon  the  dissolution  of  a 

Moulton,  9  R.  I.  90.  copartnership,  one  partner  assumes 

The  affairs  of  a  partnership  were  a  liability,  he  does  it  prima  facie, 

submitted   to   an   arbitrator,    who  upon  sufficient  consideration,  leav- 

was    to  designate    which  partner  tag  his  copartners   liable  only  as 

602 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBERS.  "254 

2.  An  adoption  by  the  creditor  of  the  new  firm  as  his 
debtor  does  not  by  any  means  necessarily  deprive  him  of 
his  rights  against  the  old  firm,  either  at  law  (c)  or  in 
equity,  {d) 

3.  And  it  will  certainly  not  do  so  if,  by  expressly  reserv- 
ing his  rights  against  the  old  linn,  he  shows  that  by  adopt- 
ing the  new  firm  he  did  not  intend  to  discharge  the  old 
firm,  (e) 

4.  And  by  adopting  a  new  firm  as  his  debtor  a  creditor 
cannot  be  regarded  as  -having  intentionally  discharged  a 
person  who  was  a  member  of  the  old  firm,  but  was  not 
known  to  the  creditor  so  to  be.  (,/) 

5.  But  the  fact  that  a  creditor  has  taken  from  a  continu- 
ing partner  a  new  security  for  a  debt  due  from  him  and  a 
retired  partner  jointly  is  strong  evidence  of  an  intention  to 
look  only  to  the  continuing  partner  for  payment,  (g) 

6.  And  a  creditor  who  assents  to  a  transfer  of  his  debt 
from  an  old  firm  to  a  new  firm,  and  goes  on  dealing  with, 
tlae  latter  for  many  years,  making  no  demand  for 
payment  against  the  *old  firm,  may  not  unfairly  be  [*254] 
inferred  to  have  discharged  the  old  firm.     If  a  jury 

finds  that  he  has  done  so  the  court  will  not  disturb  the  ver- 
dict; (A)  and  if  the  question  arises  before  a  judge,  e.  g.,  in 
bankruptcy  or  in  the  administration  of  the  estate  of  a  de- 
ceased partner,  the  court  will  consider  all  the  circumstances 

sureties ;  and  they  may  take  meas-  id.   579 ;    Palmer's    Case,    id.    623 ; 

ures  to  have  the  claim  assigned  and  Braithwaite    v.    Britain,  1    Keen, 

collected  from  the  partner  liable.  206 ;  Winter  v.  Innes,  4  M.  &  Cr. 

^Etna  Ins.   Co.  v.  Peck,  28  Vt.  93.  101. 

(c)  David  v.  Ellice,  5  B.  &  C.  196;  (e)  Bedford  v.  Deakin,  2  B.  &  A. 
Thompson  v.  Percival,  5  B.  &  Ad.  210;  Jacomb  v.  Harwood,  2  Ves. 
925 ;  Heath   v.    Percival,   1    P.  W.  Sr.  265. 

682,  and  1  Str.  403 ;  Kirwan  v.  Kir-  (/)    Robinson    v.    Wilkinson,  3 

wan,  2  Cr.  &  M.  617 ;  Gough  v.  Price,  538. 

Davies,    4    Price,     200;     Blew    v.  (g)  Evans  v.  Drummond,  4  Esp. 

Wyatt,  5  C.  &  P.  397.  89 ;  Reed  v.  White,  5  id.  122. 

(d)  Oakford  v.  European,  etc.  (h)  Hart  v.  Alexander,  2  M.  & 
Ship  Co.  1  Hem.  &  M.  182 ;  Sleech's  W.  484. 

Case,  1  Mer.  539;  Clayton's  Case, 

603 


-;:254  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

of  the  case,  and  will  infer  a  discharge  if,  upon  the  whole,  jus- 
tice to  all  parties  so  requires,  (i)  But  the  small  number  of 
cases  in  which  relief  has  been  refused,  compared  with  those 
in  which  it  has  been  granted,  shows  that  the  leaning  of  the 
court  is  strongly  in  favor  of  the  creditor. 

(b)  Of  the  effect  of  merger  and  judgment  recovered. 

Merger  of  one  security  in  another.—  Having  now  ex- 
amined the  mode  in  which  a  partner  may  be  discharged 
from  liability,  by  reason  of  a  substitution  of  some  other 
person  in  his  place  with  the  creditor's  assent,  it  is  necessary 
to  advert  to  a  doctrine  by  which  a  partner  occasionally 
finds  himself  discharged,  simply  because  his  creditor  has 
obtained  a  security  of  a  higher  nature  than  that  which  he 
previously  possessed. 

Bills,  etc.,  create  no  merger.— If  a  person  solely  in- 
debted enters  into  partnership  with  another,  and  the  two 
give  a  joint  note  or  bill  for  the  debt  of  the  first,  and 
the  note  or  bill  is  not  paid,  the  creditor  is  not  precluded 
from  demanding  payment  from  his  original  debtor,  (JS)  un- 
less it  can  be  shown  that  the  bill  or  note  was  taken  in  sat- 
isfaction of  the  original  demand.  (I) 1     So  if  two  partners 

(t)  Ex    parte   Kendall,  17  Ves.  composed  in  part  of  the  same  per- 

523-5;  Oakeley  v.  Pasheller,  4  CI.  sons;    and    the  latter    firm    may 

&  Fin.    207;  Wilson  v.  Lloyd,    16  negotiate  the  note  to  third  persons. 

Eq.  60;  Brown  v.  Gordon,  16  Beav.  Fulton  v.  Williams,  11  Cush.  108. 
302.  There    being    two     outstanding 

(k)  Ex  parte  Seldon,  2  Cox,  49;  mortgages  of  certain  lands,  X.  and 

Ex  parte  Lobb,  7  Ves.   592;    Ex  Y.,  partners,  bought  with  partner- 

parte  Meinertzhagen,  3  Deac.  101 ;  ship  funds  one-half  of  the  senior 

ExparteHny,  15  Ves.  4;  Ex  parte  mortgage  interest,  and  the  entire 

Kedie,  2  D.  &  C.  321.  legal  interest  in  the  land,  taking 

(t)  As  in  Ex  parte  Whitmore,  3  the  former  in  the  name  of  X.  and 

Deac.  365 ;  Ex  parte  Kirby,  Buck,  the  latter  in  the  name  of  Y.     In  a 

511 ;  Ex  parte  Jackson,  2  M.  D.  &  contest  between  the  holders  of  the 

D.  146.  first   mortgage  and   junior  mort- 

l  gee  ante,  ganee>    held,    that  there  was    no 

The  joint  and  several  note  of  a  merger  of  the  legal  and  equitable 

partnership  is  not  extinguished  by  estates  so  purchased ;  there  being 

a  transfer  thereof  to  another  firm  an  intervening  estate  by  the  sec- 

604 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*255 


are  indebted  on  the  partnership  account,  and  one  of  them 
gives  a  bill  or  note  for  the  debt,  and  that  bill  or  note  is  dis- 
honored, the  creditor  who  took  it  will  not  be  precluded 
from  having  recourse  to  both  partners  for  pay- 
ment, (?n)  unless  it  can  be  *shown  that  he  intended  [*255] 
to  substitute  the  liability  of  the  one  for  the  joint 
liability  of  the  two.  (n) l 

Securities  of  a  higher  nature  do  —Judgment  recovered. 
But  when  a  creditor  obtains  from  his  debtor  a  security  of  a 
higher  nature  than  he  had  before,  and  does  not  care  to  ac- 
cept it  as  a  collateral  security,  (o)  the  original  debt  is  merged 
in  the  higher  security  and  can  no  longer  be  made  the  foun- 
dation of  an  action  or  of  proof  in  bankruptcy;  {p)  and  this 


ond  mortgage,  the  taking  of  the 
purchased  estates  in  different 
names  showing  an  intention  to 
keep  them  distinct,  and  the  trans- 
action not  being  injurious  to  the 
junior  mortgagee.  Scott  v.  Web- 
ster, 44  Wis.  185. 

(m)  Keay  v.  Fenwick,  1  C.  P.  D. 
745 ;  Bottomley  v.  Nuttall,  5  C.  B. 
N.  S.  122;  Whitwell  v.  Perrin,  4 
C.  B.  N.  S.  412;  Ex  parte  Hodg- 
kinson,  19  Ves.  291.  See,  too,  Ex 
parte  Raleigh,  3  M.  &  A.  670;  Bed- 
ford v.  Deakin,  2  B.  &  A.  210,  no- 
ticed ante,  p.  244. 

(n)  As  the  jury  found  was  the 
case  in  Evans  v.  Drummond,  4 
Esp.  89,  and  Reed  v.  White,  5  id. 
122.  Compare  the  cases  in  the  last 
note. 

1  See  Melane  v.  Spencer,  6  Ired. 
L.  423 ;  Wilson  v.  Jennings,  4  Dev. 
L.  90. 

See  %nit, 

Although  the  acceptance  of  a 
security  of  a  higher  dignity  merges 
and  extinguishes  the  original  cause 
of  action,  yet  if  one  partner,  who 
has  executed  in  the  name  of  the 
firm  a  single  bill  for  the  amount  of 


a  debt  which  the  firm  owes,  after- 
wards gives  a  promissory  note  in 
the  name  of  the  firm,  a  recovery 
may  be  had  thereon  against  the 
firm.  The  partnership  debt,  which 
was  extinguished  by  the  acceptance 
of  the  single  bill,  is  thereby  re- 
vived. Davidson  v.  Kelly,  1  Md. 
492. 

Where  a  creditor  of  a  former 
commercial  firm  sues  its  individual 
members  for  goods  sold  to  the 
firm,  and  declares  in  his  petition 
on  the  itemized  account  of  the 
goods,  and  also  on  a  promissory 
note  of  the  firm  given  in  liquida- 
tion of  the  account  by  one  not 
authorized  to  sign  for  the  firm,  he 
will  be  entitled  to  recover  for  the 
goods  on  the  unopposed  proof  of 
their  sale  and  delivery.  Dodd  v. 
Bishop,  30  La.  Ann.  1178. 

(o)  As  in  Ex  parte  Hughes,  4 
Ch.  D.  34,  note. 

(p)  Ex  parte  Oriental  Financial 
Corporation,  4  Ch.  D.  33 ;  Higgen's 
Case,  6  Co.  44b;  Owen  v.  Homan, 
3  Mc.  &  G.  378 ;  Price  v.  Moulton, 
10  C.  B.  561 ;  Shack  v.  Anthony,  1 
M.  &  S.  573.     A  judgment  on  a 


605 


^255 


EIGHTS    AND    OBLIGATIONS. 


[book  ir. 


doctrine  is  as  much  applicable  to  joint  as  to  several  obliga- 
tions. And  there  is  no  mean  authority  for  saying  that  if 
two  parties  are  jointly  indebted  by  simple  contract,  and  one 
of  them  gives  his  bond  for  payment  of  the  debt,  the  joint 
debt  is  at  an  end;  (q)  but  there  are  recent  decisions  to  the 
contrary,  (r) 1  and  the  question  cannot  be  considered  as  yet 

Brozee  v.  Poyntz,  3  B.  Mon.  178; 
Calk  v.  Orear,  2  id.  420;  Horton  v. 
Child,  4  Dev.  L.  460. 

So  a  promissory  note  given  by  a 
firm  is  not  merged  in  a  bond  and 
mortgage,  executed  at  the  same 
time  and  for  the  same  debt  by  one 
partner  in  the  name  of  the  firm, 
but  without  the  knowledge  of  his 
copartners.  Pierce  v.  Cameron,  7 
Rich.  114. 

The  mere  acceptance  of  a  bond 
and  a  deed  of  trust  to  secure  it  by 
a  creditor  from  one  member  of  the 
firm  after  dissolution,  for  a  part- 
nership debt  due  by  simple  con- 
tract, destroys  the  right  of  the 
creditor  to  proceed  at  law  against 
the  other  member;  but  a  court  of 
equity  will  look  at  the  attendant 
circumstances  of  the  case,  and  will 
not  absolve  the  firm  from  liability 
unless  it  appears  from  those  cir- 
cumstances, or  otherwise,  that  the 
higher  security  was  accepted  as  a 
substitute  for  the  simple  contract 
of  the  firm.  Niday  v.  Harvey,  9 
Gratt.  454. 

A  partnership  assigned  the  part- 
nership effects  for  the  benefit  of 
such  creditors  as  should  sign  the 
deed  of  assignment  and  receive 
their  dividends;  and  in  consider- 
ation thereof,  and  that  they  would 
release  the  other  partners,  the 
senior  partner  covenanted  to  pay 
the  balance  due  such  creditors  after 
exhausting  the  property  assigned. 
Held,  that  the  prior  claims  of  the 


covenant  in  a  mortgage  does  not 
affect  the  right  of  the  mortgagee 
to  foreclose.  Popple  v.  Sylvester, 
22  Ch.  D.  98 ;  Ex  parte  Fewings, 
25  Ch.  D.  338. 

(q)  Basset  v.  Wood,  11  Vin.  Ab. 
Exting.  B.  8.  And  see  Owen  v. 
Homan,  3  Mc.  &  G.  407;  Ex  parte 
Hernaman,  12  Jur.  642,  and  17 
L.  J.  Bk.  17. 

(r)  Sharpe  v.  Gibbs,  16  C.  B.  N.  S. 
527;  Ansel  1  v.  Baker,  15  Q.  B.  20; 
and  infra,  note  (c). 

1  A  debt  made  by  partners  under 
general  authority  as  partners  is 
still  a  partnership  debt  and  binding 
on  the  partner  who  did  not  join  in 
giving  the  bond,  notwithstanding 
one  or  more  of  the  other  partners 
gave  their  bond  to  the  party  with 
whom  they  made  the  contract. 
Jordan  v.  Miller,  75  Va.  442. 

The  sealed  individual  note  of  an 
ostensible  partner  does  not  extin- 
guish the  original  cause  of  action 
as  against  a  dormant  partner, 
whose  connection  as  partner  was 
unknown  to  the  creditor  at  the 
time  the  note  was  executed.  Cham- 
berlain v.  Madden,  7  Rich.  395. 
See,  also, Watson  v.  Owens,  1  id.  111. 

Contra,  Ward  v.  Motter,  2  Rob. 
(Va.)  536.  See,  also,  Anderson  v. 
Levan,  1  Watts  &  Serg.  334. 

The  execution  of  a  sealed  note 
for  a  debt  due  by  partners,  by  one 
of  them  in  the  firm  name,  without 
authority,  does  not  merge  the  joint 
liability  on  the    simple    contract. 


606 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


-255 


settled.  If  a  joint  creditor  obtains  judgment  against  one 
of  the  partners  only,  he  loses  his  remedy  against  the  others, 
even  if  not  known  to  him.  (s) l     But  this  rule  does  not  apply 

A  bill  against  dormant  partners, 
after  judgment  recovered  agains 
the  ostensible  partners,  cannot  be 
sustained  without  showing  special 
cause  for  relief ;  as,  that  the  plaint- 
iff was  kept  in  ignorance  of  the 
partnership  by  undue  means ;  that 
he  has  used  due  diligence  to  in- 
form himself,  etc.  Penny  v.  Mar- 
tin, 4  Johns.  Ch.  566. 

Where  one  of  several  partners 
unites  with  a  third  person  in  mak- 
ing a  note  to  a  creditor  of  the  firm 
for  a  partnership  debt,  which,  by 
agreement,  is  made  and  accepted, 
not  for  the  debt,  but  a  collateral  se- 
curity merely,  a  judgment  upon 
the  note  will  not  merge  or  affect 
the  original  indebtedness  even  as  to 
the  partner  signing  the  note.  In 
such  a  case  the  agreement  prevents 
the  merger.  Hawks  v.  Hinchcliff, 
17  Barb.  492. 

Judgment  against  one  partner 
upon  a  contract,  upon  its  face  his 
sole  and  individual  contract,  is  no 
bar  to  a  subsequent  action  upon  it 
as  a  partnership  contract.  Scott  v. 
Colmesnil,  7  J.  J.  Marsh.  416. 

Where  a  state  statute  provides 
that  in  suits  against  two  or  more 
jointly  indebted  the  judgment  shall 
be  evidence,  as  against  those  not 
served  with  process,  only  of  the 
extent  of  the  plaintiff's  demand, 
the  original  demand  against  the 
parties  not  brought  into  court  is 
not  merged  in  the  judgment  against 
those  who  were.  Mason  v.  Eldred, 
6  Wall.  231. 

The  fact  that  a  judgment  was 
rendered  against  part  of  the  mem- 
bers of  a  firm  does  not  affect  the 


creditors  who  became  parties  to 
the  agreement  were  extinguished 
and  merged  in  the  covenant  of  the 
senior  partner.  Hosack  v.  Rogers, 
8  Paige,  229. 

(s)  Kendall  v.  Hamilton,  4  App. 
Ca.  504;  King  v.  Hoare,  13  M.  & 
W.  494;  Ex  parte  Higgins,  3  De  G. 
&  J.  33.  See,  as  to  dormant  part- 
ners, Cambefort  v.  Chapman,  19 
Q.  B.  D.  229,  noticed  in  the 
addenda.  In  Baddeley  v.  Consoli- 
dated Bank,  34  Ch.  D.  536,  the 
surety  had  not  recovered  judg- 
ment, and  this  rule  did  not  apply. 
A  colonial  judgment  creates  no 
merger.  Bank  of  Australasia  v. 
Nias,  16  Q.  B.  717.  See  ante,  p.  193, 
note(fc). 

1  When  a  judgment  is  obtained 
against  one  of  two  partners  on  a 
joint  contract,  the  contract  is 
merged  in  the  judgment,  and  an 
action  at  law  cannot  be  maintained 
thereon  against  the  partners.  Se- 
dan v.  Williams,  4  McLean,  51 ; 
Smith  v.  Black,  9  Serg.  &  R.  142. 
Contra,  Williams  v.  Rogers,  14 
Bush,  777. 

The  ostensible  partner  of  a  firm 
gave  notes  in  the  partnership  name, 
which  was  his  own  name,  for  goods 
purchased  for  the  use  of  the  part- 
nership, upon  which  the  payee,  in 
ignorance  of  the  partnership,  sued 
and  recovered  judgment  against 
the  ostensible  partner  alone.  Held, 
in  an  action  afterwards  brought 
against  the  dormant  partner,  that 
his  liability  upon  the  notes  was  ex- 
tinguished by  the  judgment.  Moale 
v.  Hollins,  11  Gill  &  J.  11.  See, 
also,  Smith  v.  Black,  supra. 


607 


*256  EIGHTS   AND    OBLIGATIONS.  [BOOK    II. 

when  the  other  partners  are  abroad,  and  cannot  therefore 
be  sued  here  with  effect,  (t)    If  one  partner  only  is  sued, 
and  judgment  is  given  for  him,  the  creditor  is  not  precluded 
from  afterwards  suing  the  others,  unless   the  first  action 
failed  for  a  reason  which  applies  equally  to  the  second,  (u) 
It  has   been   already  seen  that   a   judgment    recovered 
against  continuing  partners  and  an  incoming  part- 
[-256]  ner  is  a  defense  to  an  ^action  against  a  retired  part- 
ner who  might  have  been  sued  with  the  continuing 
partners  in  the  first  instance,  (a?) 

Merger  of  joint  and  several  obligations. —  With  respect 
to  obligations  which  are  joint  as  well  as  several  there  is 
more  difficulty.  A  joint  and  several  obligation  arising  ex 
delicto  is  extinguished  by  a  judgment  recovered  against  any 
one  of  the  persons  obliged;  (y)  but  as  regards  joint  and  sev- 
eral obligations  arising  ex  contractu,  although  a  joint  judg- 
ment against  all  the  persons  obliged  extinguishes  the  sep- 
arate liability  of  each,  for  nemo  debet  bis  vexari  pro  eadem 
causa,  yet  a  judgment  obtained  against  one  of  them  only 

equitable  right  to  have  the  part-  itors;the  relief  which  equity  will 

nership  property  subjected  to  its  give  is  to  subject  the  whole  assets 

payment.     Equity  does  not  regard  to  the  payment  of  such  debts.  How 

the  form  of  the  judgment,  but  the  v.  Kane,  2  Chand.  222. 
substance  of  the  debt.     Martin  v.        (t)  See   19  and   20  Vict.    ch.  97, 

Davis,  21  Iowa,  535.  §  11;  Ex  parte  Waterfall,  4  De  G. 

Where  a  partnership  exists  be-  &  S.  199. 
tween  two  persons,  one  of  whom  is        (u)  Phillips  v.   Ward,   2  Hurlst. 

a  dormant  partner,  and  the  cred-  &  C.  717. 

itors   of    the  firm    have  obtained        (x)  Scarfe  v.  Jardine,  7  App.  Ca. 

judgments  against  the    ostensible  345,  ante,  pp.  46  and  197.  See,  also, 

partner,  founded  on  debts  created  Cambefortu.  Chapman,  19  Q.  B.  D. 

on  the  partnership  account,  upon  229,  noticed  in  the  addenda.     See 

which  executions  have  been  issued  ante,  p.  193,  note  (k). 
and  returned  nulla,  bona,  a  bill  in        (?/)  Brinsmead  v.  Harrison,  L.  R. 

equity  against  both  partners  will  be  6  C.  P.  584,  aff.  7  id.   547;  Brown 

sustained  upon  the  allegation  that  v.  Wootton,  Cro.  Jac.  73;  Buckland 

the  dormant  partner  has,  by  fraud-  v.  Johnson,  15  C.  B.  145.    And  see, 

ulent  connivance  with  the  osten-  as  to  the  plea  of  another  suit  de- 

sible  one,  obtained  the  possession  of  pending,    Boyce     v.     Douglas,     1 

and  laid  claim  to  all  the  partner-  Camp.  61. 
ship  assets   in   fraud  of  the  cred- 

608 


CH.  II,  SEC.  III.]  LIABILITY    OF   MEMBEKS. 


*256 


does  not  extinguish  the  separate  liability  of  the  others,  (s) l 
In  order  that  this  effect  may  be  produced  the  judgment 
must  be  satisfied,  (a) 2  As  regards  joint  and  several  liabili- 
ties arising  from  breaches  of  trust,  a  joint  judgment  does 
not  preclude  proof  in  bankruptcy  against  the  separate 
estates  of  the  judgment  debtors,  (b) 

Further,  if  several  persons  are  jointly  liable,  and  one  of 
them  afterwards  gives  a  separate  collateral  security  on 
which  judgment  is  recovered  against  him,  this  will  not 
merge  the  prior  joint  liability,  (c) 

Effect  of  doctrines  of  merger  on  securities  for  future 
advances. —  The  rule  that  a  bond  or  judgment  merges  any 


(z)  Ex  parte  Christie,  Mon.  &  Bl. 
352.  See,  also,  Ansell  v.  Baker,  15 
Q.  B.  20. 

1  A  judgment  recovered  in  Mis- 
souri, where  by  the  law  all  con- 
tracts are  construed  as  joint  and 
several,  against  one  of  three  co- 
partners who  had  drawn  bills  upon 
the  plaintiffs,  which  were  accepted 
in  this  state  and  paid  for  accom- 
modation without  funds,  is  not  a 
merger  of  the  right  of  action 
against  the  other  partners  in  this 
state.     Reed  v.  Girty,  6  Bosw.  587. 

An  action  against  partners  is  not 
barred  by  a  judgment  in  an  action 
by  one  partner  against  the  others, 
dissolving  the  firm,  appointing  a 
receiver,  etc.  Honegger  v.  Wett- 
stein,  47  N.  Y.  Super.  Ct.  125. 

Where  a  decree  has  been  ren- 
dered upon  a  bill  filed  by  a  firm, 
the  estoppel  thereby  created  cannot 
be  avoided  by  another  suit  insist- 
ing upon  the  same  rights  in  the 
individual  name  of  one  of  the 
partners.  Croft  v.  Johnson,  8  Bax. 
(Tenn.)  390. 

No  estoppel  is  worked  against  a 
firm  by  the  fact  that  a  member 
thereof  proved  as  his  own  debt  a 


note  once  held  by  the  firm.  Melt- 
zer  v.  Doll,  91  N.  Y.  365. 

As  to  estoppel  of  partners  by 
declarations  in  the  court  of  claims, 
as  to  their  interest  in  a  claim  prose- 
cuted there  by  another  partner, 
from  setting  up  their  interest  in 
the  property  sought  to  be  recov- 
ered, see  Hobbs  v.  McLean,  117 
U.  S.  567. 

One  copartner,  as  between  him- 
self and  the  firm  creditors,  eannot 
estop  himself,  by  any  dealing  with 
the  other  partner,  from  claiming 
partnership  assets.  In  re  Gorham, 
9  Biss.  C.  Ct.  23. 

(a)  Higgen's  Case,  6  Co.  46a; 
King  v.  Hoare,  13  M.  &  W.  494. 
And  see  Drake  v.  Mitchell,  3  East, 
251. 

2  And  such  is  believed  to  be  the 
better  opinion  also  in  respect  to 
joint  and  several  obligations  arising 
ex  delicto.  Cooley  on  Torts,  136-139. 

(6)  Be  Davison,  13  Q.  B.  D.  50. 

(c)  Drake  v.  Mitchell,  3  East,  251. 
See,  too,  Re  Clarkes,  2  Jo.  &  Lat. 
212 ;  Ex  parte  Bate,  3  Deac.  858. 
Compare  Cambefort  v.  Chapman, 
19  Q.  B.  D.  229,  noticed  in  the 
addenda.   See  ante,  p.  193,  note  (fc). 


Vol.  1  —  39 


609 


*257  EIGHTS    AND    OBLIGATIONS.  ,  [liOOK   II. 

simple  contract  debt  in  respect  of  which  it  may  have  been 
given  or  obtained  only  applies  if  the  simple  contract  debt 
existed  first  in  order  of  time,  and  if  the  specialty  creditor  is 
the  same  as  the  simple  contract  creditor.  So  that  if  a  bond  is 
given  or  a  judgment  is  obtained  (under  a  warrant  of  attor- 
ney) as  a  security  for  future  advances;  (d)  or  if  a 
[*257]  simple  contract  debtor  gives  a  bond  or  -confesses  a 
judgment  to  a  trustee  for  his  creditor,  (e)  in  neither 
of  these  cases  will  there  be  any  merger. 

Estates  of  deceased  partners. —  It  must  also  be  borne  in 
mind  that,  as  regards  the  liability  of  the  estate  of  a  de- 
ceased partner,  at  law,  when  a  partner  died,  his  liability  on 
contracts  survived  to  his  copartner,  who  alone  could  be  sued 
in  respect  of  them.  Hence  a  judgment  recovered  against 
the  surviving  members  of  a  firm  does  not  preclude  the  judg- 
ment creditor  from  obtaining  payment  of  his  original  debt 
from  the  estate  of  the  deceased  partner  in  equity;  (/)  nor 
does  proof  against  his  estate  afford  a  defense  to  an  action 
against  the  surviving  partners,  (g) 

Merger  not  an  extinction  of  the  debt. —  Further,  it  is  to 
be  observed  that  merger  does  not,  properly  speaking,  extin- 
guish a  debt;  for,  notwithstanding  the  fact  that  a  debt  is 
merged  in  a  higher  security,  the  merged  debt  is  sufficient 
to  support  an  adjudication  of  bankruptcy  against  the 
debtor.  (7t) 

Proof  in  bankruptcy. —  Again,  proof  in  bankruptcy 
against  the  estate  of  one  partner  in  respect  of  a  partnership 
debt  does  not  preclude  the  proving  creditor  from  afterwards 
suing  the  solvent  partners  and  recovering  from  them  what 
he  may  have  failed  to  obtain  in  the  bankruptcy,  (i) 

(d)  Holmes  v.  Bell,  3  Man.  &  Gr.  v.  Walker,  4  De  G.  &  J.  24.  See, 
213,  and  the  note  there.  also,  Rawlins  v.  "Wickham,  3  De  G. 

(e)  Bell  v.  Banks,  3  Man.  &  Gr.     &  J.  304,  ante,  pp.  195,  250. 

258.     In  such  a  case  equity  would        (g)  Re  Hodgson,  31  Ch.  D.  177. 
probably  follow  the    law,  ut    res        (h)  Re  Davison,  13  Q.  B.  D.  50; 
magis  valeat  quavi  pereat.-  Re  Griffiths,  3  De  G.  M.  &  G.  174, 

(/)  Jacomb  v.  Harwood,  2  Ves.     and  the  cases  there  cited. 
Sr.  265;  Liverpool  Borough  Bank        (i)  Keay  v.  Fenwick,  1  C.  P.  D. 

G!0 


CH.  IIj  SEC.  III.]  LIABILITY    OF    MEMBERS. 


-258 


4.  Lapse  of  Time. 

Statutes  of  limitation.— By  a  number  of  well-known 
enactments,  usually  referred  to  as  the  statutes  of  limitation, 
a  certain  definite  time  has  been  prescribed  within  which,  if 
at  all,  a  person  having  a  demand  against  another  must  en- 
force it.1  These  statutes  apply  as  well  to  partners  as  to 
other  persons;  and  it  becomes,  therefore,  necessary  to  ad- 
vert to  them  in  the  present  work. 

The  principal  statutes  are  the  following:  (7j)  21 
Jac.  1,  *ch.  16;  4  and  5  Anne,  ch.  16;  3  and  4  Wm.  [-258] 
4,  ch.  27;  3  and  4  Wm.  4,  ch.  42;  19  and  20  Vict, 
ch.  97;  37  and  3S  Yict.  ch.  57. 


745;  Whitwell  V.  Pen-in.  4  C.  B. 
N.  S.  412;  Bottopiley  v.  Nuttall,  5 
C.  B.  N.  S.  122. 

1  If  one  sues  a  partnership  and 
is  nonsuited  he  cannot  recom- 
mence his  action  against  one  of  the 
partners  individually  within  six 
months  after,  so  as  to  prevent  the 
6tatute  of  limitations  from  attach- 
ing, under  section  2932  of  the  code. 
Ford  v.  Clark,  75  Ga.  612. 

Otherwise  in  North  Carolina, 
where  the  first  suit  was  defeated  by 
reason  of  the  non-joinder  of  co- 
partners, the  second  suit  being 
properly  brought.  Martin  v. 
Young,  85  N.  C.  15(3. 

Where  one  member  of  a  firm  is 
dead,  and  no  suit  is  instituted  on 
an  open  account  against  such  firm 
for  more  than  four  years  after  it 
becomes  due,  and  no  reason  ap- 
pears why  suit  was  not  brought 
against  the  survivor,  the  action  is 
barred  as  to  him,  and,  he  being 
primarily  liable,  this  laches  of  the 
plaintiff  will  discharge  the  admin- 
istrator of  the  deceased  partner. 
McNaught  v.   Bostick,  71  Ga.  782. 

Representatives    of    a    deceased 

Gl 


partner  cannot  set  up  a  statute  of 
limitations  against  a  firm  creditor 
so  long  as  the  surviving  partner 
continues  liable  for  the  debt  and 
has  a  l-ight  to  contribution  from 
the  estate  of  the  deceased  partner. 
Buckingham  v.  Ludlum,  37  N.  J. 
Eq.  137. 

A  creditor  of  a  firm  cannot  main- 
tain an  action  against  one  partner 
for  money  had  and  received  upon 
a  firm  account  barred  by  the  stat- 
ute of  limitations  upon  the  ground 
that,  when  the  partners  settled, 
upon  defendant's  misrepresenta- 
tion to  his  partner  that  he  had  paid 
plaintiff's  claim,  he  was  allowed 
the  amount  of  it  in  such  settle- 
ment. Libby  v.  Robinson,  79  Me. 
168. 

The  action  authorized  by  section 
4  of  the  act  of  February  22,  1816, 
against  partners,  is  barred  in  ten 
years  after  the  right  of  action  ac- 
crued. Hawkins  v.  Lasley,  40 
Ohio  St.  37. 

(k)  The  principal  act  relating  to 
Ireland  is  16  and  17  Vict.  ch.  113. 
See  §  20. 


*253  RIGHTS    AND   OBLIGATIONS.  [BOOK    It 

Times  limited  for  bringing  actions. —  Neglecting  those 
provisions  of  the  statutes  of  limitation  which  are  of  little 
importance  to  partners,  the  times  prescribed  for  the  prose- 
cution of  actions  are  as  follows: 

Twelve  years  for  the  recovery  of  legacies,  of  rent,  of 
money  charged  on  lands,  of  money  due  on  judgments,  bonds 
and  mortgages,  and  for  the  redemption  of  mortgages.  3 
and  4  Ira.  4,  ch.  27,  §§  28  and  40;  3  and  4  Ira.  4,  ch.  42; 
37  and  38  Vict.  ch.  57. 

Six  years  for  the  recovery  of  arrears  of  rent  and  of  in- 
terest on  money  charged  on  land  (3  and  4  Win.  4,  ch.  27, 
§§  41 ,  42) ;  and  for  the  recovery  of  seaman's  wages  (4  and 
5  Anne,  ch.  16,  §  17) ;  and  of  money  due  on  bills  of  ex- 
change, promissory  notes,  or  in  respect  of  any  other  con- 
tract which  is  not  under  seal  (21  Jac.  1,  ch.  1G,  §  3);  and  of 
money  due  on  awards  where  the  submission  is  not  under 
seal  (3  and  4  Wm.  4,  ch.  42,  §  3);  and  for  the  institution  of 
actions  or  suits  for  an  account.  21  Jac.  1,  ch.  16,  §  3,  and 
19  and  20  Vict.  ch.  97,  §  9. 

Four  years  for  the  recovery  of  damages  in  respect  of  an 
assault,  battery  or  false  imprisonment.  21  Jac.  1,  ch.  16, 
§3. 

Two  years  for  the  recovery  of  damages  for  words  of  them- 
selves defamatory  (21  Jac.  1,  ch.  16,  §  3);  and  for  the  re- 
covery of  penalties,  damages  or  sums  given  by  statute  to 
the  party  grieved.     3  and  4  Wm.  4,  ch.  42. 

Further  time. —  There  are  provisions  extending  these  pe- 
riods in  favor  of  persons  who,  when  their  right  to  sue 
accrues,  are  within  the  age  of  twenty-one,  under  the  dis- 
ability of  coverture,  or  of  unsound  mind;(£)  and  also  in 
favor  of  those  whose  demands  are  against  persons  beyond 

(0  21  Jac.  1,  ch.  16,  §  7 ;  3  and  4  §10;  Cornill  v.  Hudson,  8  E.  &  B. 

Win.  4,  ch.  42,  §  4;  3  and  4  Wm.  4,  429;  Pardo  v.  Bingham,  4  Ch.  735. 

ch.  27,  §  16,  etc. ;  37  and  38  Vict.  The  absence  beyond  the  seas  of  one 

ch.  57,  §  3.     The  imprisonment  or  of  several  joint  creditors  did  not 

absence  beyond  the  seas  of  acred-  enlarge  their  time  for  suing  under 

itor  does  not  now  enlarge  his  time  the  old  law.     Perry  v.  Jackson,  4 

for  suing.     19  and  20  Vict.  ch.  97,  T.  K.  516. 

612 


CH.  II.  SEC.  III.]  LIABILITY    OF   MEMBERS.  *259 

the  seas.  (?«■)  But  the  absence  beyond  the  seas  of  one  of 
several  joint  debtors  does  not  now,  as  it  did  formerly,  en- 
large the  time  for  suing  the  others,  (n) 

"Account  between  merchants. —  By  the  statute  [*259] 
of  James,  actions  "for  such  accounts  as  concern  the 
trade  of  merchandise  between  merchant  and  merchant,  their 
factors  or  servants,"  were  excepted  from  limitation,1  but 
this  exception  no  longer  exists;  (o)  and  actions  for  an  ac- 
count, or  for  not  accounting,  must  be  brought  within  six 
years,  {p) 

General  rules  applicable  to  the  statutes  of  limitation. — 
In  applying  the  statutes  of  limitation  to  any  particular  case 
it  is  important  to  bear  in  mind  one  or  two  principles  appli- 
cable to  them  all. 

Foreign  debts.— 1.  Although  a  debt  may  have  been  con- 
tracted abroad,  any  person  who  attempts  to  enforce  it  in 
this  country  must  do  so  within  the  time  limited  by  the  Eng- 
lish statutes;  for  it  is  by  them,  and  not  by  the  law  of  the 
place  where  the  debt  was  contracted,  that  English  courts 
are  governed  in  a  matter  of  this  description,  (q) 

Continuous  running  of  time. —  2.  When  once  time  has 
begun  to  run,  no  subsequent  disability  or  inability  to  sue 

(ro)4  and  5  Anne,  ch.  16,  §  19,        (p)  See   19  and  20  Vict.  ch.  97, 

and  3  and  4  Wm.  4,  ch.  42,  §  4.  §  9,  and  21Jac.  1,  ch.  10,  §  3.    This 

(n)  19  and  20  Vict.  ch.  97,  §  11.  branch  of  the  subject  will  be  ex- 
See,  as  to  what  is  beyond  the  seas,  amined  more  at  length  in  that  part 
§  12 ;  and  as  to  the  old  law,  Fan-  of  the  work  which  treats  of  ac- 
nin  v.  Anderson,  7  Q.  B.  811 ;  Towns  counts  between  partners.  The  prin- 
v.  Mead,  16  C.  B.  123.  cipal  cases  on  the  exception  relat- 

1  Running  accounts  with  a  part-  ing  to    merchants'   accounts  are : 

ner,  though  he  be  a  surviving  part-  Inglis   v.  Haigh,  8   M.  &  W.  769 ; 

ner,  and  as  such  has  the  collection  Cottam  v.  Partridge,  4  Man.  &  Gr. 

of  partnership    assets,   cannot    be  271 ;  Robinson  v.  Alexander,  8  Bli. 

called  an  account  with  the   firm,  N.  S.  352 ;  Forbes  v.  Skelton,  8  Sim. 

and  can  therefore  be  of  no  avail  to  335.  See  Webber  v.  Tyvill,  2  Wms. 

stop  the    running  of  the   statute  Saund.  124,  and  the  note  there, 
against  a  partnership  claim.  Stew-        (q)  See  The  British  Linen  Co.  v. 

art's  Appeal,  105  Pa.  St.  307;  S.  C.  Drummond,  10  B.  &  C.  903;  Huber 

14  Weekly  Not.  Cases,  442.  v.  Steiner,  2  Bing.  N.  C.  202. 

(o)  19  and  20  Vict.  ch.  97,  §  9. 

013 


:230 


FJGIITS    AND    OBLIGATIONS. 


[BOOK    II. 


slops  it,*(r)  except  where  a  defendcant  dies  and  there  is  no 
representative  to  sue.  (s) 

When  time  begins  to  run. —  3.  Time  begins  to  run  from 
the  moment  the  right  to  sue  arises;  (t)  but  in  a  case 
^260]  of  concealed  fraud,  from  the  moment  -'when  the  per- 
son acquiring  the  right  first  becomes  aware  of  it.  (u) x 

Cases  of  trust. —  4.  The  claim  of  a  cestui  que  trust  against 
his  trustee  in  respect  of  a  breach  of  an  express  trust  is  not 
barred  by  mere  lapse  of  time;  (x)  although  it  is  otherwise  if 
the  trust  is  only  constructive,  {y)  In  consequence  of  the 
first  branch  of  this  rule,  if  a  partner  dies,  having  made  a 
will  containing  a  trust  for  payment  of  his  debts,  his  estate 
will  be  liable  to  the  demands  of  creditors  of  the  firm  much 
Ion o-er  than  if  there  were  no  such  trust  in  the  will,  (z) 


(>•)  See  Rhodes  v.  Smethurst,  4 
M.  &  W.  42,  and  G  id.  331 ;  Goodall 
v.  Skerratt,  3  Drew.  21G;  Wych  v. 
East  India  Co.  3  P.  W.  309.  There 
is,  however,  an  exception  to  this 
rule,  where  an  action  brought  in 
time  becomes  abated,  and  another 
is  afterwards  commenced.  See 
Sturgis  v.  Darrell,  4  H.  &  N.  622, 
and  6  id.  120.  See,  as  to  how  far 
merely  landing  at  an  English  port 
is  a  return,  so  as  to  make  time  be- 
£in  to  run,  Gregory  v.  Hurrill,  5  B. 
&  C.  341,  and  1  Bing.  324. 

(s)  Swindell  v.  Bulkeley,  18  Q.  B. 
D.  250. 

{t)  This  was  so  at  law,  even  in 
cases  of  concealed  fraud.  The  Im- 
perial Gas  Co.  v.  The  London  Gas 
Co.  10  Ex.  39;  Hunter  v.  Gibbons. 
1  H.  &  N.  459.  See  Bree  v.  Holbech, 
Dougl.  655.  But  see  now,  Jud. 
Act,  1873,  §  24;  Jud.  Act,  1875, 
?•  10,  cl.  11,  and  the  cases  in  the 
next  note. 

(u)  Gibbs  r.  Guild,  9  Q.  B.  D.  59: 
Smith  Sea  Co.  v.  Wyrnondsell,  3  P. 
\V.    143;  Blair   v.   Bromley,   2  Ph. 


354.  and  5  Ha.  542 ;  Petre  v.  Petre, 
1  Drew.  397.  The  fraud  in  Urqu- 
bart  v.  Macpherson,  3  App.  Ca.  838, 
was  not  alleged  to  have  been  con- 
cealed. 

1  Where  a  county  treasurer  mis- 
applied court  money  deposited  with 
him  to  the  benefit  of  the  firm  of 
which  he  was  a  member,  the  six 
years'  statute  of  limitations  is  a 
good  defense  as  to  another  member 
of  the  firm  in  an  action  for  money 
had  and  received,  such  member  not 
having  been  guilty  of  fraud.  Price 
n  Mulford,  9  Cent.  Rep.  (N.  Y.)SGG; 
S.  C.  36  Hun  (N.  Y.),  247. 

(x)  See  Jud.  Act,  1S75,  §  10,  cl.  2. 

(y)  Banner  v.  Berridge,  18  Ch.  D. 
254 ;  Beckford  v.  Wade,  17  Ves.  87. 

(2)  See  Ault  v.  Goodrich,  4  Russ. 
430 ;  Braithwaite  v.  Britain,  1  Keen, 
206;  Brown  v.  Gordon,  16  Beav. 
302.  See,  also,  Pare  v.  Clegg,  29 
Beav.  589.  where  a  society's  prop- 
erty was  on  its  dissolution  sub- 
jected to  a  trust  for  the  payment 
of  its  creditors. 


G14 


CH.  II,  SEC.  III.]  LIABILITY    OF    MEilBEES.  *261 

Reyival  of  debts. —  5.  After  time  has  begun  to  run,  and 
even  after  it  has  run,  a  debt  may  be  revived  by  a  written 
promise  to  pay  it;  or  by  an  acknowledgment  in  writing, 
from  which  a  promise  to  pay  it  may  be  inferred;  (a)  or  bjr 
a  payment  on  account  of  the  principal  or  interest  due,  (I) 
from  which  a  similar  promise  may  be  implied,  (c) 

Application  of  these  rules  to  partners  —  Old  law. —  In 
order  that  the  application  of  these  general  rules  to  partners 
may  be  fully  understood,  it  becomes  necessary  to  consider 
the  extent  to  which  one  partner  can  affect  the  other  by  ac- 
knowledging and  promising  to  pay,  or  by  making  payments 
on  account  of  a  partnership  debt.  The  old  law  upon  this 
subject  was  materially  altered  by  the  Mercantile 
Law  Amendment  Act,  -but  in  order  to  understand  its  [*261] 
provisions  a  short  allusion  to  the  law  as  it  previously 
stood  is  necessary.  Prior  to  the  act  in  question  it  was  held 
that: 

Admissions  by  one  partner. —  1.  An  admission  by  one  of 
several  joint  debtors  that  their  debt  was  still  due  was  not 
sufficient  to  take  the  case  out  of  the. statutes  as  against  the 
others;1  nor  even  as  against  the  person  making  the  admis- 
sion, unless  it  were  in  writing  signed  by  him.  (d) 

(a)  See  Tanner  v.  Smart,  6  B.  &  Ch.  D.  254;  Quincey  v.  Sharpe,  1 

C.  603.  The  cases  upon  the  ques-  Ex.  D.  72 ;  Prance  v.  Syrnpson,  Kay, 
tion,  What  is  a  sufficient  acknowl-  GTS.  A  letter  from  one  partner 
edgnient?  are  innumerable.  The  to  another  will. not  avail  a  creditor 
following  are  selected  for  refer-  whose  debt  is  mentioned  and  recog- 
ence:  Green  v.  Humphreys,  26  Ch.  nized  in  it.  Be  Hindmarsh,  1  Dr.  & 

D.  47-4:  Mitchell's  Claim,  6  Ch.  822,  Sm.  129. 

a  letter  without  prejudice;  Bourdin  (b<  See  Whitcomb  v.  Whiting,  1 

v.  Greenwood,  13  Eq.  281,  a  mem.  Smith,  L.  C,  and  the  note  there, 

on  a  prom,  note;  Bush  v.  Martin,  (c)  See  Morgan  v.  Rowlands,  L. 

2  H.  &  C.  311,  entry  by  a  committee  E.  7  Q.  B.  493. 

in  their  minutes ;  letter  asking  for  l  SeeHensley  v.  Bagdad  Sash  Fac- 

an  account,  or  admitting  a  liability  tory   Co.    1    Tex.   App.  (Civ.)  392; 

to  account;  Banner  v.  Berridge,  18  Wilson  v.  Waugh,  101  Pa.  St.  233; 

(d)  9  Geo.  4,  ch.  14,  §  1 ;  Hyde  v.  George  4.  chapter  14.  See  Man- 
Johnson,  2  Bing.  N.  C.  777;  Bris-  dertson  r.  Robertson,  4  Man.  &  Ry. 
tow  v.  Maxwell,  11  Ir.  Law  Rep.  440.  As  to  admissions  by  one  part- 
4G1.      It   was   otherwise  before    9    ner,  see  ante,  p.  128. 

615 


*261 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   II. 


Promise  by  one  partner.— 2.  An  actual  promise  by  one 
of  'several  joint  debtors  that  the  debt  should  be  paid  was  of 
no  validity  against  any  person  except  him  who  made  it.1 
and  not  even  against  him  unless  it  were  in  writing  and 
signed  by  him.  (e) 

Payment  by  one  partner.—  3.  But  as  regards  payment  (f) 
it  was  held  that  if  one  of  several  joint  debtors  paid  any 


S.  C.  40  Leg.  Int.  242 ;  Rice  v.  Pen- 
nypacker,  5  Del.  279. 

Otherwise  where  the  partner 
making  such  acknowledgment  has 
taken  the  stock  and  become  the 
liquidating  partner.  Wilson  v. 
Waugh,  101  Pa.  St.  233;  S.  C.  40 
Leg.  Int.  242. 

The  mere  agreement  on  the  dis- 
solution of  a  firm  that  one  of  the 
partners  should  take  the  assets  and 
pay  the  liabilities  of  the  firm,  no 
particular  firm  debts  being  speci- 
fied, does  not,  however,  prevent 
the  running  of  the  statute  of  lim- 
itations upon  debts  due  third  per- 
sons; and  admissions  or  promises 
made  by  the  partner  continuing 
the  business,  as  to  the  payment  of 
the  firm  debts,  will  not,  under 
these  circumstances,  bind  the  re- 
tiring partner  whei*e  notice  of  the 
dissolution  has  been  given.  Folk  v. 
Russell,  7  Bax.  (Tenn.)  591. 

1  After  the  dissolution  of  a  part- 
nership, an  acknowledgment  and 
promise  to  pay,  made  by  one  of 
the  partners,  will  not  revive  a  debt 
against  the  firm  which  is  barred  by 
the  statute  of  limitations.  Van 
Keuren  v.  Parmelee,  2  N.  Y.  523 ; 
Walsh  v.  Cane,  4  La.  Ann.  533; 
Kauffman  v.  Fisher,  3  Grant.  Cas. 
302;  Reppert  v.  Colvin,  48  Pa.  St. 
248.  See,  also,  Levy  v.  Cadet,  17 
Serg.  &  R.  126;  Yandis  v.  Lefa- 
vour,  2  Blackf.  371 ;  Tate  v.  Clem- 
ents, 16  Fla.  339;  Folk  v.  Russell, 


63  Tenn.  591 ;  Ford  v.  Clark,  72  Ga. 
760. 

Some  cases,  however,  hold  that 
the  acknowledgment  of  a  partner- 
ship debt  by  one  of  the  partners 
after  the  dissolution  is  sufficient  to 
take  the  debt  out  of  the  statute. 
Smith  v.  Ludlow,  6  Johns.  267; 
Ward  v.  Howell,  5  Har.  &  J.  60 ; 
Neal  v.  Hassan,  3  McCord,  278; 
Greenleaf  v.  Quincy,  11  Me.  11. 
See,  also,  Carroll  v.  Gayarre,  15 
La.  Ann.  671. 

Under  Revised  Statutes,  Wiscon- 
sin, section  4244,  a  promise  or  ac- 
knowledgment within  the  period 
of  limitation  by  one  member  of  a 
firm  previously  dissolved  is  not 
binding  upon  another  member  un- 
less such  dissolution  was  not  known 
to  the  payee  of  the  promissory 
note  at  the  time  such  acknowledg- 
ment was  made.  Clement  v.  Clem- 
ent, 35  N.  West.  Rep.  (Wis.)  17. 

Where  one  of  several  partners, 
after  the  dissolution  of  the  part- 
nership, assumed  a  partnership 
debt,  but  afterwards  pleaded  the 
statute  of  limitations,  jointly  with 
the  other  partners,  to  an  action 
upon  such  debt,  it  was  held  that 
the  promise  of  such  partner  might 
be  given  in  evidence,  for  the  plea 
admitted  that  they  did  once  as- 
sume. Brockenbrough  v.  Hackley, 
6  Call,  51. 
(e)  See  last  note. 
(/)  As  to  payment  by  bills,  see 


616 


C1I.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


*2G2 


money  on  account  of  the  principal  or  interest  due  from 
them  all,  such  payment  was  sufficient  to  take  the  debt  out 
of  the  statute,  not  only  as  against  the  person  making  the 
payment,  but  as  against  all  the  others  jointly  liable 
with  him.  ((f) 1    But  even  before  the  Mercantile  -Law  [*2G2] 

decisions  went  the  length  of  bind- 
ing the  firm  even  in  this  extreme 
case.  See  the  excellent  judgment 
in  Bell  v.  Morrison,  1  Peters,  351, 
set  out  in  Story  on  Part.  §  324,  note. 

1 A  payment  made  upon  a  simple 
contract  debt  of  a  partnership  after 
its  dissolution,  by  a  partner  author- 
ized to  settle  the  concerns  of  the 
partnership,  and  before  the  debt  is 
already  barred  by  the  statute  of 
limitations,  is  such  an  acknowledg- 
ment of  the  debt  as  will  take  it  out 
of  the  statute  as  to  all  the  copart- 
ners. Houser  v.  Irvine,  3  Watts  & 
S.  345. 

Payment  by  one  partner  upon  a 
partnership  note  which  is  a  joint 
contract,  within  the  period  of  the 
statute  of  limitations,  will  not  bind 
the  other  partner  where  the  firm 
has  previously  dissolved  to  the 
payee's  knowledge.  Gates  v.  Fisk, 
45  Mich.  522.  See,  also,  Cronkhite 
v.  Herrin,  15  Fed.  Rep.  888. 

In  an  action  against  a  firm  upon 
a  draft  accepted  by  the  cashier  of 
a  bank,  who  was  a  member  of 
the  firm,  and  who  made  a  partial 
payment  on  the  same,  held,  that, 
to  remove  the  statutory  bar  of 
statute  of  limitations,  the  burden 
was  on  the  plaintiff  to  show  in  what 
capacity  the  acceptor  acted  in 
making  such  payment,  whether  as 
cashier  or  as  a  partner.  Wood  v. 
Barber,  90  N.  C.  76. 

After  a  firm  has  been  dissolved, 
partial  payment  on  a  firm  debt, 
made  by  one  partner  to  a  party 


Gowan  v.  Forster,  3  B.  &  Ad.  507 ; 
Irving  v.  Veitch,  3  M.  &  W.  90; 
Turney  v.  Dodwell,  3  E.  &  B.  136. 
(gr)  See  Whitcomb  v.  Whiting,  2 
Dougl.  652,  and  1  Sm.  L.  C. ;  9 
Geo.  4,  ch.  14,  §  1.  The  doctrine 
that  payment  by  one  partner  took 
a  debt  out  of  the  statute  as  against 
all  was  generally  rested  on  the 
ground  that  the  partner  making 
the  payment  acted  virtually  as  the 
agent  for  the  rest.  But  the  right  of 
one  of  several  co-debtors  (whether 
they  are  pa:  t  lers  or  not)  to  make  a 
payment  on  account  of  the  joint 
debt  is  not  derived  from  any  au- 
thority conferred  by  the  other 
debtors,  for  they  have  no  right  to 
prevent  their  co-debtor  from  l-eliev- 
ing  himself  from  a  liability  to 
which  he  is  subject  as  much  as 
they.  Moreover,  admitting  that 
the  doctrines  of  agency  are  appli- 
cable to  payments  made  by  one  of 
several  co-debtors,  it  is  impossible 
to  justify,  on  that  ground,  the  de- 
cisions which  have  just  been  no- 
ticed. They  were  all,  it  is  said, 
based  upon  this,  that  a  part  pay- 
ment is  evidence  of  a  new  promise 
to  pay  more  (Bateman  v.  Pinder,  3 
Q.  B.  574).  But  upon  what  prin- 
ciple can  it  be  held  that,  after  a 
partnership  is  dissolved,  one  part- 
ner has  any  implied  authority  from 
his  late  partners  to  bind  them  by  a 
fresh  promise  to  pay  an  old  debt? 
Assuming  the  debt  to  be  already 
barreJ,  the  question  can  admit  of 
no  satisfactory  answer,  and  yet  the 


617 


*262 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


Amendment  Act  payment  by  a  surviving  partner  did  not 
prejudice  the  estate  of  a  deceased  partner  (A)  any  more 
than  a  payment  by  the  executors  of  the  deceased  prejudiced 
the  partners  who  survived;  (i)  for  the  excutors  of  a  de- 
ceased partner  are  not  liable  jointly  with  the  surviving 
partners.  But  if  one  of  the  surviving  partners  was  an 
executor  of  the  deceased,  then  a  question  of  a  different 
nature  arose,  turning  not  only  on  the  effect  of  the  payment 
as  such,  but  on  whether  it  was  made  by  the  survivors  as 
surviving  partners  only,  or  as  to  one  of  them  in  his  char- 
acter of  executor  also.  (Jc) 

who  has  had  dealings  with  the  count,  and  is  not  such  an  acknowl- 
edgment of  indebtedness  as  will 
bind  the  other  copartners  in  refer- 
ence to  the  statute  of  limitations. 
Turner  v.  Ross,  1  R.  I.  88. 

S.,  being  liable  for  the  debts  of  a 
firm,  whether  as  a  partner  inter 
sese  or  as  to  third  persons,  after  the 
firm  went  into  liquidation  gave  to 
a  partner  of  the  firm  an  amount 
of  money,  to  be  applied  by  liini 
towards  the, payment  of  the  debts 
of  the  firm,  such  partner  agreeing 
to  pay  the  debts  in  full ;  such  part- 
ner made  a  part  payment  on  a 
claim  against  the  firm.  Held,  suf- 
ficient to  take  the  case  out  of  the 
statute  of  limitations  as  to  S., 
though  the  claimant  may  have  re- 
ceived no  part  of  the  identical 
money  furnished  by  S.,  and  though 
the  whole  of  the  money  so  fur-- 
nished  may  have  been  applied  to 
the  payment  of  other  firm  liabili- 
ties before  any  payment  on  the 
claims  in  suit.  Burnet  v.  Snyder, 
13  Jones  &  Sp.  577. 

(h)  Atkins  v.  Tredgold,  2  B.  &  C. 
23. 

(i)  Slater  v.  Lawson,  1  B.  &  Ad. 
396. 

(fc)  See  Braithwaite  v.   Britain,  1 


firm  and  has  had  no  notice  of  the 
dissolution,  is  evidence  against  all 
the  partners  to  prevent  the  run- 
ning of  the  statute  of  limitations. 
Kenniston  v.  Avery,  16  N.  H.  117; 
Buxton  v.  Edwards,  13-1  Mass.  567; 
Forbes  v.  Garfield,  32  Hun,  389. 

A  statute  of  Rhode  Island  pro- 
vides that,  "whenever  any  copart- 
nership shall  be  dissolved,  it  shall 
and  may  be  lawful  for  any  individ- 
ual who  was  embraced  in  such  co- 
partnership to  make  a  separate 
composition  or  compromise  with 
any  one  or  all  of  the  creditors  of 
such  copartnership ;  and  such  com- 
position or  compromise  shall  be  a 
full  and  effectual  discharge  to  the 
debtor  making  the  same  of  the 
whole  of  said  debt,  and  be  taken 
and  considered,  in  reference  to  the 
other  copartners,  as  actual  payment 
of  such  debtor's  proportion  of  the 
debts,  whether  the  full  amount  of 
liis  proportion  of  said  debt  be  actu- 
ally paid  or  not."  It  also  saves  the 
creditor's  action  against  the  other 
copartners  for  ths  balance  due. 
Held,  that  a  payment  and  compro- 
mise made  by  any  one  copartner  is 
wholly  on  his  own  individual  ac- 


618 


CII.  II,  SEC.  III.]  LIABILITY    OF    MEMBERS. 


:"263 


Liability  in  equity  of  estate  of  deceased  partner.—  The 

effect  of  the  statutes  of  limitation  upon  suits  in  equity 
against  the  executors  of  a  deceased  partner  was  not  well 
settled.  In  Winter  v.  Lines,  (I)  Lord  Cottenham  expressed 
a  doubt  whether  the  executors  could  set  up  the  statute 
where  the  surviving  partner  continued  liable  and  had  a  right 
of  contribution  against  them ;  but  in  Way  v.  Bassett  (m)  the 
statute  was  successfully  relied  upon  as  a  defense  by  the  ex- 
ecutors of  a  deceased  partner,  although  the  surviving  part- 
ners had  by  various  payments  kept  the  debt  alive  as  against 
themselves.  The  law  now  is  in  accordance  with  the  latter 
decision,  (n) 

Alterations  introduced  by  19  and  20  Yictoria,  chapter 
97._By  the  Mercantile  Law  Amendment  Act,  19  and  20 
Victoria,  chapter  97,  it  is  enacted  as  follows: 

§  13.  In  reference  to  the  provisions  of  the  acts  of  9  George  4,  chapter 
14,  sections  1  and  8,  and  16  and  17  Victoria,  chapter  113,  sections  24  and 
27  (Irish),  an  acknowledgment  or  promise  made  or  contained  by  or  in  a 
writing  signed  by  an  agent  of  the  party  chargeable  thereby,  duly  author- 
ized to  make  such  acknowledgment  or  promise,  shall  have  the  same 
effect  as  if  such  writing  had  been  signed  by  such  party  himself. 

Payments  by  one  of  several  co-debtors.— §  14.  In  reference  to  the 
provisions  of  the  acts  21  James  1,  chapter  .16,  section  3;  3  and  4  William 
4,  chapter  42,  section  3,  and  16  and  17  Victoria,  chapter  113,  section  20 
(Irish),  when  there  shall  be  two  or  more  co-contractors  or  co-debtors, 
whether  bound  or  liable  jointly  only,  or  jointly  and  severally,  or  exec- 
utors or  administrators  of  any  co-contractor,  no  such  co-contractor  or 
co-debtor,  executor  or  administrator  shall  lose  the' benefit  of  the 
said  enactments,  or  any  of  them,  so  as  to  be  charge*able  in  [*263] 
respect  or  by  reason  only  (o)  of  payment  of  any  principal,  inter- 
est or  other  money,  by  any  other  or  others  of  such  co-contractors  or 
co-debtors,  executors  or  administrators. 

Effect  of  above  statute  on  partners.—  The  above  stat- 
ute, it  will  be  observed,  has  materially  altered  the  law  as 

Keen,  206,  where  the  payment  pre-  (/)  4  M.  &  Cr.  101. 

vailed ;  Way  v.  Bassett,  5  Ha.  55 ;  (m)  5  Ha.  55. 

.Brown  v.  Gordon,    16  Beav.   302,  (n)  19  aDd  20  Vict.   ch.  97,  §  14, 

where  it  did    not.     See,   further,  infra. 

Griffin  v.  Ashby,  2  Car.  &Kir.  139;  (o)  See,  as  to  this  word,  Cockrill 

Atkins  v.  Tredgold,  2  B.  &  C.  23.  v.  Sparks,  1  H.  &  C.  699. 

619 


^2G3 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


regards  the  effect  of  acknowledgments  and  part  payments. 
An  acknowledgment  by  an  agent  being  now  sufficient  to 
affect  bis  principal,  acknowledgment  by  one  partner  will, 
it  is  apprehended,  be  regarded  as  an  acknowledgment  by 
the  firm;  and  notwithstanding  section  14  a  part  payment 
by  a  partner  will  probably  be  regarded  as  a  part  payment 
by  the  firm,  (p) 

But  after  a  dissolution  a  part  payment  by  a  continuing 
or  a  surviving  partner  will  not  prevent  a  retired  partner,  {q) 
or  the  executors  of  a  deceased  partner,  (r)  from  availing 
themselves  of  the  statute;  and  the  same  is  true  of  an  ac- 
knowledgment, (s) 


(pJSee  Goodwin  v.  Parton,  42 
L.  T.  568;  Watson  v.  Woodman,  20 
Eq.  p.  730. 

(q)  Ibid.  721. 

(r)  Thompson  v.  Waithman,  3 
Drew.  028,  in  which  the  surviving 
partner  was  the  sole  executor  of 
the  deceased.  In  this  case  section 
14  of  the  act  in  question  was 
treated  as  having  a  retrospective 
operation,  and  as  destroying  the 
effect  of  a  payment  made  before 
the   act    passed.     This,    however, 


was  a  mistake.  In  every  other  re- 
spect the  case  is  good  law.  As  to 
the  non-retrospective  operation  of 
section  14  of  the  statute,  see  Jack- 
son v.  Woolley,  8  E.  &  B.  773; 
Flood  v.  Patterson,  29  Beav.  295. 

(s)  If  in  any  case  it  could  be 
6hown  that  a  continuing  or  sur- 
viving partner  was  in  point  of  fact 
authorized  to  act  for  the  late  part- 
ner or  his  executors  in  making  ac- 
knowledgments or  payments,  the 
case  would  be  different. 


620 


^CHAPTER  III.  [*26±] 

OF  ACTIONS  BETWEEN  PARTNERS  AND  NON-PARTNERS. 

General  observations.— In  order  to  complete  the  sub- 
jects discussed  in  the  preceding  chapters  it  is  necessary  to 
examine  the  remedies  by  which  rights  and  obligations  be- 
tween partners  and  non-partners  can  be  enforced. 

It  is  unnecessary  to  dwell  upon  criminal  prosecutions,  for 
although  partners  may  be  prosecutors  or  prosecuted,  in  re- 
spect of  criminal  offenses,  the  fact  that  they  are  partners 
has  little,  if  any,  effect  on  their  position  in  a  criminal  point 
of  view. 

The  remedies  which  alone  are  of  sufficient  importance  to 
require  consideration  in  a  treatise  like  the  present  are  ac- 
tions, defenses  by  way  of  set-off,  proceedings  to  enforce 
judgments,  and  proceedings  in  bankruptcy.  The  subject  of 
bankruptcy  will  be  discussed  hereafter,  and  the  present 
chapter  will  therefore  be  confined  to  actions,  set-off  and 
execution. 

Section  I. —  Actions  by  and  against  Paetnees. 

General  observations. 

The  Judicature  Acts,  1873  and  1875,  and  the  rules  of  the 
supreme  court,  1883,  have  materially  altered  and  improved 
legal  proceedings  by  and  against  partnerships  and  unincor- 
porated companies. 

1.  There  is  now  no  distinction  between  legal  and  equi- 
table rules  as  regards  parties  to  sue  and  be  sued,  (a) 

2.  No  action  can  be  defeated  by  reason  of  the  misjoinder 

(a)  See  Supreme  Court  Rules,  1883,  Order  xvi. 

621 


•205 


PJGIITS    AND    OBLIGATIONS. 


[BOOK    II. 


or  non-joinder  of  parties;  (7>)  and  picas  in  abatement  are 
abolished,  (c)  If  too  many  or  too  few  persons  join 
['X'2G5]  as  plaintiffs,  and  the  defendant  can  show  that  he  is 
thereby  prejudiced,  he  can  apply  to  have  the  im- 
proper plaintiffs  struck  out  or  the  proper  plaintiffs  joined,  as 
the  case  may  be.  (d) l 


{!>)  Orel,  xvi,  r.  11.  See  ante, 
p.  193,  n.  (k). 

(c)  Orel,  xxi,  r.  20. 

If  one  only  of  several  joint  con- 
tractors is  sued  lie  can  require  the 
others  to  be  made  defendants. 
Pilley  v.  Robinson,  20  Q.  B.  D.  155. 

(d)Ord.  xvi,  r.  11. 

1  The  partners  must  all  join  as 
plaintiffs  in  an  action  at  law  to  en- 
force a  partnership  claim  ;  and  this 
whether  the  action  is  brought  be- 
fore or  after  the  dissolution  of  the 
partnership.  No  others  should  be 
joined  as  plaintiffs.  Gallot  v. 
McCluskey,  18  La.  Ann.  259; 
Cochran  v.  Cunningham,  1G  Ala. 
448;  Dob  v.  Halsey,  10  Johns.  34; 
Snodgrass  v.  Broadwell,  2  Litt.  353: 
Wright  v.  Williamson,  3  N.  J.  L. 
978;  Shutts  v.  Chaffee,  48  Wis.  617, 
Gage  v.  Rollins,  10  Mete.  348;  Holt 
v.  Kernodle,  1  Ired.  L.  199;  Wiley 
v.  Logan,  95  N.  C.  358;  Bigelow  v. 
Reynolds,  36  N.  W.  Rep.  95;  S.  C. 
12  West.  Rep.  659;  Venal  v.  W. 
Va.  Oil  Co.  110  U.  S.  215;  Clapp  v. 
Pawtucket  Institution,  4  New  Eng. 
Rep.  (R.  I.)  97;  Bischoff  v.  Blease, 
20  S.  C.  4G0 ;  Coffee  v.  Eastland,  1 
Brunner,  216;  Fish  v.  Gates,  133 
Mass.  441 ;  Hammersmith  v.  Hil- 
ton, 8  Mo.  A  pp.  564;  Slutts  v. 
Chafee,  48  Wis.  617.  See,  also, 
Moore  v.  Watts,  81  Ala.  261 ;  Pear- 
son v.  Parker,  3  N.  H.  3G6. 

In  a  suit  by  a  partnership  upon 
a  contract  it  must  appear  that  all 


who  sue  were  partners  at  the  time 
of  making  the  contract;  one  sub- 
sequently admitted  to  the  firm  can- 
not join  in  the  action  although  it 
were  agreed  as  between  the  part- 
ners that  he  should  become  equally 
interested  with  the  others  in  all  the 
existing  property  and  rights,  unless 
at  his  admission  a  new  and  bind- 
ing promise  has  been  made  to  pay 
to  the  new  firm.  This  principle 
applies  with  great  strictness  where 
the  contract  is  by  specialty.  Fire- 
men's Ins.  Co.  v.  Floss,  67  Md.  403. 

Where  plaintiff,  being  a  member 
of  a  copartnership,  brings  suit  in 
his  own  name  for  goods  shipped  by 
the  firm  and  mixed  with  some  of 
his  own,  if,  before  trial,  it  was 
shown  that  he  acquired  title  from 
the  copartnership  to  the  goods  in 
question,  he  can  maintain  the  ac- 
tion. Lance  v.  D^^acon,  15  Phil. 
318;  S.  C.  39  Leg.  Intel.  178. 

Where,  however,  a  publication 
is  libelous  per  se  as  to  a  partnership, 
one  partner  may  maintain  an  indi- 
vidual action  for  the  injury  to  him- 
self therefrom.  Rosenwaldi'.  Ham- 
merstein,  12  Daly,  377. 

One  of  two  partners  cannot,  in 
his  own  name,  recover  full  dam- 
ages for  a  tort  resulting  in  an  in- 
terruption to  the  joint  business. 
Farnum  v.  Ewell,  59  Vt.  327. 

Where  a  client  retains  one  mem- 
ber of  a  firm  of  attorneys  alone 
an  action  for  the  fees  is  properly 


622 


Cn.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


-205 


3.  All  persons  may  be  joined  as  plaintiffs  or  as  defend- 
ants, in  or  against  whom  the  right  to  any  relief  claimed  is 


brought  by  the  firm.     Jackson  v. 
Bohrman,  59  Wis.  40'2. 

So,  if  property  held  by  a  firm 
under  pledge  is  taken  from  the 
manual  possession  of  one  partner 
he  alone  cannot  replevy  it.  The 
action  must  be  in  the  name  of  the 
firm.  Saul  v.  Kruger,  9  How.  Pr. 
569. 

Where  one  of  several  partners, 
to  whom  an  indemnity  is  given,  is 
compelled  by  legal  proceedings  to 
pay  out  moneys  on  account  of  a 
demand  against  his  firm,  the  ac- 
tion to  recover  back  the  moneys 
thus  paid  may  be  brought  in  the 
name  of  all  the  members  of  the 
firm.  Hill  v.  Packard,  5  Wend. 
375. 

Four  persons  formed  a  partner- 
ship in  the  ice  business  under  the 
name  of  G.,  H.  &  Co.,  and  trans- 
acted their  business  in  Charles- 
town.  Mass.  The  same  persons 
and  0.  afterwards,  by  written  arti- 
cles, formed  a  partnership  under 
the  name  of  C.  &  Co.  in  the  busi- 
ness of  shipping  ice  to  Mobile,  Ala., 
and  selling  it  there.  By  these  arti- 
cles G.,  H.  &  Co.  were  to  ship  ice 
to  Mobile  consigned  to  C.  &  Co., 
and  C.  was  to  devote  his  personal 
attention  to  the  sale  of  the  ice 
there,  and  C.  &  Co.  were  to  pay 
from  the  proceeds  of  the  sales,  to 
G.,  H.  &  Co.,  a  certain  price  per 
ton  for  the  ice  shipped  at  Charles- 
town,  and  also  to  pay  rent  for  an 
icehouse  in  Mobile,  and  all  freights 
and  expenses  on  the  ice  shipped, 
and  all  expenses  of  discharging  and 
transporting  it  from  the  vessels  to 
the  icehouse,  and  all  other  expenses 
of  taking  care  of  and  selling  it ;  and 


the  proceeds  of  the  sales,  after  de- 
ducting all  said  expenses,  were  to 
be  equally  divided  between  C.  and 
the  firm  of  G.,  H.  &  Co.  R.  made 
an  agreement  with  the  firm  of  G. . 
H.  &  Co.  to  transport  a  cargo  of 
ice  for  them  from  Charlestown  to 
Mobile,  but  did  not  fulfill  his  agree- 
ment, and  the  four  members  com- 
posing that  firm  brought  an  action 
against  him  to  recover  damages 
for  breach  of  that  agreement. 
Held,  that  the  action  could  not  be 
maintained  without  joining  C.  as 
plaintiff.  Gage  v.  Rollins,  10  Mete. 
348. 

One  partner  cannot  recover 
against  a  sheriff  for  levying  upon 
the  firm  property  on  an  execution 
against  his  copartner.  Hughes  v. 
Boring,  16  Cal.  81. 

Where  a  written  contract  is  en- 
tered into  by  an  individual  to  do 
certain  work,  in  a  suit  by  him  to 
recover  the  price  of  the  work  the 
defendant  may  show  that  the 
plaintiff  hod  a  partner  in  the  job, 
and  that  the  partner  had  been  paid 
in  full.  Shepard  v.  Ward,  8  Wend. 
542. 

A  firm  may  do  business  under 
the  name  of  one  partner  alone,  and 
can  sue  in  all  their  names  on  a 
contract  made  in  the  name  of  such 
one  alone.  Martin  v.  Johnson,  8 
Daly,  541. 

A  complainant  filed  a  bill  for 
strict  foreclosure  against  a  town- 
ship claiming  under  a  sale  of  land 
for  taxes,  and  stated  that  he  bought 
and  held  the  premises  as  trustee 
for  a  partnership  composed  of  him- 
self and  two  other  persons  whom 
he  made  defendants.     Held,  that 


623 


*265 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


alleged  to  exist,  whether  jointly  or  severally,  or  in  the  al- 
ternative, {e) 


they  should  have  been  complain- 
ants instead  of  defendants.  Jewell 
v.  West  Orange,  36  N.  J.  Eq.  403. 

Where  a  mortgage  on  a  schooner 
was  given  to  one  partner  individu- 
ally for  the  benefit  of  the  firm, 
and  by  him  transferred  to  the 
other  partner,  and  the  firm  had 
possession  of  the  vessel,  an  action 
of  the  firm  for  freight  earned  was 
held  to  be  properly  brought.  Lord 
v.  Bernier,  4  Legal  News  (Mon- 
treal), 182.     (See  S.  C.  R.  '81). 

Where  the  plaintiffs,  three  in 
number,  claimed  personal  property 
under  a  mortgage  of  it  to  the  firm , 
whose  name  was  identical  with 
that  of  one  of  them,  but  there  was 
no  evidence  that  the  plaintiffs 
composed  such  firm,  or  that  any 
interest  in  the  mortgage  had  been 
assigned  to  the  other  two,  held, 
that  misjoinder  of  parties  was  a 
good  defense.  Matthews  v.  Snif- 
fen,  10  Daly,  200. 

Where,  upon  a  writ  issued 
against  the  firm  of  '•  R.  &  Co.,"  R. 
only  appeared,  and  a  verdict  and 
judgment  was  taken  against  R., 
6ued  as  "R.  &  Co.,"  the  plaintiffs 
cannot  subsequently  have  the 
judgment  amended  so  as  to  include 
C,  a  member  of  the  firm  of  R.  & 
Co.  The  'plaintiff  must  be  taken, 
although  he  acted  in  ignorance  of 
the  facts,  to  have  elected  to  sue  R. 
alone,  and  was  concluded  by  the 
form  of  the  proceedings  subse- 
quent to  the  appearance.  Munster 
v.  Cox,  10  L.  R.  App.  Cas.  680;  S. 
C.  55  L.  J.  R.  (N.  S.)  Q.  B.  108;  34 
W.  R.  461;  53  L.  T.  (N.   S.)  474; 


S.  C.  nom.  Munster  v.  Railton,  11 
L.  R.  Q.  B.  D.  435:  S.  C.  19  Can. 
L.  J.  (N.  S.)  370;  52  L.  J.  R.  (N.  S.) 
Q.  B.  409;  31  W.  R.  880:  48  L.  T. 
N.  S.  624;  reversing  S.  C.  10  L.  R. 
Q.  B.  D.  475. 

In  a  suit  on  an  obligation  pay- 
able to  himself  "  &  Co.,"  plaintiff, 
who  carries  on  business  as  a  firm, 
using  after  his  name  "&  Co.," 
must  allege  and  prove  that  he 
alone  is  interested  in  the  business, 
or  he  will  be  nonsuited.  Ferguson 
v.  King,  5  La.  Ann.  642. 

So,  where  a  suit  was  brought  in 
the  name  of  certain  persons,  as 
composing  a  commercial  firm,  and 
the  defendant  excepted  to  the  peti- 
tion upon  the  ground  that  all  the 
members  of  the  firm  had  not  been 
joined  in  the  action,  held,  that 
where  it  was  shown  that  the  name 
of  one  of  the  persons  used  in  the 
style  of  the  firm  was  omitted,  the 
burden  of  proof  was  on  the  plaint- 
iffs to  show  that  they  alone  com- 
posed the  firm.  Rugely  v.  Gill,  15 
La.  Ann.  509. 

After  a  guaranty  had  been  made 
to  a  firm,  one  of  its  members  re- 
tired, and  the  other  partners  paid 
the  whole  debt  that  the  grantor 
had  stipulated  to  relieve  the  firm 
of.  Held,  that  the  late  partner  was 
not  an  improper  party  to  a  suit  on 
the  guaranty.  Brown  v.  Haven, 
37  Vt.  439. 

If  partners,  as  partners,  are  sure- 
ties for  one  who  died  insolvent, 
and  a  judgment  against  them  on 
the  note  is  satisfied  by  levy  on  the 
separate  estate  of  one  of  them,  the 


(e)  Ord.  xvi,  rr.  1  and  4. 


624 


CH.  Ill,  SEC.  I.]        .ACTIONS    BETWEEN    PARTNERS. 


*265 


4.  A  plaintiff  may  at  his  option  join,  as  parties  to  the 
same  action,  all  or  any  of  the  persons  severally,  or  jointly 


claim  against  the  estate  of  the  de- 
ceased principal  is  correctly  made 
by  and  in  the  name  of  the  part- 
ners. Parker  v.  Gregg,  23  N.  H. 
416. 

A  promise  to  one  of  a  firm  to  re- 
fund money  belonging  to  the  firm 
inures  to  the  benefit  of  the  firm, 
and  an  action  for  it  should  be 
brought  by  the  firm.  Creel  v.  Bell, 
2  J.  J.  Marsh.  309. 

Where  a  vessel  was  built  by  sev- 
eral individuals,  and  advances 
were  made  by  two  part  owners 
who  were  partners  out  of  the  part- 
ner-hip funds,  the  liability  of  the 
other  owners  for  such  advances  is 
to  the  firm  and  net  to  the  several 
members  of  it.  Stevens  v.  Lunt, 
19  Me.  70. 

Where,  after  the  institution  of 
suit  in  the  names  of  the  members 
of  a  firm,  one  of  them  dies,  it  is  not 
error  to  file  subsequently  a  decla- 
ration in  the  names  of  all  of  them, 
and  then  suggest  the  death  of 
the  deceased  member.  Byrne  v. 
Schwing,  6  B.  Mon.  199. 

A  commercial  firm  cannot  de- 
mand in  the  same  suit  the  payment 
of  two  promissory  notes,  although 
they  are  dated  at  the  same  place 
and  on  the  same  day,  and  both 
payable  to  the  firm  under  its  firm 
name,  where  it  is  shown  that  such 
firm  was  composed  of  different 
persons,  when  the  indebtedness 
was  created  which  formed  the  con- 
sideration of  one  note,  from  those 
persons  who  composed  the  firm 
when  the  indebtedness  was  in- 
curred which  formed  the  consider- 
ation of  the  other  note.  It  would 
be  a  case  of  distinct  creditors  join- 


ing in  the  same  action  their  sepa- 
rate and  distinr-t  demands  against 
the  debtor.  Dyas  v.  Dinkgrave,  15 
La.  Ann.  502. 

The  rule  first  above  stated  is  the 
same  although  the  defendant,  at 
the  time  of  the  purchase,  was  ig- 
norant of  the  existence  of  the 
partnership.  Bennett  V.  Scott,  1 
Cranch,  C.  C.  339. 

A  dormant  partner,  however, 
need  not  be  joined  in  a  suit  in  favor 
of  the  firm  against  their  debtor. 
Waite  v.  Dodge,  34  Vt.  181 ;  Hilli- 
ker  v.  Loop,  5  Vt.  116;  Wood  v. 
O'Kelly,  8  Cush.  406 ;  Clarkson  v. 
Carter,  3  Cow.  84 ;  Clark  v.  Miller, 
4  Wend.  628;  Rogers  v.  Kichiine, 
36  Pa.  St.  293;  Curtis  v.  Belknap, 
21  Vt.  433;  Sylvester  v.  Smith,  9 
Mass.  119;  Wilson  v.  Wallace,  8 
Serg.  &  R.  55 :  Cleveland  v.  Wood- 
ward. 15  Vt.  302;  Blin  v.  Pierce.  20 
id.  25;  Hagar  v.  Stone,  id.  106; 
Speake  v.  Prewitt,  6  Tex.  252; 
Desha  v.  Holland,  12  Ala.  513.  See, 
also;)fcookingham  v.  Lasher,  39  N. 
Y.  454;  Bird  v.  McCoy,  22  Iowa, 
549;  Hines  v.  Dean,  1  Tex.  App. 
(Civ.)  379;  Pinchower  v.  Hanks,  18 
Nev.  99:  Boehm  v.  Calisch,  3  So. 
West.  R.  293. 

See,  however,  Secor  v.  Keller,  4 
Duer,  416.  And  it  has  been  held 
that  an  ostensible  partner  may 
maintain  an  action  in  his  own 
name  without  joining  a  dormant 
partner,  although  the  latter  was 
known  to  the  defendant  when  the 
debt  was  contracted,  and  actually 
sold  him  the  goods  for  the  price 
of  which  the  action  was  brought. 
Monroe  v.  Ezzel,  11  Ala.  603. 

If  A.,  a  member  of  a  firm,  deal 


Vol.  1  —  40 


625 


*265 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


and  severally,  liable  on  any  one  contract,  including  parties 
to  bills  of  exchange  and  promissory  notes.  (/) 


in  his  own  name  in  business  of  the 
firm  with  B.,  who  is  ignorant  of 
the  partnership,  B.  may  be  sued 
for  a  demand  against  him  arising 
from  such  dealing,  either  by  A. 
alone  or  by  the  firm.  And  in  a 
suit  by  the  firm  for  such  demand, 
B.'s  right  of  set-off  is  the  same  as 
if  B.  had  sued  alone.  Ward  v. 
Leviston,  7  Blackf.  466. 

One  of  two  partners  of  a  law  firm 
may  maintain  an  action  where 
the  business  respecting  which  a 
suit  is  brought  is  uniformly  done 
in  the  name  of  the  party  suing.  A 
set-off  will  be  allowed  in  such  suit 
of  a  demand  against  the  firm. 
Piatt  v.  Halen,  23  Wend.  456. 

If  a  partnership,  upon  its  dissolu- 
tion, convey  all  its  effects  to  one  of 
the  firm,  and  after  such  dissolution 
and  transfer  a  dehtor  of  the  firm 
promise  to  pay  the  individual  part- 
ner, he  may  maintain  an  action 
in  his  own  name  on  the  promise. 
Howell  v.  Reynolds,  12  Ala.  128. 

The  liquidating  partner  of  a 
commercial  firm  may'  sue  in  his 
own  name,  by  representing  the 
claim  sued  on  as  arising  out  of  the 
business  of  the  late  firm,  so  as  not 
to  deprive  the  defendant  of  any 
means  of  defense  to  which  he 
would  be  entitled  in  a  suit  in  the 
name  of  all  the  partners.  White  v. 
Jones,  14  La.  Ann.  681. 

But  it  is  held  that,  notwithstand- 
ing the  firm  business  is  done  in  the 
name  of  one  partner,  he  alone  can- 
not sue  for  the  price  of  the  goods 
sold  by  the  firm,  but  the  other 
acting  and  ostensible  partners  can- 


not join  the  co-plaintiffs.     Wilson 
v.  Wallace,  8  Serg.  &  R.  53. 

Where  two  partners  were  sub- 
jected to  the  payment  of  a  debt  of 
a  third  person,  the  one  as  surety 
and  the  other  as  the  heir  of  a 
co-surety,  which  debt  was  paid 
from  the  partnership  funds,  held, 
that  a  separate  action  might  be 
maintained  by  each  against  the 
principal  for  a  moiety  of  t lie  money 
paid.  Gould  v.  Gould,  6  Wend.  263. 
No  rule  of  pleading  or  practice 
authorizes  a  recovery  by  an  indi- 
vidual member  of  a  firm,  in  his 
own  name,  on  what  his  partners 
agree  is  his  share  of  a  debt  due  the 
firm.  In  all  cases  of  indebtedness 
to  a  firm  the  action  must  be 
brought  by  the  members  of  the 
firm,  nor  does  an  agreement  to 
divide  the  claims  among  them- 
selves change  the  right.  American 
Cent.  R.  R.  Co.  v.  Miles,  52  III.  174. 
But  where  two  partners  agree  to 
divide  a  partnership  debt,  and  the 
debtor  consents  to  it,  and  promises 
one  of  the  partners  to  pay  a  moiety 
to  him,  such  partner  may  maintain 
an  action  for  his  moiety  against 
the  debtor.  Blair  v.  Snover.  10  N. 
J.  L.  153. 

A  bill  cannot  be  maintained  by 
one  member  of  a  firm,  before  there 
has  been  a  settlement  of  the  part- 
nership accounts,  against  the  mem- 
bers of  another  firm,  for  the  pay- 
ment of  complainant's  share  of  an 
indebtedness  by  the  lattei*.  firm  to 
the  firm  of  which  he  is  a  member. 
Corner  v.  Gilman,  53  Md.  364. 
A  dissolution  of  a  partnership  by 


(/)  Ord.  xvi,  r.  6. 


626 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


*265 


5.  Claims  by  plaintiffs  jointly  may  be  joined  with  claims 
by  them    or   any   of   them   separately  against  the   same 

may  be  entitled  to  the  proceeds,  if 
the  claim  itself  has  not  been  ap- 
plied to  extinguish  the  debt  due 
such  partner.     White  v.  Savery,  50 


the  death  of  one  of  the  partners,  or 
otherwise,  and  an  adjustment  of 
the  partnership  concerns,  will  not 
bs  such  a  severance  of  a  joint  de- 
mand in  favor  of  the  partnership 
as  will  entitle  either  partner,  or 
his  executor  or  administrator,  to 
sue  alone  for  his  share,  without  the 
consent  of  the  debtor  to  such  sev- 
erance ;  but  all  the  partners,  if  liv- 
ing, must  join  in  the  action;  and 
if  any  of  them  be  dead  the  action 
must  be  brought  by  the  survivor 
or  survivors.  Peters  v.  Davis,  7 
Mass.  257;  Austin  v.  Walsh,  2  id. 
405. 

Whei*e,  after  the  dissolution  of 
the  firm,  one  partner  bi'ought  suit 
in  his  own  name  for  breach  of  con- 
tract made  with  the  firm,  and  the 
allegations  of  his  petition  as  to  his 
right  to  sue  in  his  own  name  were 
vague,  but  it  was  proved  at  the 
trial  that  the  firm  had  been  dis- 
solved by  agreement  and  that  the 
plaintiff  as  continuing  partner  suc- 
ceeded by  the  terms  of  the  agree- 
ment to  all  the  rights  of  the  firm, 
held,  that  the  evidence  implied  a 
defect  in  the  petition.  Milne  v. 
Douglass,  5  McCrary,  C.  Ct.  401 ;  S. 
C.  17  Fed.  Rep.  482. 

One  partner  cannot  maintain  an 
action  to  recover  a  debt  due  to  the 
firm,  although  he  agreed  to  be  re- 
sponsible to  the  other  partner  for 
the  payment  of  the  debt,  there  hav- 
ing been  no  settlement  between 
the  partners  making  the  claim  a 
separate  one.  Cushing  v.  Marston, 
12  Cush.  431. 

An  action  on  a  claim  due  a  firm 
may  be  maintained  in  the  firm 
name,  although  one  of  the  partners 


Iowa,  515. 

Where  a  suit  is  brought  by  sev- 
eral as  partners,  and  one  of  them 
proves  not  to  have  been  a  partner 
and  not  a  proper  party,  a  verdict 
for  all  cannot  be  sustained.  Travis 
v.  Tobias,  8  How.  Pr.  333. 

Where  one  partner,  who  is  agent 
of  his  copartners,  makes  a  contract 
in  his  own  name,  he  may  sue  on 
that  contract  without  joining  his 
partners.  Elancy  v.  French,  1 
Blackf.  353. 

An  action  for  goods  mortgaged 
to  one  partner  to  secure  an  indebt- 
edness to  the  firm  of  which  he  is  a 
member  is  rightly  brought  in  the 
name  of  the  mortgagee  alone. 
Trott  v.  Irish,  1  Allen,  481. 

A  partner  who,  by  express  stip- 
ulation in  the  articles  of  partner- 
ship (for  the  cultivation  of  a  farm 
for  a  term  of  years),  has  "  a  lien  on 
the  produce  of  the  said  farm,  and 
upon  the  stock  and  mules  on  said 
farm,  to  secure  the  payment  of " 
his  copartner's  notes  for  a  half  in- 
terest in  them,  and  is  authorized 
"to  control  the  crops  grown  on 
said  farm  exclusively,  and  to  sell 
the  cotton,"  may  maintain  an  ac- 
tion of  detinue  for  the  cotton  in  his 
own  name.  Pierce  v.  Jackson,  56 
Ala.  599. 

In  an  action  upon  a  note  payable 
to  the  order  of  the  plaintiff  alone 
he  was  nonsuited,  on  the  ground 
that  the  evidence  showed  that  the 
money  for  which  the  note  was 
given  was  advanced,  and  the  note 


627 


'265 


EIGHTS   AND   OBLIGATIONS. 


[BOOK    II. 


defendant,  (g)  provided  no  inconvenience  is  thereby  occas- 
ioned. (A) 

6.  Parties  required  by  a  defendant  to  be  joined  for  his  in- 
demnity or  relief  by  way  of  contribution  may  be  brought 
before  the  court.  (?') 

1.  Where  there  are  numerous  parties  having  the  same  in- 
terest in  one  action,  one  or  more  of  them  may  sue  or  be 
sued  on  behalf  of  all.  (/.:) 

8.  Any  two  or  more  persons  claiming  or  being  liable  as  co- 
partners may  sue  or  be  sued  in  the  names  of  the  firms  of  which 
thev  were  members  when  the  cause  of  action  accrued;  (I)1 
given,  in  pursuance  of  a  contract     been  several  changes  in  the  plaint- 


between  the  defendants  and  a  firm 
of  which  the  plaintiff  was  a  mem- 
ber ;  and  that  therefore  the  plaintiff 
could  not  maintain  an  action  alone, 
even  if  his  partner,  as  between 
themselves,  had  no  interest  in  the 
note.  Held,  that  the  nonsuit  was 
error.  Mynderse  v.  Snook,  53  Barb. 
234. 

A  partner  making  a  sale  is  not  a 
necessary  party  to  an  action  by  one 
memb'er  of  a  dissolved  partnership 
against  a  purchaser  from  the  other 
of  certain  partnership  property,  in 
which  the  plaintiff  denies  the  right 
of  his  former  partner  to  convey  the 
entire  interest  in  the  property  and 
sues  for  the  value  of  his  interest. 
Hagendobler  v.  Lyon,  12  Kan.  276. 

As  to  when  objection  for  defect 


iff  firm,  see  German  Bank  v. 
Schloth,  59  la.  316. 

As  to  parties  to  a  bill  filed  by 
a  copartnership  in  which  parties 
other  than  the  partners  have  an  in- 
terest by  purchase  or  otherwise,  see 
Ruffner  v.  Hewitt,  14  W.  Va.  737. 

Upon  a  debt  due  to  a  partnership 
of  four  persons,  two  of  the  part- 
ners recovered  judgment.  Held, 
that  the  four  partners  might  main- 
tain an  action  to  vacate  a  fraudu- 
lent conveyance  by  the  judgment 
debtor  which  in  appearance  pre- 
vented the  judgment  from  being  a 
lien  on  the  land.  Fuller  v.  Nelson, 
28  N.  W.  R.  511 ;  S.  C.  35  Minn.  213. 

(g)  Ord.  xviii,  r.  6. 

(h)  Id.  r.  7. 

(£)  Ord.  xvi,  r.  48,  et  seq.      Seo 


of  parties  plaintiff  in  an  action  on     Birmingham  Land  Co.  v.  L.  &  N. 


a  contract  by  partners  must  be 
taken,  see  Davis  v.  Chouteau,  33 
Minn.  548. 

"Where,  in  the  title  of  a  cause, 
the  individual  names  of  partners 
are  given,  followed  by  the  word 
"  partners,"  it  is  unnecessary  to  re- 
peat the  names  in  the  body  of  the 
petition.     King  v.  Bell,  13  Neb.  409. 

As  to  who  should  file  a  claim  for 
a  mechanic's  lien  where  there  have 


W.  Rail.  Co.  34  Ch.  D.  261. 

(k)  Ord.  xvi,  r.  9. 

(I)  Id.  rr.  14  and  15. 

1  Partners  cannot  sue  nor  be  sued 
in  their  copartnership  name;  the 
individual  names  must  be  stated  in 
full.  Blackwell  v.  Reid,  41  Miss. 
103;  Tomlinson  v.  Burk,  10  N.  J. 
L.  295;  Seeley  v.  Schenck,  2  N.  J. 
L.  75;  Crandall  v.  Denny,  id.  137; 
Burns  v.  Hall,  3  N.  J.  L.  984;  Bent- 


628 


CH.  Ill,  SEC.  I.]         ACTIONS    BETWEEN   PARTNERS. 


^265 


and  provision  is  made  for  the  discovery  of  the  individuals 
so  suing  or  being  sued,  (m) 


ley  v.  Smith,  3  Cai.  170;  Tomlinson 
v.  Burke,  10  N.  J.  L.  295 ;  Porter 
v.  Cresson,  10  Serg.  &  R.  257 ;  Pate 
v.  Bacon,  6  Munf.  219 :  Marshall  v. 
Hull,  8  Yerg.  101 :  Smith  v.  Can- 
field,  8  Mich.  493;  Barber  v.  Smith, 
41  Mich.  138;  Davis  v.  Hubbard,  4 
Blackf.  50 ;  Hughes  v.  Walker,  id. 
50 :  Faulkner  v.  Whitaker,  15  N.  J. 
L.  438;  Livingston  v.  Harvey,  10 
Ind.  218:  Holland  v.  Butler,  5 
Blackf.  255;  Richardson  v.  Smith, 
21  Fla.  336;  Adams  v.  May,  27  Fed. 
Rep.  907 ;  Bannerraan  v.  Quacken- 
bush,  11  Daly,  529.  See,  also, 
Bischoff  r.  Blease,  20  S.  C.  460. 

Non-joinder  of  proper  defendants 
in  an  action  against  the  partner- 
ship can  only  be  raised  by  plea  in 
abatement.  Rutter  v.  Sullivan,  25 
W.  Va.  427 ;  Coffee  v.  Eastland,  1 
Brunner,  216. 

In  New  York  the  objection  must 
be  taken  by  answer  or  demurrer. 
Wotherspoon  v.  Wotherspoon,  49 
N.  Y.  Super.  Ct.  152. 

When  a  suit  is  brought  in  the 
firm  name,  the  individuals  com- 
posing the  firm  being  stated  in  the 
petition,  no  necessity  exists  of 
proving  who  composes  the  firm, 
unless  the  partnership  is  denied 
under  oath.  Lindsay  v.  Jaffray, 
55  Tex.  626. 

One  cannot  maintain  an  action 
in  his  own  name  for  services  ren- 
dered both  in  his  individual  capac- 
ity and  also  while  a  member  of  a 
firm,  on  the  dissolution  of  which 
he  had  acquired  the  interest  of  the 
retiring  partner.    Mosgrove  v.  Gol- 


den, 101  Pa.  St.  605;  S.  C.  13  Weekly 
Not.  Cas.  133;  40  Leg.  Intel.  201. 

Where  an  agent  employs  another 
to  aid  him  in  his  agency  the  person 
so  employed  does  not  become  a 
partner  of  the  agent  as  to  the  prin- 
cipal, and  the  agent  may  sue  the 
principal  for  commissions  without 
joining  such  person  with  him. 
Flournoy  v.  Williams,  68  Ga.  707. 

Where  plaintiff,  assuming  to  act 
not  as  a  corporation,  but  as  a  part- 
nership, sues  by  a  name  importing 
a  corporation,  the  point  may  be 
raised  by  an  answer  alleging  want 
of  parties  in  interest  to  the  suit. 
Heaston  v.  Cincinnati,  etc.  R.  R. 
Co.  16  Ind.  275. 

Where  partners  sue,  if  their  in- 
dividual names  appear  in  the  peti- 
tion the  name  of  the  firm  may  be 
used  in  the  citation.  Andrews  v. 
Ennis,  16  Tex.  45. 

A  summary  process  in  South 
Carolina,  brought  in  the  mercan- 
tile name  of  a  firm,  without  setting 
out  the  partnership  or  the  Christian 
names  of  the  partners,  is  bad  upon 
exception  by  plea,  but  not  on  mo- 
tion for  nonsuit.  Martin  v.  Kelly, 
Cheves,  215. 

A  declaration  in  behalf  of  or 
against  a  partnership,  by  the  name 
of  "firm,"  without  mentioning 
the  names  of  the  partners,  is  good 
after  verdict.  Pate  v.  Bacon,  6 
Munf.  219;  Seitz  v.  Buff  urn,  14 
Pa.  St.  69;  Wolf  v.  Lamborn,  17 
Weekly  Not.  Cas.  425;  Davis  v. 
Kline,  76  Mo.  310. 

Compiled  Laws  of  Michigan,  sec- 


(m)  Ord.  xvi,  rr.  14  and  15,  and    law,  Woolf  v.  City  Steamboat  Co. 
Ord.  vii,  r.  2.    See,  as  to  the  old    7  C.  B.  103. 

629 


*265 


EIGHTS    AND    OBLIGATIONS. 


[book  n. 


Actions  in  the  mercantile  name. —  With  reference  to  this 
last  rule  it  is  to  be  observed  that  the  firm's  name,  when  used 


tion  5307,  permits  a  partnership 
suit  to  be  instituted  in  the  firm 
name  if  the  names  of  the  partners 
are  not  known,  and  allows  of 
amendment  at  any  time  before 
pleadings  are  closed  by  inserting 
the  names  of  the  partners.  Held, 
that  this  applies  to  cases  of  actual 
partnership  only;  and  where  a 
writ  of  replevin  was  issued  in  a 
firm  name  and  the  amendment 
showed  that  there  was  only  one 
plaintiff,  the  action  failed.  Stir- 
ling v.  Heintzman,  42  Mich.  449. 

An  action  in  which  judgment 
was  rendered  was  brought  in 
Nevada,  and  the  complaint  therein 
described  the  plaintiffs  as  partners ; 
pending  the  action  the  partnership 
was  dissolved  and  the  judgment 
was  rendered  in  favor  of  the  plaint- 
iffs individually.  Held,  that  the 
judgment  was  valid.  Stewart  v. 
Spaulding,  72  Cal.  264. 

Section  2468,  Criminal  Code  of 
California,  forbidding  the  mainte- 
nance of  actions  by  partners  who 
have  failed  to  file  the  certificate 
required  by  that  section,  does  not 
apply  to  actions  for  torts.  Ralph 
v.  Lockwood,  61  Cal.  155. 

Entry  of  appearance  by  defend- 
ants, four  partners,  in  the  name  of 
"The  Turner  Casing  Company," 
held  to  be  an  appearance  not 
only  by  the  company  but  also 
by  its  members.  Packing  &  Pro- 
vision Co.  v.  Casing  Co.  34  Kan. 
340. 

A  complaint  brought  in  a  firm's 
name,  but  not  stating  the  names 
of  the  members  of  the  firm  as 
plaintiffs,  is  defective  and  can  be 
demurred  to,  but  the  defect  cannot 


be  availed  of  by  appeal.     Gilinan 
v.  Cosgrove,  22  Cal.  356. 

Where  a  foreign  firm  is  sued  in 
its  firm  name,  and  answers,  and  a 
verdict  is  taken  upon  the  defense 
set  up  in  the  answer,  without  ob- 
jection to  the  irregularity,  they 
will  be  deemed  to  have  waived 
their  strict  legal  right  to  object. 
Brownson  v.  Metcalfe,  1  Handy 
(Ohio),  188. 

A  judgment  against  a  partner- 
ship in  its  firm  name  alone  will 
support  an  action  against  an  indi- 
vidual member  of  the  firm  to  en- 
force his  individual  liability  for 
the  firm  debts.  Cox  v.  Harris,  48 
Ala.  538. 

It  is  not  competent  for  parties, 
by  articles  of  agreement  between 
themselves,  to  invest  such  person 
as  a  majority  of  them  shall  after- 
wards appoint  with  power  to  sue 
in  his  own  name  for  moneys  agreed 
to  be  contributed  by  each  partner 
to  the  general  fund.  Fortune  v. 
Brazier,  10  Ala.  791. 

In  an  action  by  a  partnership 
the  record  must  show  the  individ- 
ual names  of  the  several  partners, 
although  the  statute  (Code  of  1876, 
§  3038)  dispenses  with  the  necessity 
of  proving  them  unless  denied  by 
plea  verified  by  affidavit,  and  also 
(§  2904)  authorizes  a  suit  against  a 
partnership  by  its  firm  name. 
Moore  v.  Burns,  60  Ala.  269. 

In  a  suit  by  a  partnership  the 
names  of  the  partners  who  compose 
the  firm  should  be  distinctly  stated. 
Therefore,  when  in  such  a  suit  the 
record  does  not  show  the  Christian 
names  or  surnames  of  the  persons 
composing  the  firm,  nor  anything 


630 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


*265 


in  any  action,  is  merely  a  convenient  method  of  expressing 
the  names  of  those  who  constituted  the  firm  when  the  cause 

else  upon  which  an  amendment 
may  be  based,  it  is  error  to  render 
judgment  by  default.  Lanford  v. 
Patton,  44  Ala.  584. 

By  Nebraska  Code,  section  24,  a 
partnership  not  incorporated  may 
sue  in  its  firm  name,  but  the  course 
indicated  by  sections  25  and  26, 
must  be  strictly  followed ;  in  partic- 
ular it  must  be  shown  that  the  com- 
pany is  formed  for  business  pur- 
poses, etc.,  and  is  not  incorporated, 
and  security  for  costs  must  b3 
given.  Burlington,  etc.  R.  R.  Co. 
v.  Dick,  7  Neb.  242. 

Suit  in  the  name  of  "Hanson 
Gregg,  Albert  Torrian  and  Mason 
Gregg,  late  copartners,  under  the 
firm  name  and  style  of  Gregg,  Tor- 
rian &  Co.,  plaintifTs,"  held,  on 
demurrer,  not  brought  under  the 
provisions  of  section  24,  chapter  57, 
General  Statutes,  and  it  was  not 
necessary  that  plaintiffs  should 
state  that  such  partnership  "  was 
formed  for  the  purpose  of  carrying 
on  trade  or  business,  or  for  the 
purpose  of  holding  any  species  of 
property  in  this  state."  Smith  v. 
Gregg,  2  N.  W.  Rep.  (N.  S.)  459; 
S.  C.  9  Neb.  213. 

A  proper  construction  of  section 
1  of  the  "  act  regulating  suits  by 
and  against  companies  and  part- 
ners," authorizing  suits  by  and 
against  companies  not  incorporated 
in  the  firm  name,  limits  its  opera- 
tion to  companies  formed  for  and 
doing  business  or  holding  property 
within  this  state.  Haskins  v.  Al- 
cott,  13  Ohio  St.  210. 

In  Iowa,  where  a  note  is  made 
payable  to  a  firm  by  its  name,  it  is 
advisable  to  declare  thereon  in  the 


name  of  the  firm ;  but  if  the  names 
of  the  several  partners  are  set  out 
it  is  not  necessary  to  prove  them. 
Gordon  v.  Janney,  1  Mori-.  182; 
Bernard  v.  Parvin,  id.  309. 

In  Iowa  and  Ohio  partnership 
may  be  sued  in  the  individual 
names  of  its  members,  as  well  as 
in  its  copartnership  name.  Mark- 
ham  v.  Buckingham,  21  Iowa,  494 ; 
Johnson  v.  Smith,  1  Morr.  105; 
Abernathy  v.  Latimore,  19  Ohio, 
28G. 

The  statute  of  Alabama,  which 
authorizes  an  action  at  law  against 
a  partnership  by  the  common  name 
without  mentioning  the  names  of 
the  individual  partners,  applies  to 
actions  commenced  by  attachment. 
McCaskey  v.  Pollock,  82  Ala.  174 ; 
S.  C.  2  So.  Rep.  674. 

Under  the  Illinois  attachment 
law  partners  may  be  sued  in  their 
firm  name.  U.  S.  Express  Co.  v. 
Bedbury,  34  111.  459. 

In  an  action  by  partners  it  is 
not  necessary  to  describe  them  as 
such  in  the  writ.  Tarlton  v.  Her- 
bert, 4  Ala.  359. 

Describing  the  plaintiffs  in  a  title 
to  an  action  as  partners  is  surplus- 
age where  the  suit  is  not  upon  a 
partnership  matter ;  and  an  allega- 
tion of  compliance  with  the  law 
relative  to  filing  and  publishing 
notice  of  the  partnership  is  un- 
necessary. Lee  v.  Orr,  11  Pac. 
Rep.  745. 

Where  an  action  was  brought 
against  "Albany  Lodge,  No.  24, 
Free  and  Accepted  Masons,"  and 
"Albany  Chapter,  No.  15,  Royal 
Arch  Masons,"  without  alleging 
either    that  the   defendants  were 


631 


*265 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


of   action   accrued.     The   rule   does   not   incorporate   the 
firm;(n)  so  that  if  A.  is  a  creditor  of  a  firm,  B.,  C.  and 


corporations,  or  that  the  members 
were  partners,  held,  that  there  was 
no  party  defendant,  and  a  de- 
murrer was  properly  sustained. 
Barbour  v.  Albany  Lodge,  73  Ga. 
474. 

Where  plaintiffs  sue  as  partners, 
their  right  to  sue  as  such  depends 
upon  the  existence  of  a  partner- 
ship, which  therefore  is  an  issuable 
fact  and  must  be  alleged  in  the 
declaration.  Bischoff  v.  Blease,  20 
S.  C.  460. 

An  averment  that  the  plaintiffs 
for  several  years  past  have  been 
and  now  are  copartners,  doing  busi- 
ness under  the  firm  name  and  style 
of  "A.  Pfister  &  Co.,"  is  a  suffi- 
cient averment  of  copartnership. 
Pfister  v.  Wade,  69  Cal.  133. 

In  a  complaint  stating  that  "  the 
plaintiffs  complain  of  the  defend- 
ants and  say  that  they  are  part- 
ners," etc.,  the  personal  pronoun 
was  held  to  refer  to  the  plaintiffs, 
and  the  complaint  in  this  respect 
was  held  sufficient  on  demurrer. 
Moore  v.  Beem,  83  Ind.  219. 

As  to  the  form  of  complaint  in 
an  action  by  or  against  partners 
doing  business  under  a  fictitious 
name,  see  Phillips  v.  Goldtree,  13 
Pac.  R.  313;  15  id.  451;  Lee  v.  Orr, 
70  Cal.  398. 

See  further  as  to  the  manner  of 
describing  plaintiffs  in  an  action 
by  a  partnership,  McCord  v.  Seale, 
56  Cal.  262 ;  Sweet  v.  Erwin,  54  la. 
101;  Smith  v.  Gregg,  9  Neb.  212 
(under  sec.  24,  ch.  57,  Gen.  Stat. 


Neb.) ;  Putnam  v.  Wheeler,  65  Tex. 
522 ;  Moses  v.  Hatfield,  3  So.  East. 
Rep.  538;  Wise  v.  Williams,  72 
Cal.  544. 

In  an  action  against  pei'sons  for 
a  cause  of  action  which  arose  while 
they  were  partners,  plaintiff  may 
sue  them  in  their  late  firm  name, 
although  the  partnership  was  dis- 
solved before  the  writ  was  issued. 
Wilson  v.  Roger,  10  Ont.  Pr.  355; 
S.  C.  4  Can.  L.  T.  548. 

As  to  the  verification  of  the  an- 
swer in  an  action  against  paitners, 
see  Lacy  v.  Wilkinson,  7  N.  Y.  Civ. 
Proc.  104. 

As  to  the  description  of  a  de- 
fendant firm  in  a  declaration,  see 
Morrissey  v.  Schindler,  18  Neb.  672. 

As  to  the  manner  of  describing 
the  defendants  in  a  bill  against  the 
members  of  a  firm  after  its  disso- 
lution, see  Vance  v.  Kirk,  29  West 
Va.  345;  S.  C.   1  So.  East.  Rep.  717. 

Partners,  as  a  general  rule,  may 
be  declared  against  as  other  .joint 
contractors,  only  care  must  be 
taken  that  all  the  causes  of  action 
be  alleged  to  be  joint.  Hawley  v. 
Hurd,  56  Vt.  617. 

Pleadings  upon  a  complaint 
charging  a  partnership,  and  ask- 
ing for  an  accounting,  considered. 
McMahon  v.  Thornton,  4  Mont.  36. 

Defendants  were  sued  as  a  cor- 
poration. There  was  no  such  cor- 
poration, but  there  was  a  copart- 
nership under  the  same  name  as 
the  alleged  corporation.  Process 
was  served  on  one  partner  as  treas- 


(n)  See  per  James,  L.  J.,  in  Ex    was  taken,  see  Bullock  v.  Caird,  L. 
parte  Blain,  12  Ch.  D.  533.     As  to    R.  10  Q.  B.  276. 
the  Scotch  law  from  which  the  rule 

632 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


*265 


D.,  and  D.  retires  and  E.  takes  bis  place,  and  the  name 
of  the  firm  continues  unchanged,  A.  cannot  maintain  an 


urer  of  the  alleged  corporation 
and  the  defendants  appeared  and 
pleaded  nul  tiel  corporation;  the 
court  allowed  the  plaintiff  to 
amend  his  writ  by  setting  up  the 
defendant  company  as  a  copartner- 
ship, naming  the  copartners.  Held, 
that  this  was  error.  Sawyer  v.  N. 
Y.  St.  Clothing  Co.  2  Atl.  R.  483. 

Where  a  firm,  upon  a  change  of 
its  membership,  adds  the  word 
"limited"  to  the  firm  name,  and 
thereafter  brings  an  action  for  a 
debt  due  to  the  firm  as  newly  con- 
stituted, but  without  using  that 
word  in  the  petition,  the  petition 
may  be  corrected  during  the  trial 
by  adding  the  word  to  the  plaint- 
iff's name.  Paine  v.  Waterloo  Gas 
Co.  28  N.  W.  R.  560. 

Where  a  firm  has  received  money, 
and,  after  its  dissolution,  a  bill  is 
filed  against  the  persons  who  con- 
stituted the  firm  to  compel  them  to 
refund  the  money,  although  it  is 
usual,  it  is  not  necessary  to  de- 
scribe them  as  lately  doing  business 
under  a  certain  name.  "Vance  v. 
Kirk,  1  S.  E.  R.  717. 

In  an  action  by  partners  of  the 
same  surname,  it  is  not  error  if  it 
is  not  added  to  every  Christian 
name.  Chance  v.  Chambers,  2  N. 
J.  L.  384. 

Plaintiffs  may  join  in  one  suit 
several  demands  for  debts  con- 
tracted with  them  by  the  defend- 
ant under  different  firm  names. 
Messner  v.  Lewis,  20  Tex.  221. 

As  to  multifariousness  in  joining 

distinct  causes  of   action  against 

different    firms,    see    Sanborn    v. 

Dwinell,  135  Mass.  236. 

Where  a  note  or  bill  is  payable 


to  a  firm,  strict  proof  is  required 
that  the  firm  consists  of  the  plaint- 
iffs on  the  record.  M'Gregor  v. 
Cleveland,  5  Wend.  475. 

In  an  action  against  D.  and  M., 
the  writ  described  them  as  late  co- 
partners under  the  firm  name  and 
style  of  "  D.  &  Co.,"  and  the  decla- 
ration alleged  that  they  made  a 
promissory  note  signed  D.  &  Co. 
D.  alone  appeared  and  filed  a  gen- 
eral denial.  Held,  that  the  signa- 
ture to  the  note  was  alleged  to  be 
that  of  D.,  and  that  under  the  stat- 
ute of  1877,  chapter  103,  the  genu- 
ineness of  the  signature  was  ad- 
mitted, and  it  was  not  necessary  for 
the  plaintiff  to  prove  that  D.  was 
a  member  of  the  firm  of  D.  &  Co. 
Haskins  v.  D'Este,  133  Mass.  356. 

As  to  the  manner  of  declaring 
upon  a  partnership  note  and  put- 
ting its  execution  in  issue,  see, 
also,  Lucas  v.  Baldwin,  97  Ind.  471 ; 
McRobert  v.  Crane,  49  Mich.  483., 

As  to  what  allegations  in  a  plea 
admit  the  existence  of  a  partner- 
ship, see  Porter  v.  Graves,  104  U.  S. 
171. 

As  to  when  a  plea  of  non  est  fac- 
tum is  necessary  in  a  suit  against 
partners,  see  Palmer  v.  Scott,  68 
Ala.  380.  See,  also,  King  v.  Bar- 
bour, 70  Ind.  35. 

One  partner  cannot  assign  his 
interest  in  an  open  account  due  to 
the  firm  to  his  copartner,  and  the 
latter  may  become  the  real  party 
in  interest  so  as  to  maintain  a  suit 
on  the  account  in  his  own  name. 
Swails  v.  Coverdill,  17  Ind.  337; 
Cook  v.  Beach,  10  Humph.  412.  But 
see  Horbach  v.  Huey,  4  Wc.tts,  455. 

One  partner  cannot  maintain  an 


633 


*2Q6 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


[*266]  -action  against  B.,  C.  and  E.  in  the  name  of  the  firm, 
unless  B.,  C.  and  E.  have  become  or  are  content  to 
be  treated  as  his  debtors.  In  the  case  supposed  an  action 
against  the  firm  would  mean  an  action  against  B.,  C.  and  D., 
*.  e.,  A.'s  real  debtors. 

Where  there  have  heen  no  changes  in  the  firm. —  Where 
there  have  been  no  changes  amongst  the  members  of  a  firm 
since  the  cause  of  action  accrued  there  is  no  difficulty  in 
following  the  rules.  The  writ  may  be  served  either  upon 
any  one  or  more  of  the  partners,  or  at  the  principal  place  of 
business  of  the  firm,  upon  any  person  having  the  control  or 
management  of  the  partnership  business  there.  (<>)  Appear- 
ances are  entered  by  the  partners  in  their  own  names,  but 
subsequent  proceedings  continue  in  the  name  of  the  firm,  (p) 
If  all  the  members  of  the  firm  have  properly  appeared, 
judgment  may  be  entered  up  against  the  firm,  (q)  but  not 
otherwise,  {r) 


action  in  his  own  name  alone  to 
recover  a  partnership  debt,  al- 
though his  copartners'  interest  has 
been  assigned  to  him,  without 
showing  that  the  debt  to  the  firm 
has  been  extinguished,  and  a  new 
liability  assumed  to  the  plaintiff 
alone;  and  if  a  new  contract  be 
made  it  must  be  declared  on  spe- 
cially. De  Grott  v.  Darby,  7  Rich. 
118. 

An  indorsement  by  one  partner 
in  his  individual  name,  to  his  co- 
partner, of  a  promissory  note  pay- 
able to  both  of  them  or  order,  will 
not  enable  the  indorsee  to  sue 
thereon  in  his  own  name.  Esta- 
brook  v.  Smith,  6  Gray,  570. 

In  a  suit  by  the  plaintiff  as  as- 
signee of  a  firm  on  a  promissory 
note  against  the  maker,  the  decla- 
ration need  not  state  the  names  of 
the  persons  composing  the  firm. 
Smith  v.  Blatchford,  2  Ind.  184. 


A  judgment  in  favor  of  "L.  & 
M.,"  trading  as  a  firm,  is  valid,  and 
is  competent  evidence,  in  a  suit 
brought  by  the  firm,  that  the  judg- 
ment was  recovered  by  the  part- 
nership, their  individual  names 
being  set  out  in  full.  Lash  v.  Ar- 
nold, 8  Jones,  L.  91. 

(o)  Ord.  ix,  r.  6.  See,  as  to  foreign 
firms,  Pollexfen  v.  Sibson,  16  Q.  B. 
D.  792 ;  Baillie  v.  Goodwin,  33  Ch. 
D.  604;  and  as  to  lunatics,  Fore 
Street  Warehouse  Co.  v.  Durrant  & 
Co.  10  Q.  B.  D.  471. 

(p)  Ord.  xii,  r.  15. 

(q)  Id. ;  Jackson  v.  Litchfield,  8 
Q.  B.  D.  474. 

(r)  Adam  v.  Townend,  14  Q.  B.  D. 
103;  Jackson  v.  Litchfield,  8  Q.  B. 
D.  474 :  Minister  v.  Cox,  10  App.  Ca. 
680,  affirming  Munster  v.  Rail  ton, 
11  Q.  B.  D.  435.  As  to  execution, 
see  infra,  §  3. 


634 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN   PARTNERS.  "::"2G7 

Where  there  have  been  changes. —  Where  changes  have 
occurred  amongst  the  members  of  the  firm  since  the  cause 
of  action  accrued,  little,  if  any,  advantage  is  derived  from 
using  the  name  of  the  firm.  If  an  action  is  brought  against 
a  firm,  which  the  plaintiff  knows  has  been  dissolved  before 
the  commencement  of  the  action,  the  writ  must  be  served 
upon  all  the  persons  sought  to  be  made  liable,  (s)  If,  as 
sometimes  happens,  the  plaintiff  sues  a  firm  and  obtains 
judgment  against  it,  without  having  discovered  that  any 
changes  have  occurred  in  it  since  the  cause  of  action  ac- 
crued, he  may  find  himself  in  a  difficulty  when  he  seeks  to 
enforce  his  judgment.  In  such  a  case  it  may  well  happen 
that  the  person  against  whom  he  seeks  to  enforce  it  is  not 
one  of  those  mentioned  in  Ord.  XLII,  r.  10,  and  is,  in  fact, 
not  liable  to  execution  without  further  proceedings,  if  at 
all.  (t) 

A  debt  due  from  a  firm  under  a  judgment  recov- 
ered against  *it  in  its  mercantile  name  cannot  be  [*2G7] 
attached  under  the  garnishee  orders,  (u) 

Two  firms  with  common  partner. —  It  frequently  hap- 
pens that  there  are  reasons  which  prevent  the  joinder  as 
plaintiffs  of  all  who  pri/nafacie  ought  to  be  joined;  in  such 
a  case  those  who  cannot  be  so  joined  may  be  made  defend- 
ants.1    Thus,  if  a  firm  has  a  cause  of  action,  and  one  meni- 

(s)  Ord.  xvi,  r.  14.  executed  an  assignment  to  his  as- 

(t)  See  Munster  v.  Cox,  10  App.  signee,  his  insolvent  partners  and 

Ca.  680,  and  infra,  §  3,  as  to  execu-  such  assignee  must  join  in  an  ac-  • 

tion.  tion  to  collect  a  claim  due  to  the 

(a)  Walker  v.  Rooke,  6  Q.  B.  D.  firm.      Browning    v.    Marvin,    22 

631.  Hun  (N.  Y.),  547. 

1  Where  a  demand  exists  in  favor  If  one  partner  is  omitted  as 
of  a  partnership,  and  one  of  the  plaintiff  and  made  a  party  defend- 
part  ners  refuses  to  join  in  an  ac-  ant  with  another  person  not  a 
tion  for  its  enforcement,  he  may  partner  and  not  representing  the 
be  made  a  defendant  with  the  interests  of  one,  the  court  will  not 
partnership  debtor  in  a  suit  brought  have  equity  jurisdiction  as  it  re- 
by  his  copartner.  Hill  v.  Marsh,  spects  the  latter.  Reed  v.  Johnson, 
46  Ind.  218.  24  Me.  322. 

After  one  member  of  a  firm  has        A  decree  of  foreclosure  against 

been  adjudged  a  bankrupt  and  has  the  members  of  a  partnership,  as 

635 


•267 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   II. 


ber  has  improperly  released  it,  the  other  members  can  never- 
theless maintain  the  action,  joining  him  as  a  defendant,  so 
that  justice  may  be  done  both  to  the  plaintiffs  and  to  their 
opponents,  (a?)  Again,  there  appears  to  be  no  reason  why 
an  action  should  not  now  be  maintained  for  the  recovery  of 
a  debt  due  from  one  partner  to  the  firm;  (y)  nor  why,  if  two 
firms  have  a  common  partner,  an  action  should  not  be  main- 
tained by  one  firm  against  the  other;1  not,  perhaps,  in  their 


such,  all  the  known  memhers  not 
being  made  parties  to  the  suit,  does 
not  bind  the  firm.  Lippincott  v. 
Shaw  Carriage  Co.  25  Fed.  Rep. 
577. 

Where  there  were  one  hundred 
partners,  who  had  executed  mort- 
gages individually  to  the  partner- 
ship to  secure  the  debts  of  the 
concern,  and  some  of  the  partners 
were  dead,  leaving  numerous  rep- 
resentatives, held,  that  assignees  of 
such  mortgages  might  foreclose  by 
separate  suits  against  each  partner, 
without  making  the  others  parties. 
Boisgerard  v.  Wall,  1  Smed.  &  M. 
Ch.  404. 

(x)  See  the  cases  in  the  next  note. 

(y)  Piercy  v.  Fynney,  12  Eq.  69; 
Taylor  v.  Midland  Rail.  Co.  28  Beav. 
287,  and  8  H.  L.  C.  751,  show  that 
suits  in  equity  would  lie  in  these 
cases  in  aid  of  legal  rights.  See, 
also,  Luke  v.  South  Kensington 
Hotel  Co.  11  Ch.  D.  121;  William- 
son v.  Barbour,  9  Ch.  D.  536,  per 
Jessel,  M.  R. 

As  to  contracts  with  partners, 
which,  although  joint  in  form,  are 
in  point  of  law  joint  and  several 
owing  to  the  separate  interests  of 
the  partners,  see  Palmer  v.  Mallet, 
36  Ch.  D.  411,  a  case  of  a  contract 
by  an  assistant  not  to  carry  on 
business  without  the  consent  of  the 
partners. 


1  Where  two  companies  are 
composed  in  part  of  the  same  in- 
dividuals no  action  at  law  can  be 
maintained  by  one  against  the 
other.  Portland  Bank  v.  Hyde,  11 
Me.  196 :  Green  v.  Chapman,  27  Vt. 
236;  Griffith  v.  Chew,  8  Serg.  &  R. 
30;  Eastman  v.  Wright,  6  Pick. 
321 ;  Burley  v.  Harris,  8  N.  H.  235; 
Graham  v.  Harris,  5  Gill  &  J.  489; 
Rogers  v.  Rogers,  5  Ired.  Eq.  31 ; 
Beacannon  v.  Liebe,  11  Or.  443;  Cal- 
vin v.  Markham,  4  Miss.  343; 
Haven  v.  White,  39  111.  509 ;  Englis 
v.  Furniss,  4  E.  D.  Smith,  587. 
See,  also,  Denny  v.  Metcalf,  28  Me. 
389. 

A  balance  of  account  due  from 
one  partnership  to  another,  where 
the  two  partnerships  are  composed 
in  part  of  the  same  individuals, 
may  be  assigned,  and  the  assignee 
maintain  an  action  at  law  to  re- 
cover such  balance,  unless  it  ap- 
pears that  a  general  accounting  is 
necessary  between  the  two  firms  to 
ascertain  the  same.  Beacannon  v. 
Liebe,  11  Or.  443.  See,  also,  Pitcher 
v.  Barrows,  17  Pick.  361 ;  Scott  v. 
Green,  89  N.  C.  278. 

A  complaint  upon  an  assigned 
partnership  account,  which  does 
not  state  the  consideration  for  the 
assignment  and  does  not  aver  a 
settlement  of  the  partnership  af- 
fairs, is  sufficient  upon  a  motion  in 


036 


OH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


:-2cr 


mercantile  names,  but  by  those  members  of  one  firm  which 
are  not  common  to  both  against  the  members  of  the  other 
firm;  e.  g.,  if  there  are  two  firms,  A.,  B.  and  C.  and  A.,  D. 
and  E.,  an  action  may,  it  is  conceived,  be  now  maintained 
by  A.,  B.  and  C.  against  D.  and  E.,  or  by  B.  and  C.  against 
A.,  D.  and  E.,  or  vice  versa,  (s) 

Defenses  to  actions  by  partners  founded  on  the  conduct 
of  one  of  them. —  As  a  general  principle,  what  a  person  has 
no  right  to  do  himself  he  cannot  acquire  a  right  to  do  by 
associating  others  with  him.  ((()  Thus,  it  being  a  rule  that 
a  trustee  cannot  claim  from  his  cestui  que  trust  compensa- 
tion  for  trouble,  or  loss  of  time  in  the  execution  of  the 


arrest  of  judgment.  Kious  v.  Day, 
94  Ind.  500. 

Plaintiff  and  D.  were  partners, 
and  so  were  D.  and  defendant. 
The  first  firm  owned  a  building 
which  it  rented  to  the  second 
under  a  contract  made  between  D. 
for  the  second  firm,  and  plaintiff 
for  the  first,  to  the  effect  that  de- 
fendant should  pay  plaintiff  one- 
half  the  rent  of  the  building.  This 
contract  defendant  ratified.  Held, 
that  the  plaintiff  might  recover  the 
half  rent  from  defendant  with- 
out an  assignment  from  D. ;  that 
defendant's  ratification  dated  back 
to  the  time  it  was  made,  and  that 
plaintiff  need  not  resort  to  equity 
for  relief.  Hernott  v.  Kersey,  69 
la.  111. 

An  action  at  law  cannot  be  main- 
tained by  the  members  of  a  firm  on 
a  written  obligation  for  the  pay- 
ment of  money  to  them  where  one 
of  the  obligors  is  a  member  of  the 
firm.  Tindal  v.  Bright,  Minor, 
103. 

Under  the  statute  of  Mississippi, 
declaring  all  notes  joint  and  sev- 
eral, a  member  of  a  firm  may  be  a 
co-plaintiff  in  a  suit  on  a  promis- 


sory note  against  another  firm  of 
which  he  is  a  partner,  provided  he 
is  not  also  joined  in  the  action  as 
defendant.  Morris  v.  Hillery,  8 
Miss.  61. 

The  rule  first  above  stated  has 
been  modified  by  statute  in  Penn- 
sylvania. See  McFadden  v.  Hunt, 
5  W.  &  S.  468;  Hepburn  v.  Curt?, 
7  Watts,  300 ;  Tassey  v.  Church,  5 
W.  &  S.  468 ;  McConkey  v.  Rogers, 
Brightley,  N.  P.  450. 

(z)  Before  the  Judicature  Acts 
such  actions  could  not  be  main- 
tained. Bosanquet  v.  Wray,  6 
Taunt.  59S;  1  Wins.  Saund.  2917*. 
But  suits  in  equity  could.  See  the 
cases  in  the  last  note.  See  as  to  the 
non-application  of  this  rule  at  law 
to  companies,  Bosanquet  v.  Wood- 
ford, 5  Q.  B.  310.  As  to  estimating 
damages  sustained  by  one  firm  by 
reason  of  being  prevented  from 
completing  a  contract  made  with 
another  firm,  some  members  being 
common  to  both,  see  Waters  v. 
Towers,  8  Ex.  401. 

(a)  See,  in  addition  to  the  cases 
cited  infra,  ante,  pp.  116,  117,  and 
Salomons  v.  Nissen,  2  T.  R.  674. 


637 


*268  EIGHTS    AND   OBLIGATIONS.  [BOOK   II. 

[*268]  trust,  it  has  been  held  that  if  one  *of  a  firm  of 
solicitors  is  a  trustee,  and  the  firm  acts  as  solicitors 
in  the  matter  of  the  trust,  the  firm  cannot  claim  payment 
for  its  services;  the  disability  of  one  of  its  members  thus 
extending  to  them  all.  (b)  So  if  one  member  of  a  firm  is 
guilty  of  fraud  in  entering  into  a  contract  on  behalf  of  the 
firm,  his  fraud  may  be  relied  on  as  a  defense  to  an  action  on 
the  contract  brought  by  him  and  his  copartners;  for  their 
innocence  does  not  purge  his  guilt,  (c)  So  if  one  partner 
resident  abroad  sells  partnership  goods,  and  he  knows  they 
are  to  be  smuggled  into  this  country,  and  he  is  privy  to 
their  being  so  smuggled,  then,  although  his  copartners  are 
innocent,  the  firm  cannot  recover  the  price  of  such  goods,  (d) 
So  if  one  of  several  partners  draws  a  bill  in  his  own  name, 
and  the  bill  is  accepted  upon  condition  that  he  will  provide 
for  it  when  due,  he  cannot,  by  indorsing  that  bill  to  the 
firm  to  which  he  belongs,  entitle  himself  and  his  copartners 
to  sue  upon  it.  (e)  In  Astley  v.  Johnson,  one  of  three  part- 
ners purchased  a  bill  in  the  partnership  name,  and  under- 
took to  pay  for  it  at  the  end  of  a  month.  He  remitted  the 
bill  to  his  copartners  in  England,  and  they  sued  upon  it. 
The  bill,  however,  had  not  been  paid  for  as  agreed,  and  it 
was  held  that  the  plaintiffs  were  not  entitled  to  recover, 
and  were  in  no  better  position  without  their  copartner 
than  they  would  have  been  had  he  been  a  co-plaintiff  in  the 
action.  (/) 

Surviving  partners  prejudiced  by  conduct  of  deceased 
partner. —  In  such  cases4as  these  the  inability  of  the  firm 
to  sue  is  not  removed  by  the  death  of  the  partner  who  has 

(&)  See  Broughton  v.  Broughton,  (c)  See  Kilby  v.  Wilson,  Ry.  & 

2  Sm.  &  G.  422,  and  5  De  G.  M.  &  Mood.  178. 

G.  160;  Christophers  v.  White,  10  (d)  Biggs  v.  Lawrence,  3  T.  R. 

Beav.  523;  Collins  v.  Carey,  2  id.  454. 

128;  Matthison  v.  Clark,  3  Drew.  3.  (e)  Sparrow  v.  Chisman,  9  B.  & 

See  the  exception  in  cases  of  litiga-  C.  241 ;  and  see  Richmond  v.  Heapy, 

tion,  Cradock  v.  Piper,  1  Mc.  &  G.  1  Stark.  202. 

664,  and  Re  Corsellis,  34  Ch.  D.  (/)  Astley  v.  Johnson,  5  H.  &  N. 

675.  137. 

638 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *269 

created  the  inability.  Thus,  in  Ex  parte  Bell,  (g)  one  of  a 
firm  advanced  money  of  the  firm  to  a  stranger  for  an  illegal 
purpose ;  and  it  was  held,  after  the  death  of  the  part- 
ner who  advanced  the  -money,  that  the  survivors  [*269] 
could  not  recover  it  from  the  person  to  whom  it  was 
lent.  So  if  a  firm  has  become  bankrupt,  its  trustee  is  in 
general  in  no  better  position  than  the  partners  themselves 
would  have  been  in,  and  is  therefore  frequently  liable  to  be 
defeated  on  similar  grounds,  (h)  But  the  trustee  of  a  bank- 
rupt partner  can  disaffirm  and  avoid  such  of  his  acts  as  are 
fraudulent  as  against  his  creditors,  and  consequently  acts  of 
this  nature  afford  no  defense  to  an  action  by  the  trustee  and 
the  solvent  partner.  Thus,  in  Ileilhut  v.  Wevill,  (i)  a  solv- 
ent partner  and  the  assignees  of  a  bankrupt  partner  success- 
fully maintained  an  action  for  a  bill  of  the  firm,  given  by 
the  bankrupt  to  a  creditor  of  his  own,  under  circumstances 
which  amounted  to  a  fraudulent  preference. 

Frauds  l)y  one  partner  on  the  firm.— Owing  to  the  old 
technical  rules  relating  to  the  joinder  of  parties  to  actions, 
the  principle  above  discussed  was,  moreover,  applied  at  law 
to  cases  where  it  produced  great  injustice,  viz.,  to  cases 
where  one  partner  acted  in  fraud  of  his  copartners.  For 
example,  where  a  partner  pledged  partnership  property,  and 
in  so  doing  clearly  acted  beyond  the  limits  of  his  authority, 
still,  as  he  could  not  dispute  the  validity  of  his  own  act,  it 
was  held  at  law  that  he  and  his  copartners  could  not  recover 
the  property  so  pledged.  (&)  So  although  a  partner  has  no 
right  to  pay  his  own  separate  debt  by  setting  it  off  against 
a  debt  due  from  his  creditor  to  the  firm,  yet  if  he  actually 
agreed  that  such  set-off  should  be  made,  and  it  was  made 
accordingly,  it  was  held  at  law  that  he  and  his  copartners 
could  not  afterwards  recover  the  debt  due  to  the  firm.  (I) 

(g)  1    M.    &    S.    751.     See,    abo,  (k)  Brownrigg  v.  Rae,  5  Ex.  489. 

Brandon  v.  Scott,  7   E.  &  B.  237,  (I)  See  Wallace  v.  Kelsall,  7  M.  & 

and  compare  Innes  v.  Stephenson,  W.  264;  Gordon  v.  Ellis,  7  Man.  & 

1  Moo.  &  Rob.  147.  Gr.  607.  Compare  Kendal  v.  Wood, 

(h)  Jones  v.  Yates,  9  B.  &  C.  532.  L.  R.  6  Ex.  243,  where  the  techni- 

(i)  L.  R.  4  C.  P.  354.  cal  difficulty  did  not  arise. 

639 


*270  EIGHTS    AND   OBLIGATIONS.  [BOOK   II. 

So  where  a  firm  of  three  partners  deposited  goods  upon  the 
terms  that  they  were  not  to  be  parted  with  except  on  the 
joint  authority  of  all  three  partners,  and  they  were  never- 
theless given  up  to  one  of  them,  it  was  held  at  law  that  the 
firm  could  sustain  no  action  for  the  recovery  of  the  goods,  (rn) 
In  such  cases,  as  observed  by  Lord  Tenterden  in 
[""270]  Jones  v.  Yates,  (?i)  there  is  no  instance  *  "  in  which 
a  person  has  been  allowed  as  plaintiff  in  a  court  of 
law  to  rescind  his  own  act,  on  the  ground  that  such  act  was 
a  fraud  on  some  other  person,  whether  the  party  seeking  to 
do  this  has  sued  in  his  own  name  only,  or  jointly  with  such 
other  person." 

In  such  cases  as  these,  however,  relief  might  have  been 
had  in  equity ;  (o)  and  it  is  apprehended  that  the  cases  at 
law  above  referred  to  can  no  longer  be  relied  upon,  the 
Judicature  Acts  having  removed  the  technical  difficulties 
which  led  to  their  decision. 

If  a  partner  in  collusion  with  a  debtor  to  the  firm  gives 
him  a  receipt  for  his  debt,  although  no  payment  or  anything 
equivalent  to  payment  is  made,  an  action  for  the  recovery 
of  the  debt  is  nevertheless  maintainable  by  the  firm,  i.  e., 
by  the  partner  giving  the  receipt  and  his  copartners,  (p) 
For  a  receipt  does  not  preclude  the  person  giving  it  from 
showing  that  the  money  therein  expressed  to  be  received 
was  not  in  fact  received,  (q)  nor  does  it  discharge  the  debt. 
Again,  a  right  of  set-off  which  might  be  pleadable  to  an  ac- 
tion brought  by  one  partner  is  not  pleadable  to  an  action 
by  him  and  his  copartners;  (r)  nor  if  one  partner  covenants 
not  to  sue  for  a  partnership  debt  will  this  preclude  him 
from  joining  with  his  copartners  in  an  action  for  the  re- 

(m)  Brandon  v.  Scott,7  E.  &  B.  234.  (p)  Henderson  v.  Wild,  2  Camp. 

(ri)  9  B.  &  C.  532.    And  see  Rich-  561 ;  Farrar  v.  Hutchinson,  9  A.  & 

mond  v.  Heapy,  1  Stark.  202.  E.  641. 

(o)  Piercy  v.  Fynney,  12  Eq.  69 ;  (g)  Skaife  v.  Jackson,  5  Dow.  & 

Midland  Counties  Rail.  Co.  v.  Tay-  Ry.  290,  and  3  B.  &  C.  421. 

lor,  8  H.  L.  C.  751,  affirming  Taylor  (r)  See  infra,  book  ii,  ch.  3,  §  2. 
v.   Midland   Counties    Rail.  Co.  28 
Beav.  287. 

640 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *271 

covery  of  that  debt,  (s)  In  each  of  these  cases  there  is  only 
a  right  of  cross-action  against  the  one  partner;  and  al- 
though such  right  might  be  relied  on  as  a  defense  to  an. 
action  by  him  alone,  it  is  held  not  to  affect  the  firm  to  which 
he  belongs. 

Result  of  the  decisions. —  The  conclusion  to  be  drawn 
from  the  foregoing  cases  appears  to  be  that  the  conduct  of 
one  partner  affords  a  defense  to  an  action  by  him  and  his 
copartners,  or  by  them  without  him,  where  they  are  bound 
by  his  act,  either  by  adopting  and  seeking  the  bene- 
fit of  it,  (t)  or  upon  the  ground  that  it  is  on*ordinary  [*271] 
principles  of  agency  the  act  of  the  firm,  and  bind- 
ing upon  him  and  his  copartners  accordingly.  But  the  cases 
at  law  which  go  further  than  this  cannot,  it  is  submitted, 
be  now  relied  upon. 

Power  of  one  partner  to  act  for  the  firm. —  The  power 
of  one  partner  to  act  for  the  firm  in  legal  proceedings  may 
be  conveniently  noticed  in  the  present  place. 

One  partner  suing  in  the  name  of  the  firm. —  A  part- 
ner may  sue  in  the  name  of  himself  and  copartners  without 
their  consent;  (u)1  but  if  he  sues  against  their  consent  he 

(s)  See  Walmsley  v.  Cooper,  11  A.  partner.     Ward  v.  Barber,  1  E.  D. 

&  E.  216.  Smith,  423. 

(t)  As  in  Ex  parte  Bell,  1  M.  &S.  Any  member  of  a  firm  has  the 

751 ;  Broughton  v.  Broughton,  5  De  right  to  use  the  name  of  the  firm 

G.  M.  &  G.  160.  in  perfecting  a  mechanic's  lien  to 

(u)  Whitehead  v.  Hughes,  2  Cr.  which  the  firm  is  entitled  ;  and  the 

&  M.    318.     And  see  Harwood  v.  validity  of  the  lien  is  not  impaired 

Edwards,  Gow  on  Part.   65,  note,  by  the  fact  that  before  the  filing  of 

where  it  was  held  by  Chappie,  J.,  the  account  for  that  purpose,  in  the 

that  the  action  must  be  considered  firm  name,  one  of  the  members  of 

as    brought    by    all.     See    below,  the  firm  has  become  sole  owner  of 

note  (z).  the  claim  and  the  account  contains 

1  Kuhn  v.  Weil,  73  Mo.  213.  a  recital  of  that  fact,  and  declares 

The  right  of  a  partner  to  collect  that  he   alone  is    entitled  to  the 

the  debts  of  the  partnership,  and  benefit  of  the  lien.   Jones  v.  Hurst, 

to  commence  suits  for  that  pur-  67  Mo.  568. 

pose,  is  an  incident  to  the  partner-  A  defendant  sued  with  another 

ship  which  survives  the  dissolu-  as  partners  has  no  power  to  make 

tion,    and    is    inherent    in    either  his  co-defendant,  against  his  con- 
Vol.  I  — 41                          641 


>271 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


must  indemnify  them  against  the  costs,  (x)  So,  one  part- 
ner may  defend  an  action  brought  against  the  firm,  indem- 
nifying the  firm  against  the  consequences  of  so  doing,  if  he 
acts  against  the  will  of  other  partners,  (y) 


sent,  a  party  to  an  appeal  from  an 
award  in  the  latter's  favor.    Mono- 
han  v.  Lloyd,  2  Luzerne  L.  Reg. 
140. 
(x)  Whitehead  v.  Hughes,  2  Cr. 

6  M.  318. 

(y)  In  Goodman  v.  De  Beauvoir, 
12  Jur.  989  and  1037,  a  solicitor  em- 
ployed by  a  managing  committee 
to  defend  a  suit  was  held  author- 
ized to  enter  an  appearance  for  a 
member  of  a  provisional  commit- 
tee, who  had  made  the  managing 
committee  his  agents.  See,  fur- 
ther, as  to  the  authority  of  one 
partner  to  enter  an  appearance  for 
his  copartner,  Harrison  v.  Jackson, 

7  T.  R.  207 ;  Morley  v.  Strombom, 
3  Bos.  &  P.  254;  Goldsmith  v. 
Levy,  4  Taunt.  299.  The  author- 
ity has  been  doubted  in  America. 
See  Hall  v.  Lanning,  1  Otto,  160. 

1  When  a  suit  is  commenced 
against  a  firm  one  of  the  partners 
has  power  to  employ  an  attorney 
to  attend  to  the  suit ;  and  an  ap- 
pearance, entered  by  such  attorney, 
will  be  binding  upon  the  other 
partners.  Bennett  v.  Stickney,  17 
Vt.  531 ;  Messinger's  Appeal,  43 
Leg.  Intel.  101.  See,  also,  Wheat- 
ley  v.  Tutt,  4  Kan.  240. 

The  employment  of  counsel  to 
•  litigate  the  title  to  a  mine  does 
not,  however,  come  within  the 
limited  powers  vested  in  a  mining 
partner ;  but  this  rule  does  not  ap- 
ply to  incorporated  mining  associa- 
tions nor  to  partnerships  formed 
under  the  statutes.  Charles  v. 
Eshleman,  5  Colo.  107. 


One  member  of  a  dissolved  part- 
nership has  no  authority,  unless 
specially  given,  to  retain  an  attor- 
ney to  defend  the  other  members 
of  the  late  firm  in  an  action  brought 
against  them.  Such  authority  does 
not  result  from  the  partnership  it- 
self. Bowler  v.  Huston,  30  Gratt. 
266. 

And  after  the  dissolution  of  a 
partnership  one  of  the  parties  can- 
not authorize  an  appearance  for 
the  other.  Haslet  v.  Street,  2 
McCord,  311;  Loomis  v.  Pearson, 
Harp.  470. 

A  declaration  was  served  on  one 
partner  only,  and  he  employed  an 
attorney,  and  authorized  him  to 
give  a  cognovit,  which  he  did  for 
both,  in  good  faith.  The  attorney 
being  responsible,  the  court  refused 
to  set  aside  the  judgment,  but  per- 
mitted the  partner  who  had  not 
been  brought  in  to  contest  the 
validity  of  the  claim.  Grazebook 
v.  McCreedie,  9  Wend.  437.  The 
rule  is  different  where  the  attor- 
ney is  irresponsible.  Groesbeck  v. 
Brown,  2  How.  Pr.  21. 

In  an  action  against  partners,  on 
only  a  part  of  whom  process  has 
been  served,  a  plea  filed  for  defend- 
ants generally,  without  naming 
them,  will  not  be  considered  as  the 
plea  of  all.  Boyce  v.  Watson,  3  J. 
J.  Marsh.  498. 

The  entry,  by  an  attorney,  of  his 
general  appearance  for  the  defend- 
ants, in  an  action  against  a  part- 
nership, must  be  construed  to  be 
an  appearance  for  the  partners  as 


642 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *272 

One  partner  staying  proceedings. —  But  if  it  is  competent 
for  one  partner  to  sue  for  the  firm,  it  is  as  competent  to 
any  other  partner  to  stay  proceedings,1  or  to  put  an  end 
to  the  action  altogether  by  means  of  a  release ;  and  although 
the  court  will  not  allow  this  to  be  done  by  collusion  with 
the  defendant  for  the  purpose  of  defrauding  the  other  part- 
ners of  their  rights  (see  ante,  p.  145),  a  release  will  be  effect- 
ual where  there  is  no  fraud  in  the  case. 

In  Harwood  v.  Edwards,  (2)  one  of  three  partners,  with- 
out the  knowledge  or  consent  of  the  other  two,  brought  an 
action  in  his  name  and  theirs  for  the  recovery  of  a  debt 
due  to  the  firm.  The  other  two  afterwards  agreed  with 
the  defendant  that  proceedings  should  be  stayed ;  and  the 
court  held  that  this  agreement  bound  all  three;  and  pro- 
ceedings were  stayed  accordingl}r,  although  the  partner  who 
promoted  the  action  disputed  the  validity  of  the  agreement, 
and,  by  the  partnership  articles,  it  had  been  agreed 
between  the  partners  that  one  *of  them  should  [*272] 
not  give  a  release  without  the  assent  of  the  others. 

Consenting  to  arbitration. —  If  an  action  is  brought  for 
the  recovery  of  a  debt  due  to  the  firm,  one  of  the  part- 
ners cannot  bind  the  firm  by  consenting  to  a  judge's  order 
referring  all  matters  in  difference  between  the  plaintiffs  and 
the  defendant  to  arbitration,  (a) 

partners,  and  for  the  purpose  of  merit  for  the  benefit  of  creditors, 

defending  the  action  against  the  will  not  bind  the  other  partners, 

partnership,  and  not  as  an  appear-  Atchison  Savings  Bank  v.  Templar, 

ance  for  the  partners  individually,  26  Fed.  Rep.  580. 

severally  and  personally,  so  as  to  *  A  discontinuance  of  a  suit  by  one 

render    a    judgment    against    the  of  two  copartners  will  not  be  per- 

partnership,  in  such  action,  bind-  mitted  if  done  in  fraud  or  in  collu- 

ing  on  an  individual  partner  in  an-  sion  with  the  defendant  or  to  the 

other  jurisdiction,  by  whom  such  co-plaintiff's    injury.      Arnold    v. 

appearance    was    not    authorized.  Green,  5  Atl.  R.  503;   S.  C.  2  N. 

Phelps  v.  Brewer,  9  Cush.  390.  Eng.  R.  894. 

The  entry  by  one  partner  of  an  (2)  Gow  on  Part.  65,  note, 

appearance  for  the  firm  after  a  dis-  (a)  Hatton  v.   Royle,  3  H.  &  N. 

solution  thereof,    and  an    assign-  500. 

643 


*272 


EIGHTS   AND   OBLIGATIONS. 


[book  II. 


Consenting  to  judgment,  etc. —  In  an  action  against  a 
firm  it  has  been  held  that  one  partner  has  no  authority  to 
bind  the  firm  by  consenting  to  an  order  for  judgment 
against  it;  (b)  or  by  giving  a  cognovit  to  pay  the  debt  and 
costs.  (<?)  *     But  a  warrant  of  attorney  executed  by  one  part- 


(&)  Hambridge  v.  De  la  Crouee,  3 
C.  B.  742.  See,  also,  Munster  v. 
Cox,  10  App.  Ca.  680. 

(c)  Rathbone  v.  Drakeford,  4  Moo. 
&  P.  57,  and  6  Bing.  375. 

1 A  partner  has  no  power  to  bind 
his  copartner  by  a  confession  of 
judgment  against  the  firm;  but  if 
Buch  a  judgment  be  confessed  it 
will  bind  the  partner  who  did  it 
and  be  void  as  to  the  other.  Bit- 
zer  v.  Shunk,  1  Watts  &  S.  340 ; 
Sloo  v.  State  Bank,  1  Scam.  428; 
York  Bank's  Appeal,  36  Pa.  St. 
458 ;  Christy  v.  Sherman,  10  Iowa, 
535;  Edwards  v.  Pitzer,  12  id.  607; 
North  v.  Mudge,  13  id.  496;  Crane 
v.  French,  1  Wend.  311;  Barlow  v. 
Reno,  1  Blackf.  252;  Everson  v. 
Gehrman,  1  Abb.  Pr.  167;  Shed 
v.  Bank,  etc.  32  Vt.  709;  Reming- 
ton v.  Cummings,  5  Wis.  138.  See, 
also,  Mills  v.  Dickson,  6  Rich.  487 ; 
Waring  v.  Robinson,  1  Hoff.  524; 
Conery  v.  Rotchford,  30  La.  Ann. 
692;  McKenna's  Estate,  11  Phila. 
84;  S.  C.  32  Leg.  Intel.  218;  Hop- 
per v.  Lewis,  86  Ind.  43;  Simpson 
v.  King,  14  Weekly  Not.  Cas.  44; 
Trenwith  v.  Meeser,  12  Phila.  366. 
See,  however,  Lahey  v.  Kingon,  13 
Abb.  Pr.  192;  S.  C.  22  How.  Pr. 
209;  Hewitt  v.  Patrick,  26  Tex. 
326;  Wilmot  v.  Steamer,  32  La. 
Ann.  607. 

A  confession  of  judgment  for  a 
partnership  debt,  after  a  dissolu- 
tion, binds  only  the  partner  mak- 
ing it.     Herrick  v.  Conant,  4  La. 


Ann.  276;  Mitchell  v.  Rich,  1  Ala. 
228 ;  Bennett  v.  Marshall,  2,  Miles, 
436 ;  Morgan  v.  Richardson,  16  Mo. 
409;  Mair  v.  Beck,  2  Atl.  Rep.  218. 

A  parol  authorization  by  one 
partner  about  to  go  away,  to  his 
copartner,  to  a  confession  of  judg- 
ment to  a  creditor  of  the  firm, 
which  was  accordingly  made,  the 
absent  partner's  name  being  signed 
by  his  copartner,  and  afterwards, 
upon  his  return,  upon  being  in- 
formed of  what  was  done,  he  re- 
plied, "that  is  all  right,"  this  ren- 
ders such  confession  valid,  both  as 
against  such  copartner  and  third 
parties.  Record  v.  Record,  21  N. 
Brum  277. 

Though  one  partner  cannot  con- 
fess a  judgment  against  another 
partner,  even  for  a  partnership 
debt,  yet  a  creditor  of  the  firm 
cannot  be  permitted  to  make  ob- 
jection to  the  judgment  on  that 
account ;  and  a  sale  of  partnership 
property,  on  an  execution  issuing 
from  such  judgment,  will  pass  a 
perfect  title  to  the  purchaser;  and, 
if  the  first  lien,  will  be  entitled  to 
the  proceeds  of  the  sale,  but  the 
judgment  will  not  affect  the  per- 
sons nor  the  separate  property  of 
the  other  partners.  Grier  v.  Hood, 
25  Pa.  St.  430. 

And  in  Ross  v.  Howell,  84  Penn, 
St.  129,  it  was  held  that  the  inter- 
est of  all  the  partners  in  the  part- 
nership property  may  be  sold  under 
an  execution  upon  a  judgment  con- 


644 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


*272 


ner  in  the  name  of  the  firm  with  the  consent  of  the  other 
partners  is  not  invalid  simply  because  the  others  have  not 

executed  it.  (d) 


fessed  by  a  single  partner  in  the 
firm  name  and  for  a  firm  debt. 

Under  Oregon  Code,  202,  section 
252,  a  judgment  by  confession  of 
one  partner  does  not  bind  his  co- 
partners in  the  partnership  prop- 
erty, unless  made  in  an  action 
pending.  Richardson  v.  Fuller,  2 
Oreg.  179. 

A  judgment  confessed  by  one  of 
two  copartners,  using  a  corporate 
name,  may  bind  the  other  if  the 
circumstances  create  a  belief  that 
he  knew  of  it  and  intended  to  be 
bound.  Bivingsville  Manuf.  Co. 
v.  Bobo,  11  Rich.  386. 

Where  one  of  the  partners  of  a 
firm  executed  a  warrant  of  attor- 
ney, under  seal,  for  himself  and 
as  attorney  for  his  partner,  author- 
izing the  confession  of  a  judg- 
ment, the  court  refused  to  set 
aside  the  judgment  on  the  sole  ap- 
plication of  the  defendant  who  had 
executed  the  warrant  of  attorney. 
St.  John  v.  Holmes,  20  Wend.  609. 

A  confession  of  judgment  by  one 
partner  for  a  partnership  debt  does 
not  discharge  the  other  partners 
from  liability  for  the  same  debt 
since  the  act  of  April  6,  1830. 
Kauffman  v.  Fisher,  3  Grant,  Cas. 
302. 

One  partner  cannot  subject  the 
firm  property  to  levy  and  sale  for 
his  individual  debts  by  giving  a 
judgment  note  in  the  firm  name, 
without  the  knowledge  and  con- 
bent  of  his  copartners,  even  though 
the  monej7  for  which  the  judgment 


note  was  given  was  used  by  such 
partner  for  partnership  purposes  as 
his  contribution  to  the  firm.  Mc- 
Naughton's  Appeal,  101  Pa.  St.  550; 
S.  C.  12  Weekly  Not.  Cas.  540;  40 
Leg.  Intel.  162. 

A  judgment  entered  on  such  a 
note,  and  a  sale  of  the  partnership 
property  thereunder,  is  a  fraud  on 
the  firm  creditors,  and  may  be  va- 
cated as  to  them  in  a  collateral 
proceeding  before  an  auditor  to 
distribute  the  fund  derived  from 
the  sale.  McNaughton's  Appeal, 
101  Pa.  St.  550;  S.  C.  12  Weekly 
Not.  Cas.  540 ;  40  Leg.  Intel.  162. 

Where  partners  are  sued  one  of 
them  has  no  power  to  offer  judg- 
ment under  the  code,  on  behalf  of 
himself  and  his  copartner,  without 
some  evidence  that  his  copartner 
authorized  him  to  make  the  offer 
or  assented  to  it.  But  the  appear- 
ance of  an  attorney  for  both  on 
the  record  may  make  the  judg- 
ment regular.  Binney  v.  Legal, 
19  Barb.  592. 

Where  a  bond  with  a  warrant  to 
confess  judgment  is  executed  by 
one  partner,  and  subsequently  all 
the  partners  revive  the  judgment 
by  their  attorney,  this  is  a  ratifica- 
tion. Overton  v.  Tozer,  7  Watts  & 
S.  331 ;  Cash  v.  Tozer,  1  Watts  & 
S.  519. 

Where  a  warrant  of  attorney  to 
confess  a  judgment  was  executed 
in  the  firm  name  of  the  defend- 
ants, held,  on  error,  that  the  court 
would   intend    that    the  warrant, 


(d)  Brutton  v.  Burton,  1  Chitty,  707. 

645 


~*\ 


*272 


EIGHTS   AND    OBLIGATIONS. 


[BOOK   II. 


Costs.— If  in  an  action  costs  are  ordered  to  be  paid  to 
one  partner,  payment  to  another  partner  is  not  sufficient,  (e) 

Service  on  one  partner.—  One  partner  is  not  the  agent 
of  his  copartner  except  as  to  partnership  matters;  and  if 
one  partner  is  sued  in  respect  of  some  private  affair  of  his 
own,  he  must  be  proceeded  against  like  any  other  individ- 
ual, and  service  of  writs,  etc.,  must  be  made  accordingly, 
and  they  must  not  be  left  at  the  place  of  business  of  the 
firm,  to  be  served  on  the  other  partners.  (/)  And  even  in 
proceedings  relating  to  partnership  matters,  although  serv- 
ice on  one  partner  is  sometimes  held  equivalent  to  service 
on  all,  this  is  not  the  case  where  the  service  is  relied  on  as 
the  foundation  of  process  of  contempt,  or  of  any  proceed- 
ings of  a  penal  nature,  (g) 


although  executed  by  one  partner 
only,  was  adopted  by  the  others. 
Bissell  v.  Carville,  6  Ala.  503. 

A  confession  of  judgment  by  one 
partner  of  a  firm,  the  assets  of 
which  are  in  the  hands  of  a  re- 
ceiver, for  an  actual  bona  fide  in- 
debtedness upon  which  an  attach- 
ment might  have  been  issued,  will 
not  subject  him  to  punishment  as 
for  a  contempt  in  violating  an  in- 
junction, although  he  intended 
thereby  to  give  firm  creditors  in 
Philadelphia  an  opportunity  to  en- 
force their  superior  legal  rights 
against  the  firm  property  in  that 
state, —  receiver  having  been  ap- 
pointed in  New  York.  O'Callaghan 
v.  Fraser,  37  Hun  (N.  Y.),  483. 

A  firm  may  lawfully  confess  a 
judgment  to  one  to  whom  money 
is  due  by  an  individual  partner, 
but  which  has  gone  into  the  firm 
for  its  use.  Rose  v.  Keystone  Shoe 
Co.  18  Weekly  Not.  Cas.  565. 

(e)  Showier  v.  Stoakes,  2  Dowl. 
&  L.  3.  But  as  to  payment  out  of 
money  in  court,  see  tlie  Sup.  Ct. 
Funds  Rules,  1886,  r.  63. 


(/)  See  Petty  v.  Smith,  2  Y.  &  J. 
Ill ;  Fairlie  v.  Quin,  1  Smythe,  198. 
See.  as  to  substituted  service,  Leese 
v.  Martin,  13  Eq.  77 ;  and  as  to  deliv- 
ering a  solicitor's  bill  of  costs,  Egg- 
ington  v.  Cumberledge,  1  Ex.  271. 

(g)  Young  v.  Goodson,  2  Russ. 
255.  And  see  Moulston  v.  Wire,  1 
Dowl.  &  L.  527;  Be  Holiday,  9 
Dowl.  1020;  Grant  v.  Prosser, 
Smith  &  Batty,  95;  Murray  v. 
Moore,  1  Jo.  Ir.  Ex.  129;  Nolan  v. 
Fitzgerald,  2  Ir.  Com.  Law  R.  79 ; 
Kitchen  v.  Wilson,  4  C.  B.  N.  S. 
483.  In  Leese  v.  Martin,  13  Eq. 
77:  Carrington  v.  Cantillon,  Bunb. 
107 ;  and  Coles  v.  Gurney,  1  Madd. 
187,  service  of  a  bill  on  one  partner 
was  allowed,  the  other  being 
abroad;  and  in  ejectment  against 
a  firm,  service  on  an  acting  partner 
is  sufficient.  Doe  v.  Roe,  9  Dowl. 
1039.  And  in  an  action  against  a 
firm  on  its  promissory  note,  the 
order  to  compute  (after  judgment 
by  default)  need  only  be  served  on 
one  of  the  defendants.  Figgins  v. 
Ward,  2  Cr.  &  M.  424 ;  Carter  v. 
Southall,  3  M.  &  W.  128. 


646 


CH.  Ill,  SEC.  I.]        ACTIONS   BETWEEN    PARTNERS. 


'272 


[Where  partners  are  sued  in  the  name  of  the  firm,  serv- 
ice of  the  writ  on  one  of  them  is  sufficient,1  but  all  the 
partners  must  appear  individually  in  their  own  names.] 


*To  the  point  that  service  of 
process  on  one  partner  is  not 
equivalent  to  service  on  all,  see 
Rice  v.  Doniphan,  4  B.  Mon.  123; 
Faver  v.  Briggs,  18  Ala.  478;  Dun- 
can v.  Tombeckbee  Bank,  4  Port. 
181 ;  Deraoss  v.  Brewster,  12  Miss. 
661 ;  Scott  v.  Bogart,  14  Ls.  Ann. 
261 ;  Beal  v.  Snedicor,  8  Port.  523. 
See  further,  as  to  service  of  process 
upon  partners,  form  of  return,  ver- 
dict, etc.,  Peel  v.  Bryson,  72  Ga. 
331 ;  Dulany  v.  Elford,  22  S.  C.  304; 
Loeb  v.  Morton,  63  Miss.  280 ;  Bank 
of  Hamilton  v.  Blakeslee,  9  Ont. 
Pr.  130 ;  S.  C.  2  Can.  L.  T.  47 ;  Gil- 
lett  v.  Walter,  74  Ga.  291;  Cor- 
coran v.  Trich,  10  Cent.  Rep.  (Pa.) 
624;  S.  C.  11  Atl.  Rep.  677;  Graves 
v.  Drane,  1  So.  West.  Rep.  905; 
Rosenbaum  v.  Hayden,  36  N.  W. 
Rep.  (Neb.)  147. 

A  judgment  rendered  in  another 
state  against  all  the  members  of  a 
partnership,  after  the  dissolution 
of  the  partnership,  does  not  per- 
sonally bind  a  member  of  said 
partnership  not  served  with  process 
and  not  appearing  in  the  case,  al- 
though the  other  members  were 
served  or  appeared  and  caused  an 
appearance  to  be  entered  for  all. 
Bowler  v.  Huston,  30  Gratt.  266. 

A  judgment  in  New  York  under 
the  code  of  procedure  of  that  state 
against  the  members  of  a  dissolved 
partnership,  one  of  whom  was  not 
served  with  process  and  did  not 
appear  in  person  or  by  attorney 
in  the  suit,  is  not  such  a  judgment 
as  is  contemplated  by  the  constitu- 
tion and  act  of  congress  as  to  such 
person.     Bowler  v.  Huston,  supra 


Partnership  proper ty,  or  the  sep- 
arate property  of  the  partner  served, 
may,  however,  in  many  of  the 
states,  be  subjected  to  the  debts  of 
the  partnership  by  service  of  cita- 
tion on  one  member  of  the  firm. 
See  Alexander  v.  Stern,  41  Tex. 
193;  Hale  v.  Van  Saum.  18  Iowa, 
19;  Flannery  v.  Anderson,  4  Nev. 
437;  Brooks  v.  Mclntyre,  4  Mich. 
316;  Kidd  v.  Brown,  2  How.  Pr. 
20 ;  Stoutenburgh  v.  Vanderburgh,  7 
id.  229;  Hedges  v.  Armistead,  60 
Tex.  276;  Sanger  v.  Ker,  1  Tex. 
App.  (Civ.)  612 ;  Rhodius  v.  Storey, 
id.  143;  Texas  &  St.  L.  R.  R.  Co. 
v.  McCaughey,  62  Tex.  271;  Cun- 
ningham v.  Woodbridge,  76  Ga. 
302 ;  Stewart  v.  Spaulding,  72  CaL 
264;  Thomas  v.  Brown,  67  Md.  512; 
McCaskey  v.  Pollock,  82  Ala.  174. 
See,  also,  In  re  Lowenstein,  7  How. 
Pr.  100. 

As  to  the  effect  of  a  judgment  in 
an  action  against  the  partnership, 
where  not  all  the  partners  are 
served,  under  section  414,  Code 
Civil  Procedure  of  California,  see 
Golden  State  &  Miners'  Iron  Works 
v.  Davidson,  15  Pac.  Rep.  (Cal.)  20. 
Judgment  against  known  part- 
ners binds  dormant  partner  al- 
though not  made  a  party.  Tyn- 
burg  v.  Cohen,  67  Tex.  220. 

A  judgment  recorded  against  a 
firm  which  does  not  show  the 
names  of  the  individual  members 
cannot  be  charged  against  the  in- 
dividual property  of  an  alleged  de- 
ceased member  of  the  firm.  Fox's 
Appeal,  11  Atl.  Rep.  (Pa.  St.)  228. 
Suit  was  brought  against  a  firm 
to  collect  an  alleged  partnership 


647 


*273 


EIGHTS   AND    OBLIGATIONS. 


[BOOK  II. 


[*273]       *Having  made  these  general  observations,  it  will 
be  convenient  to  consider,  in  the  first  place,  the  gen- 
eral rules  which  apply  to  actions  by  and  against  partners, 
when  there  has  been  no  change  in  the  firm  between  the 


debt;  service  was  made  on  one 
partner  only  and  judgment  ren- 
dered against  him  as  for  an  indi- 
vidual debt.  Held,  that  he  was 
not  a  party  to  suit,  and  that  a  judg- 
ment against  him  alone  was  erro- 
neous. Craig  v.  Smith,  15  Pac. 
Rep.  (Colo.)  337. 

Where  A.  obtained  judgment 
against  three  partners,  J.,  K.  and 
L.,  by  service  of  process  upon  K. 
alone,  who  confessed  judgment, 
held,  that  the  partners  not  served 
could  not  be  proceeded  against  by 
warrant  under  the  non-imprison- 
ment act  founded  upon  such  judg- 
ment, though  they  were  shown  to 
have  possession  of  partnership 
property  which  they  refused  to  ap- 
ply in  payment  of  the  judgment,  it 
being  against  the  policy  of  the  law 
to  allow  one  partner,  acting  against 
the  wishes  of  the  firm,  to  give  a 
preference  to  creditors  by  assign- 
ment or  otherwise.  In  re  Lowen- 
stein,  7  How.  Pr.  100. 

If  firm  property  has  been  bona 
fide  conveyed  to  one  it  cannot  be 
subjected  to  a  judgment  against 
the  firm  to  which  he  was  not  made 
a  party,  upon  a  mere  suggestion, 
on  an  attempt  to  levy  on  the  prop- 
erty, that  he  was  a  copartner,  as 
that  would  be  to  bind  him  as  a 
partner  without  notice  or  suit,  and 
without  any  regular  proceeding 
against  him  as  such.  Strong  v. 
Hines,  35  Miss.  201. 

Where  a  suit  is  brought  against 
a  firm,  the  name  of  one  of  the  part- 
ners composing  which  is  alleged  to 


be  unknown,  a  judgment  cannot 
be  rendered  against  the  firm  so  far 
as  concerns  the  unknown  partners ; 
but  where  the  other  partner,  not 
having  been  personally  cited,  ap- 
peared and  filed  general  denial, 
and,  upon  judgment  being  ren- 
dered against  the  firm,  appealed 
as  a  partner,  held,  that  he  was 
bound  by  the  decree.  Grieff  v. 
Kirk,  15  La.  Ann.  320. 

In  an  action  against  a  partner- 
ship, setting  out  the  individual 
names  of  the  several  partners,  the 
present  statute  of  Alabama  (Pev. 
Code,  §  2538),  unlike  the  former 
(Clay's  Digest,  323,  §  03),  does  not 
authorize  a  judgment  by  default 
against  all  the  defendants  when 
process  has  been  served  on  only  a 
portion  of  them.  Shapard  v.  Light- 
foot,  56  Ala.  506. 

In  Iowa  service  upon  one  mem- 
ber of  a  firm  is  sufficient  to  give 
the  court  jurisdiction  over  the 
other  members  of  the  firm.  Greg- 
ory v.  Harmon,  10  Iowa,  445; 
Walker  v.  Clark,  8  Iowa,  474; 
Saunders  v.  Bentley,  id.  516. 

But  a  service  made  on  one  part- 
ner after  a  dissolution  of  the  firm 
is  insufficient  in  a  case  where  the 
interest  of  the  partner  upon  whom 
the  service  is  made  is  adverse  to 
that  of  the  partners  who  are  not 
served  with  notice.  Stephens  v. 
Parkhurst,  10  Iowa,  70. 

In  Louisiana  persons  associated 
together  for  carrying  personal  prop- 
erty for  hire  in  vessels  are  com- 
mercial partners,  and  may  be  cited 


648 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNEKS. 


*273 


time  when  the  right  sought  to  be  enforced  accrued,  and 
the  time  when  proceedings  are  taken  to  enforce  it;  and  then 
to  consider  how  far  those  rules  apply  or  have  to  be  modi- 
fied when  a  change  has  taken  piece. 


in  the  manner  prescribed  for  the 
citation  of  such  associations;  but  it 
is  only  where  they  are  associated 
together  under  a  title,  or  as  a  firm, 
that  the  service  of  a  citation  ad- 
dressed to  the  partnership  in  its 
social  name,  made  on  one  of  its 
members  only,  is  sufficient.  Hef- 
ferman  v.  Brenharn,  1  La.  Ann. 
146. 

Suit  being  brought  against  R.  F. 
and  C.  W.,  as  composing  the  com- 
mercial firm  of  R.  F.  &  Co.,  and 
the  petition  and  citation  served  on 
R.  F.  alone,  held,  that  the  service 
of  citation  was  sufficient  as  to  both 
partners.  Kearney  v.  Fenner,  14 
La.  Ann.  870. 

Where  a  defendant  is  sued  as 
silent  partner  in  a  commercial  firm, 
service  of  citation  on  the  clerk  of 
the  firm  is  not  sufficient.  Ridge  v. 
Alter,  14  La.  Ann.  866. 

"Where,  in  an  action  on  a  claim 
for  supplies  furnished  to  a  steamer, 
the  proceedings  are  not  in  rem.  and 
the  owners  are  not  shown  to  have 
had  a  social  name,  and  citation  was 
served  on  but  one  of  the  two  own- 
ners,  the  judgment,  though  ren- 
dered against  the  part  owner  who 
was  cited,  and  against  the  steamer 
itself,  cannot  be  executed  by  seiz- 
ing the  whole  boat.  The  part  owner 
who  was  not  cited,  and  made  no 
appearance,  must  be  regarded  as  a 
stranger  to  the  proceedings ;  and  he 
may  arrest  the  sheriff  in  any  at- 
tempt to  seize  his  share  of  the  boat 
to  satisfy  the  judgment;  and  he  is 
not  bound  to  notice  the  proceedings 


until  an  attempt  is  made  to  seize 
his  share  of  the  boat.  Hefferman 
v.  Brenham,  1  La.  Ann.  146. 

Where  partners  are  sued  upon  a 
partnership  debt,  and  there  is  a 
regular  return  of  service  as  to  one 
and  no  return  of  any  kind  as  to  the 
other,  the  latter  may  come  in  pend- 
ing the  suit,  even  as  late  as  the  reg- 
ular trial  term,  and  acknowledge 
that  he  has  been  duly  served,  waive 
copy  and  previous  entry  of  service, 
and  consent  that  the  case  then 
stand  for  trial.  Judgment  rendered 
at  or  after  the  second  term  succeed- 
ing the  entering  and  signing  of  such 
acknowledgment  on  the  declara- 
tion will  affect  third  persons  the 
same  as  if  the  evidence  of  service 
had  been  complete  at  first.  Oates 
v.  Brown,  59  Ga.  711. 

In  a  suit  against  two  as  partners, 
where  service  is  made  only  on  one, 
and  the  officer  returns  non  est  in- 
ventus as  to  the  other,  if  the  one 
served  dies,  the  plaintiff  may, 
under  the  act  of  1820,  make  his 
legal  representatives  parties  and 
proceed  to  judgment  and  execu- 
tion against  them.  Ross  v.  Everett, 
12  Ga.  30 ;  Wright  v.  Harris,  24  Ga. 
415. 

As  to  the  effect  of  the  acceptance 
of  service  of  process  by  one  partner, 
see  Bowen  v.  Sutherlin,  44  Ala. 
278;  Clark  v.  Stoddard,  3  Ala.  366; 
Demott  v.  Swain,  5  Stew.  &  P. 
293;  Bright  v.  Sampson,  20  Tex. 
21 ;  Freeman  v.  Carhart,  17  Ga, 
348. 


649 


*274  EIGHTS   AND    OBLIGATIONS.        _u  .  [BOOK   II. 

2.  Actions  by  and  against  partners  where  no  change  in  the 
firm  has  occurred. 

A.  Actions  in  respect  of  legal  rights. 
(a)  Actions  by  the  firm 
Actions  ex  contractu. 
In  order  to  determine  who  ought  to  sue  on  behalf  of  a 
firm  upon  a  contract  made  with  it,  it  is  necessary  to  dis- 
tinguish between 

1.  Contracts  under  seal. 

2.  Bills  of  exchange  and  promissory  notes. 

3.  Other  contracts. 

1 .  Actions  by  partners  on  contracts  under  seal. —  As 

regards  contracts  under  seal,  the  old  rule  was  that  if  such 
a  contract  was  entered  into  with  one  partner  only,  he  alone 
could  sue  upon  it;  and  that  if  it  was  entered  into  with 
more  than  one  partner,  all  those  with  whom  it  was  ex- 
pressly entered  into  must  sue  upon  it,  and  no  others  could, 
whatever  their  interest  in  its  performance  might  be.  (A) 
But  their  joinder  will  now  be  of  no  consequence  unless  the 

defendant  is  prejudiced  by  it.  (i) 
[*274r]      ^Covenant  with  A.  &  Co. —  It  is  apprehended  that 

a  covenant  entered  into  with  A.,  B.  &  Co.  may  be 
sued  upon  by  the  persons  who,  when  the  covenant  was 
made,  constituted  that  firm. 

2.  Actions  by  partners  on  bills  and  notes  — Blank  in- 
dorsements.—  As  regards  bills  of  exchange  and  promissory 
notes.  If  they  have  been  indorsed  in  blank  any  person 
holding  them  may  sue  upon  them.  Qc) 

(h)  See   the     note    to    Cabell  v.  Moore,  579 ;  Lowe  v.  Copestake,  3 

Vaughan,  1  Saund.  291,  i;  Metcalf  Car.  &  P.   300.     See,  also,  Law  v. 

v.  Rycroft,  6  M.  &  S.  75;  Scott  v.  Parnell,  7  C.  B.  N.  S.  282,  in  which 

Godwin,  1  Bos.  &  P.  67 ;  Vernon  v.  the  manager  of  a  joint-stock  bank 

Jefferys,    2    Str.    1146.     See  ante,  was  held  entitled  to    sue,  in  his 

p.  267,  note  (y).  own  name,  on  a  bill   indorsed  in 

(i)  Ord.  xvi,  r.  11.  blank  and  given  to  him  by  a  cus- 

(7c)  See  Ord  v.  Portal,   3  Camp,  tomer  of  the  bank  on  account  of 

239;    Attwood    v.   Rattenbury,    6  advances  made  by  it  to  him.    Ma- 

650 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *'275 

Special  indorsements. —  When  a  bill  or  note  is  not  in- 
dorsed in  blank  the  proper  persons  to  sue  upon  it  are  those 
named  in  the  instrument  as  drawers,  payees  or  indorsees, 
as  the  case  may  be.  (I)  Whether  they  are  partners  or  not 
is  of  no  consequence;  and,  therefore,  if  a  bill  is  drawn  in 
the  name  of  two  persons  as  if  they  were  partners,  they 
ought  both  to  join  in  an  action  on  the  bill,  although  one  of 
them  has  no  interest  in  it.  (m)  So  it  is  immaterial  whether 
the  bill  or  note  relates  to  partnership  matters  or  not,  for  if 
a  debtor  to  a  firm  makes  his  promissory  note  payable  to 
one  of  the  partners  only,  such  one  is  the  proper  person  to 
sue  on  the  note,  (n) 

Bills  in  name  of  A.  &  Co. —  If  a  bill  is  drawn  by  or  in 
favor  of  a  firm  in  its  commercial  name,  the  persons  who 
composed  the  firm  when  the  bill  was  drawn  ought  to  be 
plaintiffs,  (o)  But  they  can  now  sue  in  their  mercantile 
name,  (p) 

Bills  accepted  for  honor. —  If  one  partner  in  his  own 
name  accept  a  bill  drawn  on  a  stranger  for  his  honor,  and 
pays  the  bill  when  due  out  of  the  funds  of  the  partnership, 
with  the  consent  of  his  copartners,  the  partner  who  ac- 
cepted the  bill  is  the  proper  person  to  sue  the  drawee  for 
indemnity,  (q) 

3.  Actions  by  partners  on  ordinary  contracts. —  With 
respect  to  other  simple  contracts,  whether  written 
*or  verbal,  where  a  contract  is  entered  into  with  sev-  [*2Y5] 
eral  persons  jointly,  they  should  all  join  in  an  action 
upon  it.  (r)     But  if  a  simple  contract,  written  or  verbal,  ex- 

chell  v.  Kinnear,  1   Stark.  499,  is  (o)  McBirney  v.  Harran,  5  Ir.  Law 

rendered  unimportant  by  Ord.  xvi,  Rep.  428;  Phelps  v.  Lyle,  10  A.  & 

rr.  1  and  11.  E.  113. 

(Z)  See  Pease  v.  Hirst,  10  B.  &  C.  (p)  Ante,  p.  265. 

122.  (q)  Driver  v.  Burton,  17  Q.  B.  989. 

(m)  Guidon  v.  Robson,  2  Camp.  (r)  1  Wms.  Saund.  291fc,   and  1 

302.     Sed  quaere  now.      See  Ord.  Chitty  on  Plead.  10-15.   Formerly, 

xvi.  mistakes  in  this  respect  were  fatal; 

(n)  Bawden  v.  Howell,  3  Man.  &  but  see  now  Ord.  xvi,  r.  11. 
Gr.  638. 

651 


*27G  BIGHTS   AND    OBLIGATIONS.  [BOOK   II. 

pressed  or  implied,  has  been  entered  into  with  an  agent, 
it  may  be  sued  upon  by  his  principal,  even  if  undisclosed, 
provided  he  can  show  that  in  point  of  fact  the  agent  con- 
tracted on  his  behalf.  ($) l 

All  may  sue,  though  uot  named.—  This  doctrine  is  con- 
stantly applied  in  partnership  cases;  it  happens  every  day 
that  a  firm  sues  on  a  contract  entered  into  on  its  behalf  by 
one  of  its  members,  and  it  is  not  by  any  means  necessary 
that  the  person  dealing  with  him  should  have  been  aware 
that  the  one  partner  was  acting  on  behalf  of  himself  and 
other  people.2  The  question  is,  With  whom  was  the  con- 
tract made  in  point  of  law  ?  And  the  true  answer  to  this 
question  does  not  by  any  means  entirely  depend  on  the  an- 
swer to  be  given  to  the  more  simple  question,  With  whom 
was  the  contract  made  in  point  of  fact? 

Thus,  in  Garrett  v.  Ilandley,  (t)  all  the  members  of  a  firm 
were  held  entitled  to  sue  on  a  written  guaranty  given  to 
one  of  the  partners  only,  there  being  evidence  to  show  that 
the  guaranty  was  intended  for  the  benefit  of  the  firm.  So, 
wdiere  a  member  of  a  firm  of  bankers  was  asked  for  a  loan, 
and  he  made  it  out  of  the  funds  of  the  bank,  it  was  held 
than  an  action  for  the  recovery  of  the  money  lent  was  prop- 
erly brought  by  all  the  members  of  the  firm,  although  the 
borrower  had  not  requested  any  loan  from  the 
[*276]  bank,  (u)  So,  where  one  partner  -sells  goods  be- 
ts) See  Phelps  v.  Prothero,  16  C.  B.  313;  Hutton  v.  Bulloch,  L.  R.  8 
B.  370;  Sims  v.  Bond,  5  B.  &  Ad.  Q.  B.  331,  and  9  id.  572. 
389.  See,  also,  Beckham  v.  Drake,  *  l  See  Ewell's  Evans  on  Agency, 
9  M.  &  W.  79,  and  11  id.  315,  no-  304,  379,  401,  and  notes, 
ticed  ante,  p.  178,  and  Trueman  v.  2  Badger  v.  Daenicke,  56  Wis.  678. 
Loder,  11  A.  &  E.  589,  as  to  suing  (0  4  B.  &  C.  664.  See  the  same 
undisclosed  principals  on  written  case,  3  B.  &  C.  462,  where  an  ac- 
contracts.  Foreign  principals,  as  tion  by  the  one  partner  failed.  See 
a  rule,  do  not  enter  into  contracts  Hopkinson  v.  Smith,  1  Bing.  13,  as 
in  this  country  through  agents,  to  actions  by  attorneys  not  retained 
The  agents  here  themselves  con-  by  the  defendant. 
tract  as  principals,  though  acting  (u)  Alexander  v.  Barker,  2  Cr.  & 
for  others.  See  Elbinger  Actien  J.  133;  Sims  v.  Britain,  4  B.  &  Ad. 
Gesellschalt   V.  Claye,  L.  R.  8  Q.     375,  and  Sims  v.  Bond,  5  id.  389. 

652 


OH.  Ill,  SFC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *2"6 

longing  to  the  firm,  (a?)  or  does  work  (y)  of  the  kind  he 
and  his  copartners  undertake,  an  action  for  payment  may 
be  maintained  by  him  and  them  jointly,  although  the  per- 
son to  whom  the  goods  were  sold,  or  for  whom  the  work 
was  done,  knew  nothing  of  the  other  partners.  In  Cooke 
v.  Seeley,  (s)  a  partner  had  an  account  at  a  bank  in  his  own 
name,  but  there  was  evidence  to  show  that  it  was  a  part- 
nership account,  and  was  known  to  the  bankers  to  be  so, 
and  under  these  circumstances  it  was  held  that  all  the  part- 
ners were  entitled  to  sue  the  bankers  for  dishonoring  a 
check  drawn  on  them  by  the  one  partner  for  partnership 
purposes. 

Dormant  partners. —  It  follows  from  the  principle  on 
which  these  cases  were  decided,  and  although  formerly 
doubted  (a)  it  is  now  clearly  established,  that  dormant 
partners  may  join  as  plaintiffs  in  an  action  on  a  contract 
entered  into  on  behalf  of  the  firm  of  which  they  are  mem- 
bers, (b) 

But  a  dormant  partner  never  need  be  joined  as  a  co- 
plaintiff  in  an  action  on  a  contract  entered  into  with  the 
firm  or  with  one  of  its  members,  (o) 

Position  of  nominal  partners. — Nominal  partners,  i.  <?., 
persons  who  are  not  entitled  to  share  the  profits  of  the 
firm,  but  whose  names  appear  and  are  used  as  if  the}'-  were, 
never  need  join  as  plaintiffs  in  an  action  on  an  ordinary 
contract  not  under  seal,  (d)  If  a  partner  retires,  and  leaves 
his  name  in  the  firm,  it  is  not  necessary  that  he  should  be 

(x)  Skinner  v.  Stocks,  4  B.  &  A.  and  (t) ;  Robson  v.  Drummond,   2 

437.  B.  &  Ad.  303,  per  Littledale,  J. 

(ij)  Townsend  v.  Neale,  2  Camp.  (c)  Leveck  v.  Shafto,  2  Esp.  463, 

189;  Arden  v.  Tucker,  4  B.  &  Ad.  action  for  work  and    labor.     See 

817.  Phelps  v.  Lyle,  10  A.  &  E.  113,  as 

(z)  2  Ex.  746.  to  contracts  with  the  "directors" 

(a)  See    Mawman    v.   Gillett,   2  of  a  company. 

Taunt.  325 ;  Lloyd  v.   Archbowle,        (d)  Kell  v.  Nainby,  10  B.  &  C.  20. 
id.  324.  See,  also,  Spurr  v.  Cass,  L.  R.  5  Q. 

(b)  Cothay  v.  Fennell,  10  B.  &  C.     B.  656,  where  the  contract  was  in 
€71.     See,     also,    ante,    notes    (s)    writing  and  with  the  nominal  part- 
ner. 

653 


*9' 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


a  co-plaintiff  in  an  action  brought  by  the  continuing  part- 
ners in  respect  of  what  has  happened  since  the  retire- 
ment, (e) 

Where  nominal  partners  must  sue. —  But  if  a  nominal 
partner's   name  is  on   a   bill  of  exchange  or  promissory 

note,  he  ought  to  be  a  party  to  the  action  brought 
[*277]  *upon  it;  and  the  same  rule  applies  to  actions  on 

contracts  under  seal,  (f) 
Actions  by  one  partner — Covenant  with  one  partner.1— 
One  partner  may  sue  alone  on  a  written  contract  made  with 
himself  if  it  does  not  appear  from  the  contract  itself  that 
he  was  acting  as  agent  of  the  firm;  (g)  and  one  partner 
ought  to  sue  alone  on  a  contract  entered  into  with  himself, 
if  such  contract  is  in  fact  made  with  him  as  a  principal,  and 
not  on  behalf  of  himself  and  others.     Therefore,  if  each  of 


(e)  Cox  v.  Hubbard,  4  C.  B.  817. 

(/)  Guidon  v.  Robinson,  2  Camp. 
302. 

1  The  partner  for  whose  benefit 
an  attachment  bond  is  given  is 
the  proper  party  to  sue  thereon, 
and  not  the  firm  of  which  he  is 
a  member,  notwithstanding  the 
goods  for  which  the  bond  is  given 
may  have  been  bought  on  account 
of  the  firm  and  paid  for  by  it. 
State  v.  Merritt,  70  Mo.  275. 

On  an  attachment  bond  executed 
to  a  partnership  by  its  firm  name, 
no  recovery  can  be  had  for  dam- 
ages sustained  by  one  partner  by 
wrongful  levy  on  his  individual 
property.  Watts  v.  Rice,  75  Ala. 
289. 

Where  an  attachment  bond  was 
given  in  a  suit  against  D.  M.  Os- 
borne and  others  unknown, 
described  as  partners,  in  which 
"D.  M.  Osborne  &  Co."  appeared, 
held,  that  D.  M.  Osborne  &  Co., 
having  been  really  the  defendant 
in  the  attachment  suit,  though  by 


wrong  description,  could  bring  suit 
on  such  attachment  bond.  Hed- 
rick  v.  Osborne,  99  Ind.  143. 

Upon  a  covenant  with  a  partner- 
ship executed  in  the  partnership 
name  only  by  one  partner,  all  who 
are  partners,  at  the  time  of  its 
execution  may  sue.  Seymour  v. 
Western  Railroad  Co.  106  U.  S. 
320. 

(g)  See  Skinner  v.  Stocks,  4  B.  & 

A.  437,  and  Cothay  v.  Fennell,  10 

B.  &  C.  671.  See,  also,  Cawthron 
v.  Trickett,  15  C.  B.  N.  S.  754,  as  to 
actions  by  a  master  and  part  owner 
of  a  ship,  on  bills  of  lading,  and 
Agacio  v.  Forbes,  14  Moo.  P.  C.  160, 
in  the  privy  council,  where  it  was 
held  that  one  partner  might  main- 
tain an  action  upon  an  agreement 
in  writing  made  with  him  alone, 
although  the  agreement  related  to 
the  business  of  the  firm,  and  was, 
in  truth,  for  its  benefit,  and  the 
consideration  was  a  release  by  the 
partner  in  question  of  a  debt  due 
to  the  firm. 


654 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN   PARTNERS.  *278 

several  partners  lends  money  out  of  his  own  funds,  each, 
ought  to  sue  alone  for  repayment  of  his  advance,  although 
the  loans  may  have  been  made  in  pursuance  of  some  ar- 
rangement with  all  the  partners;  for  each  loan  creates  a 
separate  debt  to  each  partner,  and  the  several  loans  do  not 
together  form  one  debt  to  the  firm.  (A)  Again,  if  one  part- 
ner alone  holds  a  certain  office  and  does  work  in  his  official 
capacity,  he  alone  ought  to  sue  for  payment  of  the  work 
so  done,  (i)  Again,  if  a  partner  enters  into  a  contract  under 
seal  for  the  payment  of  money,  and  the  money  is  paid  out 
of  the  funds  of  the  firm,  and  it  then  appears  that  the  con- 
tract was  invalid  on  the  ground  of  fraud,  the  partner  who 
entered  into  the  covenant  may  sue  alone  for  the  recovery 
back  of  the  money,  (k)  Lastly,  if  one  partner  acting  for 
the  firm  has  represented  himself  to  be  acting  on  his  own 
account  only,  and  has  ostensibly  entered  into  a  contract  on 
his  own  account,  he  alone  ought  to  sue  on  it.  (I) 

The  Judicature  Acts  and  the  rules  promulgated  under  them 
have  rendered  it  comparatively  unimportant  to  con- 
sider whether  *in  any  given  case  all  partners  who  [*278] 
can  sue  must  do  so,  and  whether  an  action  should  be 
brought  in  the  name  of  one  partner  or  of  all;  for  mistakes 
on  such  matters  are  no  longer  fatal  to  an  action.  At  the 
same  time  mistakes  create  delay  and  expense,  and  attention 
ought  therefore  still  to  be  paid  to  the  points  above  adverted 
to;  and  if  all  the  members  of  a  firm  sue  when  one  only 
ought  to  do  so,  or  one  only  sues  when  all  ought  to  do  so, 
and  the  defendant  can  show  that  he  is  thereby  prejudiced, 
he  can  apply  to  have  the  improper  parties  struck  out  or  the 
proper  parties  joined,  as  the  case  may  be.  (m) 

(h)  See  Thacker  v.    Shepherd,  2        (k)  Lefevre  v.  Boyle,  8  B.  &  Ad. 
Chitty,  652;  Brand  v.  Boulcott,  3    877. 
Bos.  &  P.  235.  (Z)  Lucas  v.  De  la  Cour,  1 M.  &  S. 

(i)  Brandon  v.  Hubbard,  2  Brod.     249. 
&  Bing.  11.  (m)  See  Ord.  xvi,  r.  11. 

655 


*279  EIGHTS   AND    OBLIGATIONS.  [BOOK   IL 

Actions  ex  delicto. 

Actions  by  partners  for  torts. —  With  respect  to  actions 
by  partners  not  founded  on  any  breach  of  contract,  or  of 
quasi-con  tract,  but  on  some  tort,  the  general  principle  is 
that  where  a  joint  damage  accrues  to  several  persons  from  a 
tort,  they  ought  all  to  join  in  an  action  founded  upon  it;  (n) 
whilst  on  the  other  hand  several  persons  ought  not  to  join 
in  an  action  ex  delicto  unless  they  can  show  a  joint  dam- 
age, (o) 

Actions  for  libel.1 — These  doctrines  are  well  illustrated 
by  actions  for  libel.  A  libel  on  a  firm  can  be  made  the 
subject  of  an  action  by  the  firm,  (p)  If  the  libel  reflects 
directly  on  one  partner,  and  through  him  on  the  firm,  two 
actions  will  lie,  viz.,  one  by  the  party  libeled  and  the  other 
by  him  and  his  copartners;  (q)  but  the  damage  in  the  first 
action  must  not  appear  to  be  joint,  nor  must  that  in  the 
second  appear  to  be  confined  to  the  libeled  partner  only,  (r) 
If  one  partner  is  libeled,  and  the  firm  cannot  be  shown  to 
have  been  damnified,  an  action   for  the  libel  should  be 

brought  in  the  name  of  the  individual  partner 
[*279]  *aggrieved,  and  not  by  the  firm;  (s)  and  he  may  sue 

alone,  although  the  libel  more  particularly  affects 
him  in  the  way  of  his  business,  (t)  Moreover,  a  general 
statement  not  clearly  pointing  to  any  particular  person,  but 

(n)  See  1  Wms.   Saund.  291,  m;  Saloon  Omnibus  Co.  v.  Hawkins,  4 

Addison  v.  Overend,  6  T.  R.    7GG;  H.  &  N.  87. 

Sedgworth  v.  Overend,  7  T.  R.  279.  (q)  The  two  actions  can  now  be 

(o)  2  Wms.  Saund.  116,  a.  combined  in  one.     See  Ord.  xviii, 

1  In  an  action  for  a  libel  brought  r.  6. 

by  the  partnership,  damages  can  (?•)  See  Harrison  v.  Bevington, .  8 

only  be  recovered  for  injury  sus-  C.  &  P.  708,  and  Forster  v.  Lawson, 

tained  in  the  joint  business  of  the  3  Bing.  452;  2  Wms.  Saund.  117,  b; 

firm,   and    evidence  to    show  the  Haythorne  v.  Lawson,  3  C.  &  P. 

mental  pain  and  distress  of  each  of  196. 

the    plaintiffs    is  not  admissible.  (s)  Solomons  v.  Medex,  1  Stark. 

Donahue  v.  Caffey,  2  Atl.  Rep.  397.  191. 

(p)  See  Cooke  v.    Batchellor,    3  (t)  Harrison  v.  Bevington,  8  C.  & 

Bos.  &  P.  150 ;  Forster  v.  Lawson,  3  P.   708;   Robinson  v.  Marchant,  7 

Bing.  452 ;  Williams  V.  Beaumont,  Q.  B.  918. 
10    Bing.    260;  The    Metropolitan 

656 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *279 

libelous  as  to  an  entire  class,  ma}'  be  treated  by  any  indi- 
vidual of  that  class,  who  can  show  that  he  was  in  fact 
intended,  as  a  libel  on  himself;  and  this  principle  is  as 
applicable  to  libels  affecting  a  firm  as  to  those  affecting 
single  individuals,  (u) 

Consequence  of  non-joinder  of  partners. —  An  action 
for  the  recovery  of  goods  of  the  firm,  or  for  damages  for 
their  loss  or  injury,  ought  to  be  brought  in  the  name  of  the 
firm  or  by  all  its. members;  (a?)1  but  if  one  only  sues  he  will 
be  entitled  to  recover  damages  in  respect  of  his  interest  in 
the  goods;  (x)  and  if,  after  he  has  done  so,  another  action 
is  brought  by  one  of  his  copartners,  that  action  cannot  be 
stopped,  (y) 

Actions  where  one  partner  colludes  with  defendant. — 
If  a  person  colludes  with  one  partner  in  a  firm  to  injure  the 
other  partners,  the  latter  can  jointly  sustain  an  action  against 
such  person.  Thus,  where  the  bankers  of  a  firm  of  four 
partners  knew  that  one  of  them  was  in  the  habit  of  draw- 
ing bills  in  the  name  of  the  firm  for  his  own  private  pur- 
poses, and  the  bankers  colluded  with  him  and  kept  his 
copartners  in  ignorance  of  what  was  going  forward,  and 
paid  the  funds  when  due  out  of  the  funds  standing  to  the 
credit  of  the  firm,  it  was  held  that  an  action  lay  against 
the  bankers  at  the  suit  of  the  other  three  partners,  {z) 

Actions  of  ejectment. —  An  action  of  ejectment  for  the 
recovery  of  real  property  belonging  to  the  firm  ought  to 

(u)  Le  Fanu  v.  Malcolmson,  1  H.  partner  may   therefore   bring  re- 

L.  C.  637.  plevin  for  the  whole  property  if  it 

(x)  See  Addison  v.  Overend,  6  T.  is  seized  on  execution  for  the  indi- 

R.  766 ;  Bleadon  v.  Hancock,  4  Car.  vidual  debt  of  another.     Hutchin- 

&P.  152.     See  Dockway  v.  Dicken-  son  v.  Dubois,  45  Mich.  143.     See 

son,  Comb.  366.  ante. 

*A  partner  is  not  merely  a  part  (y)  Sedg worth  v.  Overend,  7  T. 

owner  of  the  partnership  property;  R.  279. 

he  has  an  equal  as  well  as  joint  (z)  Longman  v.  Pole,  Moo.  &  Mai. 

interest  in  the  whole  of  it,  and  is  223.    Now  the  other  partner  might 

in  some  sense  a  trustee  of  the  part-  be  joined  as  a  defendant.    See  ante, 

nership  assets  as  a  trust  fund  for  p.  267,  note  (y). 
the    payment    of    creditors.     One 

Vol.  I  — 42  657 


*280  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

be  brought  in  the  names  of  all  those  persons  in  whom  the 
legal  estate  is  vested,  (a)  If,  however,  one  partner  only 
has  made  a  lease  of  the  partnership  property,  then,  as  his 

title  cannot  be  disputed  by  the  lessee,  notice  to  quit 
[*280]  may  be  given  and  ejectment  maintained  *by  the 

lessor  alone;  and  if  he  alone  has  the  legal  estate 
the  circumstances  that  rent  has  been  paid  to  the  firm,  and 
receipts  for  it  have  been  given  by  all  the  partners,  will  not 
affect  his  right  to  give  the  notice  and  bring  the  action  in 
his  own  name,  (b) 

(6)  Actions  against  the  firm. 

Actions  against  partners. —  In  considering  who  ought 
to  be  sued  in  respect  of  a  breach  of  contract  committed  by 
a  firm,  or  some  or  one  of  its  members,  regard  must  be  had 
in  the  first  instance  to  the  persons  upon  whom  that  con- 
tract is  legally  binding.  This  matter  has  been  already  dis- 
cussed at  length  in  the  first  and  second  chapters  of  the 
present  book,  and  it  is  needless  to  repeat  what  has  there 
been  said.  Assuming,  therefore,  the  question  of  liability 
to  be  determined,  it  remains  only  to  consider  whether  all 
the  persons  who  are  liable  ought  to  be  sued  jointly,  or 
whether  any  and  which  of  them  may  be  sued  without  the 
others.  If  there  is  any  doubt  on  this  question  the  proper 
way  is  to  sue  them  all;  for  this  is  now  expressly  authorized 
to  be  done.  (<?)  In  order,  however,  to  save  expense,  the  fol- 
lowing rules  will  be  found  useful. 

Actions  ex  contractu. 

Actions  against  partners  on  contracts. —  All  persons 
who  are  jointly  liable   on   a  contract  ought  to   be  sued 

(a)  See  1  Chitty  on  Plead.  74.  (c)  Ord.  xvi,  rr.  1,  4,  6.  Honduras 

(6)  See  Doe  v.  Baker,  2  B.  Moore,     Rail.  Co.  v.  Tucker,  2  Ex.  D.  301. 

189.  See,  also,  Ord.  xxi,  r.  20,  abolishing 

pleas  in  abatement. 
658 


Oil.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


*2  SO 


jointly,  (<7)'  unless  some  of  them  are  abroad,  (e)     This  rule 
applies  to  actions  against  partners  for  the  recovery  of  pen- 


(d)  See  the  note  to  Cabell  v. 
Vaughn,  1  Wms.  Saund.  2916; 
Byers  v.  Dobey,  1  H.  Blacks.  236 ; 
Bonfield  v.  Smith,  12  M.  &  W.  405. 
See  ante,  p.  264,  notes  (fr)  and  (c). 

JSee  Hunt  v.  Semonin,  79  Ky. 
270;  Northern  Ins.  Co.  v.  Potter, 
63  Cal.  157;  Harrison  v.  McCor- 
mick,  69  Cal.  616 ;  Bowen  v.  Crow, 
16  Nev.  556;  and  the  cases  cited 
below. 

One  who  has  sued  a  firm  and  re- 
covered against  a  single  partner 
only  cannot  assign  as  error  that  a 
6ole  judgment  cannot  be  rendered 
on  a  partnership  liability.  Roberts 
v.  Pepple,  55  Mich.  367. 

Where  a  person  engaged  a  firm 
of  physicians  and  surgeons,  and 
one  member  of  the  firm,  while  act- 
ing under  this  employment,  failed 
to  exercise  proper  professional  skill 
and  care,  it  was  held  that  an  action 
by  the  plaintiff  for  damages  for 
6uch  failure  was  one  on  the  con- 
tract, the  breach  of  which  was  the 
foundation  of  the  action,  and  hence 
that  all  the  partners  must  be  joined 
as  defendants.  Whittaker  v.  Col- 
lins, 34  Minn.  299. 

Any  matter  which  constitutes  a 
defense  as  to  one  partner,  where 
the  firm  is  sued  jointly  upon  a  con- 
tract, will,  in  general,  be  good  for 
all  the  defendants.  See  Cooley  v. 
Sears,  25  111.  501;  Gribbin  v. 
Thompson,  28  111.  61,  and  cases 
there  cited.  The  personal  defense 
of  infancy,  referred  to  in  the  text, 
is  an  exception  to  this  rule. 
To  a  joint  declaration    against 


partners,  a  plea  by  one  that  they 
did  not  promise  within  five  years 
is  a  good  plea.  Vallandingham  v. 
Duval,  7  J.  J.  Marsh.  262. 

In  a  suit  upon  a  copartnership 
note,  either  member  of  the  firm,  if 
the  note  is  tainted  with  usury, 
may  set  up  that  fact  in  defense, 
without  the  consent  of  the  other 
members;  and  one  member  who 
has  purchased  the  interest  of  the 
others,  assuming  the  partnership 
debts,  and  has  renewed  the  note 
tainted  with  usury  by  the  execu- 
tion of  a  new  one  in  his  own  name, 
may  set  up  this  defense.  But 
otherwise  as  to  a  third  party  as- 
suming payment  of  a  note  thus 
tainted.  Machinists'  Bk.  v.  Krurn, 
15  Iowa,  49. 

G.  and  O.  were  partners  in  the 
purchase  with  warranty  of  a 
threshing-machine,  for  which  they 
executed  their  promissory  note. 
In  an  action  on  the  note,  where  O. 
made  default,  held,  that  G.  alone 
could  plead  in  defense  the  breach 
of  the  contract  of  the  warranty. 
Brayley  v.  Goff,  40  Iowa,  76. 

In  some  of  the  states  it  is  not 
necessary  to  join  all  the  partners  as 
defendants.  See  McCulloch  v. 
Judd,  20  Ala.  703;  Hicks  v.  Ma- 
ness,  19  Ark.  701 ;  Johnson  v.  Byrd, 

I  Hempst.  434;  Hamilton  v.  Bux- 
ton, 6  Ark.  24;  Burgen  v.  Dwinal, 

II  Ark.  314;  Hicks  v.  Branton,  21 
Ark.  186;  Kent  v.  Wells,  id.  411; 
Yates  v.  Watson,  54  Mo.  585;  Ryer- 
son  v.  Hendrie,  22  Iowa,  480; 
Williams  v.   Rogers,  14  Bush,  777. 


(e)  See  3  and  4  Wm.  4,  oh.  42,  §  8;    See,  before  this  statute,  Sheppard 
Joll  v.  Lord  Curzon,  4  C.  B.  249.    v.  Baillie,  6  T.  R.  327. 

659 


f2sa 


KIGIITS    AND    OBLIGATIONS. 


[BOOK    II, 


alties  imposed  upon  them  by  statute,  (/)  and  to  actions  in 
form  ex  delicto,  but  founded  in  substance  on  a  breach  of 


See,  also,   Green  v.   Pyne,  1  Ala. 
235. 

In  California  an  action  to  enforce 
a  joint  partnership  liability  may  be 
brought  against  the  partners  col- 
lectively by  their  firm  name  under 
section  338  of  the  code.  Harrison 
V.  McCormick,  69  Cal.  616. 

At  common  law  if  two  are  de- 
clared against  as  partners  no  re- 
covery can  be  had  against  them 
severally.  Rule  cnanged  by  stat- 
ute in  Georgia.  Francis  v.  Dickel, 
68  Ga.  255. 

In  Kansas  each  partner  is  liable 
for  the  whole  of  the  partnership 
debts,  and  a  suit  may  be  brought 
against  any  one  or  more  of  such 
partners  to  recover  the  same ;  and 
in  a  proper  case  an  attachment 
issued  therein  against  one  or  more 
of  the  defendants  liable  thereto. 
In  such  case  partnership  property 
may  be  seized  on  the  attachment, 
whether  it  runs  against  the  entire 
firm  or  against  a  part  only  of  its 
members;  bu^the  individual  prop- 
erty of  one  partner  cannot  be 
seized  by  virtue  of  an  attachment 
not  issued  against  him,  but  against 
some  other  member  of  the  firm. 
Williams  v.  Muthersbaugh,  29 
Kan.  730.     See  post,  697,  note. 

By  statute  in  Alabama  contracts 
by  a  partnership  within  the  scope 
of  firm  business  are  joint  and  sev- 
eral. Hall  v.  Cook,  69  Ala.  87; 
Hall  v.  Green,  69  id.  368 ;  Heralson 
v.  Campbell,  63  Ala.  278.  See,  also, 
Dunn  v.  Jaffray,  13  Pac.  Rep.  781. 
The  same  rule  has  been  estab- 
lished by  statute  in  a  few  other 


states.  See  Kent  v.  Walker,  21 
Ark.  411 ;  Williams  v.  Rogers,  14 
Bush,  776;  Wilson  V.  Home,  37 
Miss.  477 ;  Logan  v.  Wells,  76  N.  C. 
416;  Gratz  v.  Stump,  Cooke 
(Tenn.),  493. 

Under  the  statute  (1  R.  S.  ch.  31, 
sec.  89,  N.  C),  one  partner  may  be 
sued  alone  upon  a  promissory  note 
executed  in  the  name  of  the  firm. 
Palyart  v.  Goulding,  1  Brunner,  2. 

The  statute  of  Illinois  making 
all  joint  obligations  and  covenants 
joint  and  several  does  not  refer  to 
partnership  obligations  or  debts. 
Coates  v.  Preston,  105  111.  470. 

In  Iowa,  on  the  other  hand,  in 
all  cases  of  joint  obligation  of  co- 
partners, suits  may  be  prosecuted 
against  any  one  of  those  who  are 
liable.  Frayser  v.  Moore,  22  Kan. 
115. 

The  right  of  partnership  creditors 
to  proceed  against  the  separate  es- 
tate was  not  first  conferred  by  Re- 
vised Statutes  of  Missouri,  sections 
658,  661,  making  all  contracts  joint 
and  several,  etc.  The  effect  of  the 
statute  is  to  relieve  the  joint  cred- 
itor from  resorting  to  equity  to 
reach  the  separate  estate,  and  to 
allow  him  to  sue  at  law,  in  the  first 
instance,  as  if  against  the  joint 
debtors.  Level  v.  Farris,  24  Mo. 
App.  445. 

In  Alabama  it  is  held  that  where 
several  are  sued  as  copartners  the 
plaintiff  may  discontinue  at  any 
time  as  to  such,  if  any,  as  are  not 
partners.  Wheeler  v.  Bullard,  6 
Port.  352;  Guzzan  v.  Bebee,  8  Port. 
49. 


(/)  Bristow  v.  James,  7  T.  R.  257. 

660 


CH.  Ill,  SEC.  I.]       ACTIONS    BETWEEN    PARTNERS. 


c280 


contract  express  or  implied;  ($)  but  it  is  subject  to  certain 
real  or  apparent  exceptions  which  require  notice. 


If  all  the  partners  made  defend- 
ants in  an  action  have  not  been 
served  with  process  the  plaintiff 
may  discontinue  against  those  not 
served.  Clark  v.  Stoddard,  3  Ala. 
366:  Earbee  v.  Evans,  9  Port.  295. 

So,  in  some  of  the  states,  judg- 
ment may  be  rendered  against  less 
than  the  whole  number  sued. 
Maynard  v.  Ponder,  75  Ga.  664; 
White  v.  Tudor,  32  Tex.  758; 
Finney  v.  Allen,  7  Mo.  416;  Will- 
iams v.  Rogers,  14  Bush,  777 ;  Dean 
v.  Savage,  28  Conn.  359 ;  Miles  <v. 
Von  Deyn,  6  N.  W.  Rep.  39;  Ste- 
diker  v.  Bernard,  9  N.  Y.  Civ. 
Proc.  374. 

So  where  the  holder  of  a  prom- 
issory note  signed  with  the  firm 
names  of  two  different  partnership 
firms  sues  several  individuals  as 
members  of  said  firms,  and  where 
it  appears  upon  the  trial  that  one 
of  the  individuals  sued  is  not  liable 
because  he  is  not  a  member  of 
either  firm ;  and  where  it  also  ap- 
pears that  another  of  said  indi- 
viduals is  not  liable,  because  the 
person  who  signed  the  firm  name 
of  one  of  the  firms  had  no  author- 
ity to  so  sign  the  same,  nor  any 
authority  to  bind  this  individual, 
the  plaintiff  may  dismiss  his  ac- 
tion against  those  two  defendants 
who  are  not  liable,  and  take  judg- 
ment against  those  who  are  shown 
to  be  liable.  Silvers  v.  Foster,  9 
Kan.  56. 

Where,  in  an  action  against 
partners  upon  a  partnership  obliga- 
tion, separate  judgments  are  en- 


tered against  each  of  the  defend- 
ants, instead  of  a  joint  judgment 
against  all,  this  is  an  irregularity 
merely ;  and  the  court  has  no 
power  to  set  aside  the  judgments 
on  motion,  unless  motion  is  made 
within  one  year  after  their  rendi- 
tion. Judd  v.  Hubbell,  76  N.  Y. 
543. 

Under  the  code,  in  an  action 
against  three  as  partners,  judgment 
may  go  against  the  two  who  alone 
were  served  and  appeared,  upon 
proof  that  they  alone  composed  the 
firm.    Pruyn  v.  Black,  21  N.  Y.  300. 

Where,  in  an  action  against  three 
defendants,  sought  to  be  charged 
as  partners,  only  one  appears  and 
defends,  and  there  is  evidence  of 
his  liability,  the  objection  cannot 
be  maintained  that  there  is  not 
sufficient  evidence  of  the  liability 
of  the  other  defendants ;  because 
if  they  were  not  served  with  pro- 
cess a  judgment  would  not  affect 
them ;  and  if  they  were  served 
with  process,  and  failed  to  appear, 
their  default  is  an  admission  of 
their  liability.  Van  Eps  v.  Dillaye, 
6  Barb.  244. 

In  a  suit  against  several  partners, 
some  of  whom  have  not  appeared, 
if  the  plaintiff  declare  against  all, 
he  may,  after  verdict  against  those 
who  have  appeared,  have  judg- 
ment against  those  who  have  not. 
Taylor  v.  Henderson,  17  Serg.  & 
R.  453. 

Where  three  defendants,  part- 
ners, have  been  served  with  pro- 
cess, and  one  has  pleaded,  judg- 


(g)  Powell  v.  Lay  ton,  2  Bos.  &  P.  N.  R.  365:  Buddie  v.  Willson,  6  T.  R. 
369. 

661 


-231 


EIGHTS    AND    OBLIGATIONS. 


[cook  II. 


Actions  against  infant  partners. —  In  the  first 
[:<'2S1]  place  an  infant  partner,  not  being  bound  by  any  *con- 


ment  against  him  is  erroneous, 
without  first  taking  an  interloc- 
utory judgment  against  the  other 
two.     Nelson  v.  Lloyd,  9  "Watts,  22. 

In  a  suit  against  partners,  if  one 
of  them  shows  that  the  name  of 
the  firm  was  put  to  it  without  his 
authority,  and  that  the  debt  was 
not  a  firm  debt,  and  he  is  dis- 
charged by  the  jury,  judgments 
may  be  entered  for  him  and  against 
his  prrtner.  And  in  such  a  case 
the  holder  of  the  note  may  bring  a 
several  suit  against  the  partner 
liable  and  recover  a  several  judg- 
ment. Parker  v.  Jackson,  16  Barb. 
33. 

On  a  firm  note,  in  terms  promis- 
ing jointly  and  severally,  the  part- 
ner who  signed  the  firm  name  may 
be  sued  alone.  Snow  v.  Howard, 
35  Barb.  55.  See,  also,  Ryerson  v. 
Hendrie,  supra. 

Where  one  partner  makes  a  war- 
ranty on  the  sale  of  goods  an  ac- 
tion may  be  maintained  on  the 
warranty  against  that  partner 
without  joining  the  other.  Clarke 
V.  Holmes,  3  Johns.  148;  Cooking- 
ham  v.  Lasher,  38  Barb.  656. 

If  one  of  several  partners  prom- 
ise, individually,  to  pay  a  debt  he 
will  not  be  allowed  to  show  that 
it  was  due  jointly  from  himself 
and  copartners.  Conley  v.  Good, 
Breese,  96. 

In  Indiana,  in  a  suit  upon  the 
promise  of  one  partner  to  pay  the 
debts  of  the  firm  on  dissolution, 
the  remaining  partner  is  not  a  nec- 
essary party  defendant.  Powers  v. 
Fletcher,  84  Ind.  154. 

A  partner  dealing  in  the  name  of 
his  firm  was  inquired   of   by   the 


party  with  whom  he  dealt  of 
what  persons  the  firm  consisted, 
and  replied  of  himself  and  another, 
whose  names  he  gave  in  writing. 
In  a  suit  against  the  two  as  part- 
ners they  pleaded  that  there  was 
another  partner  not  joined,  and  the 
promises  alleged  were  made  by  the 
three  jointly.  Upon  issue  joined 
the  defendants  were  held  to  be  es- 
topped to  prove  the  partnership  to 
consist  of  three.  Chase  v.  Deming, 
42  N.  H.  274. 

Where,  after  dissolution  of  a 
commercial  firm,  holding  a  lease 
of  premises  with  the  privilege  of 
renewal,  one  partner  claims  the 
right  of  renewal,  the  other  part- 
ner, bound  in  solido,  need  not  be 
made  a  party  in  an  action  to  expel 
him.  Geheebe  v.  Stanby,  1  La. 
Ann.  17. 

A  complaint  against  a  member 
of  a  copartnership  alleged  that,  at 
the  request  of  the  defendant,  the 
plaintiff  had  rendered  services  of  a 
certain  value  in  the  settlement  of 
the  partnership;  that  such  copart- 
nership had  been  dissolved,  and  the 
final  settlement  of  the  partnership 
business  placed  in  the  hands  of  the 
defendant,  pursuant  to  a  written 
agreement  of  dissolution,  made 
part  of  the  complaint  by  copy, 
whereby  the  defendant  had  agreed 
to  pay  off  the  partnership  debts, 
upon  realizing  sufficient  means  out 
of  the  partnership  assets ;  and  that 
sufficient  had  been  realized  by  the 
defendant  out  of  such  assets  to  pay 
all  of  the  partnership  debts.  Held, 
on  demurrer,  for  a  defect  of  par- 
ties defendant,  that  such  exhibit 
forms  no  part  of  the  complaint,  and 


G62 


OH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


'281 


tract  entered  into  by  or  on  behalf  of  the  firm,  ought  not 
to  be  joined  as  a  defendant  in  an  action  on  any  such  con- 
tract. (h)1 


cannot  be  looked  to  in  determin- 
ing the  demurrer;  that  the  com- 
plaint discloses  a  good  cause  of  ac- 
tion against  the  defendants  alone, 
and  that  the  other  member  of  the 
copartnership  is  not  a  necessary 
party  defendant.  Way  v.  Fravel, 
61  Ind.  162. 

In  an  action  against  a  partner- 
ship of  B.,  W.  &  Co.,  W.  appeared 
and  pleaded  non  assumpsit.  After- 
wards B.,  against  whom  the  suit 
had  been  abated,  entered  his  ap- 
pearance, and,  without  filing  any 
plea,  entered  into  the  trial  and  de- 
fended the  suit.  Held,  that  a  judg- 
ment against  B.  and  W.  only  was 
not  erroneous,  as  they  did  not  dis- 
cover, by  a  plea  in  abatement,  that 
there  were  other  partners,  and  as 
B.,  by  appearing  and  going  to  trial 
without  a  separate  plea,  had  bound 
himself  to  abide  by  the  plea  of  his 
other  partner.  Barnet  v.  Watson, 
1  Wash.  (Va.)  372. 

All  the  partners  of  a  firm  should 
be  joined  in  a  proceeding ,  to  set 
aside  a  chattel  mortgage  to  the 
firm  on  the  ground  of  fraud. 
Lyon  v.  Ballentine,  5  West.  R.  718. 

A  bill  for  the  benefit  of  a  firm 
composed  of  many  persons  can  be 
maintained  against  a  director  and 
some  partners  by  the  other  mem- 
bers of  the  board  of  directors,  with- 
out making  all  the  partners  par- 
ties. Goldman  v.  Page,  59  Miss. 
404. 

In  an  action  by  an  infant  part- 
ner to  have  a  note  and  mortgage 
procured  to  be  executed  by  him 
in  the  firm  name  by  the  fraudu- 
lent representations  of  firm  cred- 


itors, the  infant's  partner  having 
absconded,  such  absconding  part- 
ner is  not  a  necessary  party.  Salter 
v.  Krueger,  65  Wis.  217. 

In  an  action  against  partners  on 
a  promissory  note  executed  in  their 
individual  names  and  not  in  the 
firm  name,  the  complaint  alleged, 
and  the  court  found,  that  the  de- 
fendants were  partners  and  that 
they  executed  the  note.  Held,  that 
there  was  no  sufficient  allegation 
or  finding  that  the  note  was  ex- 
ecuted by  the  makers  as  partners, 
or  for  a  consideration  which  passed 
to  the  firm.  Freeman  v.  Campbell, 
55  Cal.  197;  S.  C.  56  Cal.  639. 

As  to  what  allegations,  in  an  ac- 
tion against  the  partnership,  are 
sufficient  to  charge  the  partners 
individually,  see  Hughes  v.  McDill, 
1  Tex.  App.  (Civ.)  735. 

As  to  when  the  plaintiff  is  bound 
to  prove  who  are  the  members  of 
a  firm,  in  an  action  against  the 
firm,  see  Hall  v.  Lyons,  29  West. 
Va.  410. 

(7i)See  1  Wms.  Saund.  207a; 
Chandler  v.  Danks,  3  Esp.  76;  Bur- 
gess v.  Merrill,  4  Taunt.  468;  Jaf- 
fray  v.  Frebain,  5  Esp.  47.  For- 
merly it  was  thought  that  an 
infant  partner  ought  to  be  made  a 
co-defendant.  See  Ex  parte  Hen- 
derson, 4  Ves.  164;  Gibbs  v.  Mer- 
rill, 3  Taunt.  307. 

1  In  Burgess  v.  Merrill,  cited  by 
the  author,  infancy  was  held  to  be 
a  good  replication  to  a  plea  of  non- 
joinder of  an  infant  partner  as  de- 
fendant; but  the  case  of  Burgess 
v.  Merrill  has  not  been  followed 
in  this  country.     Here,  where  one 


663 


'-2S1 


EIGHTS    AND    OBLIGATIONS. 


[lX)OK    II. 


Actions  against  dormant  partners. —  Secondly,  as  re- 
gards dormant  partners.  It  has  been  seen  that  they  are 
liable  on  all  contracts  entered  into  on  behalf  of  the  firm  to 
which  they  belong;  and,  whether  such  a  contract  is  writ- 
ten or  unwritten,  express  or  implied,  it  is  clear  that  a  dor- 
mant partner  may  be  sued  upon  it.  (i)  Dormant  partners, 
moreover,  ought  to  be  made  co-defendants  in  an  action  on 
a  contract  binding  the  firm,  (k) l     But  a  person  who  holds 


of  several  defendants  in  an  action 
of  assumpsit  pleads  his  infancy  and 
gives  it  in  evidence  upon  the  trial, 
the  jury  may  find  a  verdict  for  the 
infant  and  for  the  plaintiff  against 
the  other  defendants,  and  judg- 
ment may  properly  be  rendered  on 
such  verdict.  Cutts  v.  Gordon,  13 
Me.  474;  Hartness  v.  Thompson,  5 
John.  ICO;  Woodwards.  Newhall, 
1  Pick.  500;  Tut  tie  v.  Cooper,  10 
Pick.  281 ;  Barlow  v.  Wiley,  3  A. 
K.  Marsh.  457 ;  Allen  v.  Butler,  9 
Vt.  126;  Cole  v.  Pennell,  2  Rand. 
179 ;  Warnsley  v.  Lindenberger,  id. 
478. 

In  such  a  case  the  plaintiff  may 
enter  a  nolle  prosequi  against  the 
infant,  and  proceed  to  judgment 
against  the  other  defendants.  See, 
Woodward  v.  Newhall,  supra; 
Kirby  v.  Cannon,  9  Ind.  371 ;  Mason 
v.  Dennison,  15  Wend.  66 ;  Ex  parte 
Nelson,  1  Cow.  417. 

Where  in  an  action  on  a  contract 
the  defendant  pleads  the  non-join- 
der of  his  copartner  as  defendant, 
a  reply  that  such  copartner  is  an 
infant  is  bad  on  demurrer.  Slocum 
v.  Hooker,  13  Barb.  536.  See,  gen- 
erally, upon  this  subject,  Ewell's 
Lead.  Cases,  243,  244. 

In  an  action  against  a  firm  for  a 
partnership  debt,  judgment  was 
rendered  in  favor  of  two  of  the 
firm,  on  the  ground  that  the  debt 


was  contracted  during  their  in- 
fancy, and  against  the  remaining 
adult  member.  Held,  that  the 
moneys  and  property  of  the  firm 
were  applicable  toward  the  pay- 
ment of  the  last  mentioned  judg- 
ment. Whittemore  v.  Eliotfc,  14  N. 
Y.  Supreme  Ct.  518. 

In  an  action  upon  the  obligation 
of  a  firm,  contracted  while  one  of 
the  members  was  a  feme  sole,  but 
who  had  since  married,  held,  that 
her  husband  was  properly  joined 
as  a  party  defendant.  Keller  v. 
Hicks,  22  Cal.  457. 

(i)  Robinson  v.  Wilkinson,  3 
Price,  538;  Beckham  v.  Drake,  9  M. 
&  W.  79,  and  11  id.  315,  overrul- 
ing Beckham  v.  Knight,  4  Bing.  N. 
C.  234.  And  see  ante,  p.  178.  Of 
course,  if  a  person  is  sued  on  the 
ground  that  he  is  a  dormant  part- 
ner, that  fact  must  be  proved,  for 
otherwise  no  case  will  be  made 
against  him.  See  Hall  v.  Bain- 
bridge,  8  Dowl.  583. 

(fc)  See  Bonfield  v.  Smith,  12  M. 
&  W.  405;  Dubois  v.  Ludert,  5 
Taunt.  609,  where  it  was  held  that 
a  dormant  partner  ought  to  be 
joined. 

1  In  actions  ex  contractu  against 
a  partnership,  all  the  ostensible 
and  public  members  of  the  copart- 
nership existing  at  the  time  of  the 
making  of  the  contract  sued  on 


664 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    TARTNERS. 


*281 


himself  out  to  another  as  the  only  person  with  whom  that 
other  is  dealing  cannot  be  allowed  afterwards  to  say  that 
such  other  was  also  dealing  with  somebody  else.  (I) J 


must  be  joined  as  defendants,  but 
dormant  or  secret  partners  need  not 
be  joined.  Page  v.  Brant,  18  111.  37 ; 
Mitchell  v.  Dale,  2  Har.  &  G.  159; 
Jackson  v.  Alexander,  8  Tex.  109. 

A  failure  to  name  a  dormant 
rartner  as  a  party  defendant  in  an 
action  against  the  firm  is  immate- 
rial, as  a  judgment  will  biud  such 
partner  as  fully  as  though  made  a 
party  to  the  record.  Tynberg  v. 
Cohen,  67  Tex.  220. 

Where  a  firm  consisting  of  three 
members,  B.,  A.  and  M.,  did  busi- 
ness under  the  firm  name  of  "  B. 
&A.,"and  everything  in  the  ap- 
parent mode  of  transacting  their 
business  indicated  that  B.  and  A. 
constituted  the  sole  members  of 
the  firm,  and  there  was  nothing  to 
signify  to  ordinary  dealers  with  the 
firm  that  M.  had  anything  to  do 
with  it,  and  there  was  an  entire 
omission  on  the  part  of  B.  and  A. 
to  communicate  the  fact  of  such 
connection  to  one  dealing  with 
them,  and  actual  ignorance  by  him 
of  such  connection,  and  apparent 
good  faith  on  his  part  in  treating 
B.  and  A.  as  the  only  parties  inter- 
ested, held,  that  the  referee  was 
right  in  regarding  M.  as  a  dormant 
partner,  and  therefore  not  neces- 
sary to  be  joined  as  a  co-defendant 
with  B.  and  A.  North  v.  Bloss,  30 
N.  Y.  374. 

A  party  suing  a  firm  upon  an 
agreement  made  by  them  need  not 
join  a  member  of  that  firm,  if  he 
did  not  know  when  the  agreement 
was  made  that  there  was  such  a 
partner,  and  there  was  nothing  in 
the  style  of  the  firm  to   indicate 


that  there  was  any  other  partner 
than  those  whose  names  appeared, 
and  he  had  no  notice  of  such  a 
partner.  Hurlbut  v.  Post,  1  Bosw. 
28 ;  Brown  v.  Birdsall,  29  Barb.  549. 
See  Farwell  v.  Davis,  66  Barb.  73. 

Although  a  partnership  may  be 
open  and  notorious  in  the  imme- 
diate neighborhood  of  the  place  of 
business  of  the  firm,  yet,  if  its 
existence  be  not  known  to  the 
plaintiff,  and  one  member  of  the 
firm  make  the  contract  with  the 
plaintiff  in  his  own  name,  and 
credit  be,  upon  reasonable  grounds, 
given  by  the  plaintiff  to  him  alone, 
an  action  upon  the  contract  may 
be  sustained  against  him  without 
joining  his  copartners  as  defend- 
ants. Hagar  v.  Stone,  20  Vt.  106; 
Cleveland  v.  Woodward,  15  Vt. 
302 ;  Blin  v.  Pierce,  20  Vt.  25.  See, 
also,  Farwell  v.  Davis,  supra. 

In  assumjisit  for  goods  sold  and 
delivered  the  plaintiff  need  not 
join  a  merely  nominal  partner  of 
the  purchaser  as  a  defendant. 
Hatch  v.  Wood,  43  N.  H.  633. 

Under  the  code  suits  for  debts 
of  a  limited  partnership  may  be 
brought  against  the  general  part- 
ners only,  and  a  levy  in  pursuance 
thereof  on  firm  property  binds  the 
interests  of  all  the  partners.  Arti- 
sans' Bank  v.  Treadwell,  34  Barb. 
553. 

(I)  See  De  Mautort  v.  Saunders,  1 
B.  &  Ad.  39S ;  Stansfeld  v.  Levy,  3 
Stark.  8.  Whether  a  defendant  has 
so  held  himself  out  is  a  question 
for  the  jury.  Compare  the  cases 
in  the  last  note. 

i  Where  one  or  more  of  several 


665 


*'282  EIGHTS   AND    OBLIGATIONS.  [BOOK    II. 

One  partner  liable  if  others  are  not  disclosed.—  If, 

therefore,  a  person  carries  on  business  in  his  own  name,  and 
incurs  debt  in  so  doing,  he  may  be  properly  sued  alone  lor 
such  debts,  (w)  The  same  rule  holds  whenever  a  partner 
enters  into  a  written  contract  in  which  he  does  not  disclose 
the  fact  that  he  is  acting  for  other  people;  for,  although 
they  may  be  sued,  he  cannot  insist  that  they  shall  be 
sued,  (n) 

Statutory  exceptions  to  general  rule.— Thirdly,  to  the 
general  rule  that  all  persons  jointly  liable  on  a  contract 
ought  to  be  sued  jointly,1  there  are  a  few  statutory  excep- 
tions. Thus,  by  the  Carriers'  Act,  a  person  sued  as  a  common 
carrier,  and  not  on  any  special  agreement,  cannot 
[*282]  ^require  his  copartners  to  be  joined;  (o)  and  by  the 
Companies  Act,  18G2,  members  of  a  registered  com- 
pany who  know  that  it  has  carried  on  business  for  more 
than  six  months  with  less  than  seven  members  are  severally 
liable  for  the  debts  of  the  company  contracted  after  such 
six  months,  and  cannot  require  the  other  members  to  be 
joined,  (p) 

Actions  on  joint  and  several  contracts. —  With  respect 
to  joint  and  several  contracts,  the  rule  now  is  that  all  per- 

defendants,  sued  as  partners,  an-  thereon  for  the  plaintiff.  Reber  v. 
swered,  denying  that  they  were  Columbus,  etc.  Co.  12  Ohio  St.  175. 
members  of  the  firm,  or  indebted  (m)  See,  in  addition  to  the  cases 
to  the  plaintiff  on  the  cause  of  ac-  cited  in  the  last  note,  Mullett  v. 
tion  stated  in  the  petition,  and  on  Hook,  Moo.  &  Mai.  88 ;  Baldney  v. 
the  trial  of  this  issue  the  jury  re-  Ritchie,  1  Stark.  338;  Doo  v.  Chip- 
turned  a  general  verdict  for  the  penden,  Abbott  on  Shipping,  84; 
plaintiff,  and  also  found  specially,  Colson  v.  Selby,  1  Esp.  452.  Du- 
under  the  direction  of  the  court,  bois  v.  Ludert,  5  Taunt.  G09,  is  the 
that  the  defendants  so  answering  other  way,  but  cannot,  it  is  con- 
were  not,  in  fact,  members  of  the  ceived,  be  supported, 
firm,  but  had  held  themselves  out  (n)  See  Higgins  v.  Senior,  8  M.  & 
as  partners,  and  that  the  plaintiff  W.  834,  where  the  plaintiff  knew 
had  dealt  with  and  trusted  them  the  defendant  was  acting  as  agent, 
accordingly,  held,  that  such  spe-  1  See  ante,  p.  193,  note  (k). 
cial  finding  was  not  inconsistent  (o)  11  Geo.  4  and  1  Will.  4,  eh. 
with  the  general  verdict,  and  that  68,  §§  5,  6. 

judgment    was    properly   entered  (  p)  25  and  26  Vict.  ch.  89,  §  48. 

666 


OH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


•283 


sons  liable  on  them  may  be  sued  jointly  or  separately,  or  in 
the  alternative  in  one  action,  (q) 

Actions  on  contracts  not  binding  on  firm.— The  previous 
remarks  have  been  addressed  to  the  case  of  actions  on  con- 
tracts binding  the  firm.  But  a  contract  may  be  entered 
into  by  a  partner  and  not  bind  the  firm,  either  because  it  was 
not  entered  into  on  behalf  of  the  firm,  or  because,  if  it  was, 
the  partner  entering  into  it  exceeded  his  authority,  express 
and  implied.  In  such  cases  the  old  rule  was  that  the  part- 
ner contracting,  and  no  one  else,  ought  to  be  sued.  If  he 
contracted  as  a  principal  he  ought  to  be  sued  on  the  con- 
tract, whilst,  if  he  contracted  as  an  agent,  he  ought  to  be 
sued  as  having  done  so  without  authority.  (/•)  If  a  partner 
entered  into  a  contract  on  behalf  of  the  firm,  but  exceeded 
his  authority,  and  the  contract  did  not  bind  the  firm,  and 
the  firm  repudiated  it,  the  partner  contracting,  and  not  the 
firm,  ought  to  have  been  sued  for  money  paid  to  him  under 
it  and  sought  to  be  recovered  back,  (*)  But  now,  in  cases 
of  this  description,  whenever  there  is  any  doubt  as  to  who 
ought  to  be  sued,  the  prudent  course  is  to  sue  all  the  part- 
ners, and  so  to  frame  the  statement  of  claim  as  to  be  able 
to  obtain  judgment  against  the  right  persons  according  to 
the  evidence  on  the  trial,  (t) 

*  Actions  ex  delicto.  [*283] 

Actions  of  tort  against  partners.—  It  is  not  every  tort 
whi«h,  though  committed  by  several  persons  acting  to- 
gether, is  legally  imputable  to  them  all  jointly ;  (u)  but  sup- 
posing a  tort  to  be  imputable  to  a  firm,  an  action  in  respect 
of  it  may  be  brought  against  all  or  any  of  the  partners.    If 

{q)  Ord.  xvi,  rr.  1,  4,  6.     See,  as  (r)  See  Lewis  v.  Nicholson,  18  Q. 

to  the  old  law,  the  note  to  Cabell  B.  503. 

v.  Vaughan,  1  Wins.  Saund.  291g;  (s)  See  Hudson  v.  Robinson,  4  M. 

and  as  to  staying  one  action,  when  &  S.  475. 

the  creditor  has  been  satisfied  in  (t)  See  Ord.  xvi,  r.  1;  Honduras 

another,  see  Carne  v.  Legh,  6  B.  &  Rail.  Co.  v.  Tucker,  2  Ex.  D.  301. 

C.  124;  Nesbittr.  Howe,  8  Ir.  Law  (u)  See  2  Wins.   Saund.    117,    b 

Rep.  273.  and  c;  1  Chitty,  Plead.  96-7. 

667 


*2S3  EIGHTS   AND    OBLIGATIONS.  [BOOK   II. 

some  of  them  only  are  sued  they  cannot  insist  upon  the 
other  partners  being  joined  as  defendants ;  (a?)  and  this  rule 
applies  even  where  the  tort  in  question  is  committed  by  an 
ao-ent  or  servant  of  the  firm,  and  not  otherwise  by  the  firm 
itself,  (y)  But  there  is  a  distinction  between  ordinary  ac- 
tions of  tort  and  those  which  are  brought  against  persons 
in  respect  of  their  common  interest  in  land;  for  all  joint 
tenants,  or  tenants  in  common,  ought  to  be  joined  in  an  ac- 
tion for  an  injury  arising  from  the  state  of  their  land;  (z) 
and  this  rule  applies  to  partners  as  well  as  to  persons  who 
are  not  partners. 

B.  Actions  in  respect  of  equitable  rights. 

Parties  to  actions  in  the  chancery  division.—  Actions 
by  and  against  partnerships  for  the  specific  performance  or 
the  rescission  of  contracts,  for  taking  agency  accounts,  as 
well  as  in  respect  of  frauds,  breaches  of  trust  and  other 
matters,  are  by  no  means  unusual;  and  an  action  by  a 
creditor  of  a  firm  to  obtain  payment  out  of  the  estate  of  a 
deceased  partner  is  a  matter  of  almost  daily  occurrence,  (a) 

As  a  general  rule  an  action  in  the  chancery  division  by 
or  against  an  ordinary  partnership  will  be  defective  for 
want  of  parties  unless  all  the  partners  are  before  the  court.1 

(x)  Sutton  v.  Clarke,  6  Taunt.  29.  a  bill  to  recover  the  debt.     Gaither 

(y)  Mitchell  v.  Tarbutt,  5  T.  R.  r.  Caldwell,  1  Dev.  &  B.  Eq.  504 ; 

649;  Ansell  v.  Waterhouse,  6  M.  &  Russell  v.  Swann,  16  Mass.  314. 

g.  385.  An  account  in  favor  of  a  part- 

(z)  1  Wins.  Saund,  298,  /  and  g,  nership  is  not  matter  to  support  a 

and  Mitchell  v.  Tarbutt,  5  T.  R.  bill  brought  by  one  of  the  partners 

Q49  only,  where  it  does  not  appear  on 

(a)  See,  on  this  subject,  book  iv,  the  face  of  the  bill  that  the  other 

ch#  3.  partner  is  dead  or  has  parted  with 
1  See,  generally,  post.  his  interest.  Such  an  account  con- 
As  to  the  necessary  parties  in  an  stitutes  no  cause  of  action  in  favor 

action  for  a  contribution,  see  Scott  of  the  complainant,  and  there  can 

v.  Bryan,  3  So.  East.  Rep.  (N.  C.)  be  no  decree  thereon.      Frost    v. 

235.  Schackleford,  57  Ga.  260. 
Where  a  debt  due  a  partnership        A  person  who  was  a  member  of 

is  assigned  to  one  of  the  partners,  a    partnership  when  a    mortgage 

all  the  partners  must  be  joined  in  was  given  to  the  firm  (but  in  the 

668 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS. 


C234 


But  it  was  early  held  that  where  some  partners  are  abroad 
a  suit  against  those  who  remain  may  be  prosecuted  with 
effect,  and  a  decree  be  obtained  against  them  for  payment 
of  the  whole  of  the  amount  due  from  the  firm,  (b) 

All  the  members  of  a  firm  ought  to  be  parties  to 
an  action  *for  a  general  account;  (c)  and  in  an  ac-  [*284] 
tion  for  payment  of  a  partnership  debt  out  of  the 
assets  of  a  deceased  partner  the  surviving  partners  ought 


name  of  one  partner  only),  and 
also  when  advances  were  after- 
wards made  thereon  by  the  firm 
and  when  the  bill  was  filed,  ought 
to  be  a  party  to  a  suit  for  its  fore- 
closure. De  Grciff  v.  Wilson,  30 
N.  J.  Eq.  435. 

Where  the  title  to  firm  real  es- 
tate is  taken  in  the  name  of  one 
partner,  who  gives  the  vendor  a 
mortgage  for  the  purchase  money, 
the  other  partners  are  entitled  to 
be  made  parties  defendant  to  a  bill 
to  foreclose  said  mortgage.  John- 
ston v.  Donvan,  106  N.  Y.  169. 

To  a  bill  against  a  partnership 
after  the  death  of  a  part  of  the 
members,  the  representatives  of 
such  as  have  deceased  ought  to  be 
parties.  Carter  v.  Currie,  5  Call, 
158. 

In  an  action  by  a  third  person 
against  partners  for  an  account,  if 
one  of  the  defendants  dies  pending 
the  suit  his  representatives  must 
be  made  parties,  unless  it  is  shown 
that  there  are  no  firm  assets,  or 
that  they  are  insufficient  to  pay 
the  debts  of  the  concern,  so  that 
such  representatives  would  have 
no  interest  in  the  partnership  ef- 
fects. Pearce  v.  Bruce,  38  Ga. 
444. 

In  a  suit  against  the  surviving 
partner  to  subject  firm  assets,  the 
administrator  of  the  deceased  part- 


ner is  not  a  necessary  partner  to 
the  proceedings,  where  the  object 
is  solely  to  reach  the  property  of 
the  firm.  If  the  suit  is  to  subject 
the  individual  property  of  the  part- 
ners, then  the  administrator  of  the 
deceased  partner  ii  a  necessary 
party.  Robertshaw  v.  Hanwav.  52 
Miss.  713. 

A  person  who  has  covenanted 
with  the  survivors  of  a  partner- 
ship to  stand  in  the  place  of  a  de- 
ceased partner  and  to  satisfy  his 
demands  upon  the  firm  cannot,  in 
a  suit  to  settle  the  partnership  af- 
fairs, object  that  the  representa- 
tives of  the  deceased  should  have 
been  parties.     Waugh  v.  Mitchell, 

1  Dev.  &  B.  Eq.  510. 

Where  the  surviving  partner  of 
an  insolvent  firm  assigned  certain 
lots  belonging  to  the  firm  for  the 
benefit  of  its  creditors,  the  heirs  of 
the  deceased  partner  cannot  be 
made  parties  to  a  suit  involving 
the  title  to  the  lots,  on  the  ground 
of-  any  relation  of  trust  or  confi- 
dence subsisting  between  them  and 
the  assignee.    Rothwell  v.  Dewees, 

2  Black,  613. 

(b)  See  Darwent  v.  Walton,  2 
Atk.  510;  Cowslad  v.  Cely,  Prec. 
in  Chan.  83.  And  see  Orr  v.  Chaie, 
1  Mer.  729. 

(c)  Coppard  v.  Allen,  2  De  G.  J. 
&  S.  173. 


669 


*2Si  EIGHTS   AND    OBLIGATIONS.  [liOOK    II. 

to  be  parties,  (d)  But  if  the  ground  of  action  is  fraud  it  is 
not  necessary  to  join  a  partner  not  implicated  in  it  and  not 
sought  to  be  made  liable.  (<?)x 

Actions  against  agents. —  An  agent  of  the  firm  may  be 
sued  for  an  account  by  all  the  partners,  although  he  only 
knew  of  one  of  them,  and  was  employed  by  and  has  trans- 
acted business  with  that  one  alone.  (/)  At  the  same  time 
an  agent  is  only  liable  to  account  to  his  principal;  and, 
therefore,  if  a  person  has  been  e/nployed  by  one  partner 
only  as  principal,  or  has  been  induced  by  that  partner  to 
believe  that  he  alone  was  the  principal,  in  such  a  case  the 
other  partners  have  no  right  to  call  the  person  so  employed 
to  account  with  them,  (g)  On  the  other  hand,  if  a  person 
has  throughout  dealt  with  some  partners  only,  and  has  all 
along  treated  them  as  principals,  he  can  be  compelled  by 
them  to  account,  and  he  cannot  successfully  insist  that  the 
other  partners  ought  to  be  parties  to  the  action,  (h) 

Actions  by  surviving  partner.— A  surviving  partner 
may  sue  an  agent  of  the  firm  for  an  account  without  mak- 
ing the  executors  of  the  deceased  partner  parties  (i);  for 
the  surviving  partners  are  the  proper  persons  to  get  in  and 
give  receipts  for  debts  owing  to  the  firm,  (k) 

(d)  Ex  parte  Hodgson,  31  Ch.  D.  The  division  of  the  money  by  the 
177 ;  Hills  v.  M'Rae,  9 ,  Ha.  297.  declared  principal  among  persons 
See,  also,  infra,  book  iv,  ch.  3,  §  2.  who  are  strangers  to  the  plaintiff 

(e)  See  Plumer  v.  Gregory,  18  Eq.  in  the  transaction  does  not  affect 
621 ;  Atkinson  v.  Mackreth,  2  Eq.  his  liability.  Leslie  v.  Wiley,  47 
570.  N.  Y.  649. 

1  Where  one  assumes  to  act  as        (/)  See  Killock  v.  Greg,  4  Russ. 

agent  for  one  member  of  a  firm  in  285;  Anon.  Godb.  90. 
the  sale  of  property  of  the  firm,        (g)  See  Killock  v.  Greg,  4  Russ. 

and  his  action  is  ratified  by  the  as-  285 ;  Maxwell  v.  Greig,  1  Coop.  Ca. 

6umed  principal  by  the  receipt  of  in  Ch.  491. 

the  money  paid  on  the  sale,  the        (h)  Benson  v.  Hadfield,  4  Ha.  32. 

purchaser  being  ignorant   of  the  And  see  Aspinwall  v.  The  London 

existence  of  the  partnership,  in  an  &  N.  W.  Rail.  Co.  11  Ha.  325. 
action  to  recover  back  the  money        (£)  Haig  v.  Gray,  3  De  G.  &  Sm. 

paid,  for  fraud  on  the  part  of  the  741. 

agent,   or  for  mistake,  the  other        (k)  See  Philips  v.  Philips,  3  Ha. 

partners  are  not  necessary  parties.  281 ;  Brasier  v.  Hudson,  9  Sim.  1. 

670 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PARTNERS.  *2S5 

3.  Actions  ly  and  against  partners  where  a  change  in  the 
firm  has  occurred. 

Effect  of  change  in  firm  on  actions  by  and  against  it.— 

In  the  preceding  remarks  upon  the  persons  who  ought  to 
sue  and  be  sued  when  a  right  is  sought  to  be  enforced  by 
or  against  a  firm,  it  has  been  assumed  that  no  change  in 
the  members  of  the  firm  has  occurred  between  the 
period  when  the  right  in  ^question  accrued  and  the  [*285] 
time  when  the  action  to  enforce  it  is  brought.  It  is 
proposed  now  to  consider  to  what  extent  the  rules  above 
established  require  modification,  when  some  such  change 
has  taken  place  by  reason  either  of  the  introduction  of  a  new 
partner,  or  of  the  retirement,  death  or  bankruptcy  of  an 
old  one. 

First,  with  respect  to  changes  caused  by  the  introduction 
of  new  partners  and  the  retirement  of  old  ones. 

Alterations  made  by  Judicature  Acts.—  By  section  25, 
clause  6,  of  the  Judicature  Act,  1873,  debts  may  now  be  as- 
signed bv  writing  and  notice  to  the  debtor  so  as  to  entitle 
the  assignee  to  sue  for  them  in  his  own  name.  Consequently, 
if  on  the  introduction  of  a  new  partner  or  the  retirement  of 
an  old  partner  the  debts  due  to  the  old  firm  are  thus  as- 
signed to  the  new  firm,  the  new  firm  can  sue  in  respect  of 
them  either  in  its  mercantile  name  or  in  the  names  of  its 
members.  Again,  a  new  partner  may,  it  is  apprehended, 
always  be  joined  in  an  action  to  recover  a  debt  or  enforce 
a  demand  in  which  he  has  an  interest,  provided  his  joinder 
does  not  prejudice  the  rights  of  the  defendants.  Further, 
if  an  incoming  partner  has  agreed  with  his  copartners  to 
take  upon  himself  the  debts  and  liabilities  of  the  old  firm, 
they  can  require  him  to  be  made  a  defendant  for  their  own 
partial  indemnity.  (I) 

When  new  partner  can  be  sued.— Except,  however,  in 
these  cases  an  incoming  partner  can  neither  sue  nor  be  sued 
in  respect  of  a  liability  of  the  old  firm,  unless  there  is  some 

(7)  Ord.  xvi,  rr.  48  and  seq. 

671 


*2S3  EIGHTS    AND    OBLIGATIONS.  [EOOK    II. 

agreement,  express  or  implied,  between  himself  and  the  per- 
son suing  him  or  being  sued  by  him.  (m) 

As  regards  negotiable  instruments,  indeed,  any  persons 
who  can  agree  to  sue  jointly  upon  them  may  do  so,  provided 
the  instrument  is  in  such  a  state  as  to  pass  by  delivery; 
therefore,  if  a  bill  or  note,  indorsed  in  blank,  is  given  to  a 
firm  consisting  of  certain  individuals,  who  afterwards  take 
in  a  new  partner,  they  and  he,  or  some  or  one  of  them,  may 

sue  on  that  bill  or  note,  (n) 
[*286]  :<Effect  of  retirement  of  old  partner.—  So  as  re- 
gards changes  occasioned  by  the  retirement  of  a 
partner.  It  has  been  already  shown  that  the  retirement  of 
a  partner  in  no  way  affects  his  rights  against  or  obligations 
to  strangers  in  respect  of  past  transactions.1  Subject,  there- 
fore, to  the  above  observations,  a  retired  partner  ought  to 
join  as  a  plaintiff,  and  be  joined  as  a  defendant,  in  every 
action  to  which,  had  he  not  retired,  he  would  have  been  a 
necessary  party.  This  rule  holds  good  even  where  a  con- 
tract is  entered  into  before,  and  the  breach  of  it  occurs  after, 
the  retirement  of  a  partner,  (o) 2    In  one  case,  indeed,  it  was 

(m)  See,  accordingly,  Wilsford  v.  and  until  the  decree,  partnership 

Wood,  1  Esp.  182 ;  Ord  v.  Portal,  3  creditors    may  pursue  their  rem- 

Camp.  239,  note;  Waters  v.  Payn-  edies    at    law    to     gain    priority. 

ter,  Chitty  on  Bills,  406,  note  5,  ed.  Adams  v.  Woods,  8  Cal.  152.     See, 

10;  Vere  v.  Ashby,  10  B.  &  C.  288;  also,  Naglee  v.  Minturn,  8  Cal.  540; 

Young   v.   Hunter,  4  Taunt.  582.  Adams  v.  Woods,  9  Cal.  24. 

See  Radenhurst  v.  Bates,  3  Bing.  See  ante. 

463.    See  ante,  book  ii,  ch.  2,  §  3.  (o)  See  Dobbin  v.  Foster,  1  Car. 

(n)  See  Ord  v.  Portal,  3  Camp.  &  K.  323. 

239,  and  ante,  p.  274.  2In   1843,    A.,    B.    and   C.   were 

1  The  dissolution  of  a  firm    by  partners,  doing  business  under  the 

agreement  between  the  members  firm  of  A.,  B.  &   Co.     In  1844,  A. 

thereof  will  not   affect  the  rights  and  C.  formed  a  partnership  under 

of  its  creditors,  though  the  terras  the  firm  of  A.   &  C.     The  latter 

of  such  dissolution  will  frequently  firm  were  sued,  as  the  firm  of  A. 

be  enforced  by  the  courts,  as  be-  &  C,  for  a  debt  contracted  by  the 

tween  the  parties  to  such  agree-  former  firm.     Held,  that  A.  and  C. 

ment.    Hudgins  v.  Lane,  11  Bankr.  were  liable  only  in  a  suit  against 

Reg.  462.  the  former  firm.     Fagely  v.  Bellas, 

Pending  a  suit  for  dissolution,  17  Pa.  St.  67. 

672 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    PAETNEBS.  *2S6 

held  at  nisi  prius  that  where  two  partners  sold  goods,  and 
they  afterwards  dissolved  partnership,  an  action  for  the 
price  of  those  goods  was  sustainable  by  the  one  partner  who 
continued  to  carry  on  the  business  of  the  late  firm;  (p)  but 
the  propriety  of  this  decision  is  more  than  questionable. 
Whether,  however,  it  is  now  necessary  to  join  as  a  plaintiff 
a  retired  partner  against  whom  the  defendant  has  no  claim, 
and  who  has  no  beneficial  interest  in  what  is  sought  to  be 
recovered,  admits  of  some  doubt. 

Sometimes  one  partner  retires  and  a  new  partner  comes  in, 
and  an  agent  of  the  firm,  in  ignorance  of  the  change  which 
has  occurred,  enters  into  a  contract  on  behalf  of  the  firm; 
in  such  a  case  the  members  of  the  new  firm  may  sue  on  the 
contract,  unless  the  defendant  is  prejudiced  by  their  so 
doing,  (q)  The  liability  of  the  retired  partner  on  such  a 
contract  will,  however,  cease  if  the  creditor  sues  the  ne".T 
firm  and  recovers  judgment  against  it.  (r) 

Fresh  contract. —  And  a  new  firm  may  sue  or  be  sued  in 
respect  of  a  fresh  contract  entered  into  by  or  with  it  to  pay 
a  debt  owing  to  or  by  an  old  firm.1     Thus,  where  A.  was 

(p)  Atkinson  v.  Laing,  Dowl.  &  ing  and  covering  advances  niade 

Ry.  N.  P.  Ca.  16.  and  to  be  made  by  said  commercial 

(q)  Mitchell  v.  Lapage,  Holt,  N.  house  for  the  benefit  of  the  planta- 

P.    Ca.   253.     But   see  Boulton  v.  tion  of  P.     After  the  execution  of 

Jones,  2  H.  &  N.  564.  the    mortgage      the     commercial 

(r)  See  Scarf e  v.  Jardine,  7  App.  house  of  L.  and  C.  was  changed  by 

Ca.  345,  noticed  ante,  pp.  46  and  the  addition  of  new  parties,  and 

197.  styled  L.,  C.  &   Co.     In   1862,  P. 

1  Where,  after  a  contract  is  made,  executed  three  promissory  notes  in 
a  change  is  made  in  the  firm,  and  favor  of  the  new  firm  of  L.,  C.  & 
the  other  contracting  party  in-  Co.  The  holder  of  the  notes  brought 
formed  thereof,  who  makes  no  com-  suit  to  recover  the  amount,  and 
plaint,  an  action  cannot  be  main-  claimed  the  benefit  of  the  mort- 
tained  by  the  new  firm  for  breach  gage  in  favor  of  the  old  firm,  exe- 
of  the  contract  unless  the  contract  cuted  in  1857.  Held,  that  the  ad- 
was  renewed  with  the  new  firm,  dition  of  another  party  in  the 
Anderson  v.  Holmes,  14  S.  C.  162.  firm    dissolved  the    old    firm,    in 

A  mortgage  was  executed  by  P.  whose    favor    the  mortgage    was 

in  1857  for  $8,000  on  real  estate  in  executed,  and  created  a  new  firm, 

favor    of  L.   and  C,   commission  in  whose    favor    the    notes    were 

merchants,  for  the  purpose  of  secur-  given,  and  the  new  firm  could  not 

Vol.  1—43  673 


*287  RIGHTS   AND   OBLIGATIONS.  [BOOK   II. 

indebted  to  B.,  and  afterwards  C.  entered  into  partnership 
with  B.,  and  A.  contracted  a  further  debt  with  both,  and 
then  settled  an  account  with  both,  as  well  upon  what  was 

due  to  B.  before  his  partnership  with  C.  as  upon  the 
[*287]  debt  contracted  afterwards,  it  was  held  that  B.  and  *C. 

might  join  in  an  action  of  assumpsit  on  an  account 
stated,  and  recover  the  whole  debt,  (s) 

Change  in  firm  may  prevent  it  from  suing. —  Although 
a  change  in  a  firm,  whether  by  the  introduction  of  a  new 
partner  or  the  retirement  of  an  old  one,  cannot,  except  as 
already  mentioned,  confer  upon  the  partners  any  new  right 
of  action  against  strangers,  or  vice  versa,  as  regards  what 
may  have  occurred  before  the  change  took  place,  it  may 
nevertheless  operate  so  as  to  discharge  a  person  from  a 
contract  previously  entered  into  by  him.  Thus,  as  was 
pointed  out  in  the  sixth  chapter  of  the  first  book,  (t)  a  per- 
son who  is  surety  to  a  firm  is  discharged  from  his  surety- 
ship, for  the  future,  by  a  change  amongst  its  members,  and 
cannot,  therefore,  be  sued  either  by  the  old  or  by  the  new 
partners  for  any  default  of  the  principal  debtor  occurring 
subsequently  to  the  change.  Again,  if  a  person  enters  into 
a  contract  with  a  firm,  and  that  contract  is  of  a  purely  per- 
sonal character,  to  be  performed  by  the  individuals  who 
have  entered  into  it,  and  not  by  any  one  else,  a  change  in 
the  firm  may  operate  as  a  dissolution  of  the  contract,  so 
that  neither  the  new  nor  the  old  partners  can  sue  in  respect 
of  any  alleged  breach  which  may  have  occurred  since  the 
change  took  place.  An  illustration  of  this  is  afforded  in 
JRobson  v.  Drummond.  (u)  In  that  case  A.  and  B.  were 
partners  as  coachmakers.  C,  who  knew  nothing  of  B., 
entered  into  a  contract  with  A.  for  the  hire  of  a  carriage 
for  five  years,  at  so  much  a  year,  and  A.  undertook  to  keep 

avail  themselves  of  the  mortgage        (t)  Ante,  p.  117. 

given    in  favor  of  the    old  firm.        (u)  2  B.   &  Ad.    303.     Compare 

Abat  v.  Penny,  19  La.  Ann.  289.        British  Wagon  Co.  v.  Lea,  5  Q.  B. 

(s)  Moor   v.    Hill,   Peake,    Add.     D.  149. 
Cases,  10. 

674 


CH.  Ill,  SEC.  I.]        ACTIONS    BETWEEN    TARTNERS.  *288 

the  carriage  in  proper  order  for  the  whole  five  years.  Be- 
fore the  five  years  were  out  A.  and  B.  dissolved  partner- 
ship, and  A.  assigned  the  carriage  and  the  benefit  of  the 
contract  relating  to  it  to  B.  B.  gave  C.  notice  of  the  dis- 
solution and  arrangement  respecting  the  carriage;  but  C. 
declined  to  continue  the  contract  with  B.,  and  returned  the 
carriage.  An  action  was  then  brought  by  A.  and  B.  against 
C.  for  not  performing  the  contract;  but  it  was  held  that 
the  action  would  not  lie,  the  contract  having  been  with  A. 
alone,  to  be  performed  by  him  personally,  and  he  having 
disabled  himself  from  continuing  to  perform  it  on 
his  *part.  In  Stevens  v.  Benning*  (x)  the  same  prin-  [*288] 
ciple  was  applied  to  a  contract  between  an  author 
and  a  firm  of  publishers;  and  it  was  held  that  the  contract 
was  one  of  a  personal  character,  and  that  consequently  the 
author  was  discharged  from  it  by  a  change  in  the  firm,  and 
an  assignment  of  the  benefit  of  the  contract  to  persons  of 
whom  the  author  knew  nothing. 

Effect  of  death.— Secondly,  with  respect  to  changes 
caused  by  death.  Before  the  Judicature  Acts,  when  a  part- 
ner died  in  the  life-time  of  any  one  or  more  of  his  copartners, 
all  actions  brought  in  respect  of  any  contract  entered  into 
by  or  on  behalf  of  the  firm  before  his  death  must  have 
been  brought  by  or  against  the  surviving  members  of  the 
firm,  and  by  or  against  them  alone;  for  the  representatives 
of  the  deceased  partner  could  neither  sue  nor  be  sued  at  law 
in  respect  of  any  such  contract,  (y) l  So  an  action  for  the 
conversion  of  partnership  goods  must  have  been  brought  by 
the  surviving  partners.  (2) 

(x)  1  K.  &  J.  168,  and  6  De  G.  M.  Wras.  Saund.  121e.     Formerly  this 

&G.  223.     See,  also,  Hole  v.  Brad-  was  otherwise.    See  the  authorities 

bury,  12  Ch.  D.  886.  collected  in  Buckley  v.   Barber,  6 

(y)  Dixon  v.  Hammond,  2  B.  &  Ex.  178. 

A.  310,  which  shows  that  an  agent  *  See  post,  Survivorship. 

of  the  firm  must  account  to  the  sur-  (2)  Kemp  v.  Andrews,  Carth.  170. 

viving  partners.     See,  too,  Martin  But  see  Buckley  v.  Barber,  6  Ex. 

v.  Crompe,  1  Ld.  Raym.  340,  and  2  164.     An  indictment  for  stealing 

Salk.  444 ;  and  Webber  v.  Ty vill,  2  them  may  be  preferred  by  the  sur- 

675 


*289  EIGHTS    AND   OBLIGATIONS.  [_B00K   IL 

Actions  by  and  against  surviving  partners. —  It  fol- 
lowed from  the  above  rule  that  the  last  surviving  partner, 
or  if  he  was  dead  his  legal  personal  representative,  was  the 
proper  person  to  sue  and  be  sued  at  law  in  respect  of  the 
debts  and  engagements  of  the  firm,  (a) 

These  rules,  however,  can  be  no  longer  relied  upon  ex- 
cept where  the  obligation  sought  to  be  enforced  is  joint  in 
equity  as  well  as  at  law.  Wherever  it  is  several  as  well  as 
joint,  (b)  an  action  may,  it  lfc  apprehended,  be  brought  by  or 
against  the  surviving  partners  and  the  executors  or  admin- 
istrators of  the  deceased  partners,  (c) 

Effect  of  bankruptcy. —  Lastly,  with  respect  to 
[-289]  changes  caused  by  bankruptcy.  ^Formerly,  if  a 
partner  was  bankrupt,  his  assignees  were  required 
to  join  in  his  stead  in  any  action  in  which,  had  no  bank- 
ruptcy intervened,  the  bankrupt  himself  would  have  been 
necessarily  joined  as  a  plaintiff,  (d)  If  the  assignees  de- 
clined to  join,  the  solvent  partners  were  entitled  to  make 
use  of  their  names  upon  indemnifying  them  against  the 
costs  of  the  action,  (e)  If  all  the  parties  were  bankrupt, 
any  action  which  it  would  have  been  necessary  to  bring 
in  the  names  of  all  the  partners,  if  bankruptcy  had  not 
intervened,  must  have  been  brought  by  their  assignees,  (f) 
But  this  was  subject  to  the  qualifications  that  bankrupts, 
whether  partners  or  not,  might  sue  in  their  own  names  as 
trustees  for  other  people,  {g)     By  the  Bankruptcy  Act,  1883, 

viving  partners,  and  the  next  of  (e)  Whitehead  v.  Hughes,  2  Cr.  & 

kin  of  the  deceased  partner.     R.  v.  M.  318. 

Gaby,  Russ.  &  Ry.  178 ;  R.  v.  Scott,  Cf)  See  Ray  v.  Davies,  8  Taunt, 

id.  13.  134.      The  trustee  of  a  firm  may 

(a)  Richards  v.  Heather,   1  B.  &  sue  for  debts  owing  to  the  members 

A.  29;  Calderu.  Rutherford.  3  Brod.  thereof  individually.     Stonehouse 

&  Bing.  302.  v.  De  Silva,  3  Camp.  399;  Hancock 

(o)  As  to  which,  see  ante,  p.  194.  v.  Haywood,  3  T.  R.  433 ;  Scott  v. 

(c)  Ord.  xvi,  rr.  1,  4,  6,  8.  Franklin,  15  East,  428. 

(d)  Eckhardt  v.  Wilson,  8  T.  R.  (g)  See  Castelli  v.  Boddington,  1 
140;  Thomason  v.  Frere,  10  East,  E.  &  B.  66;  Winch  v.  Keeley,  1  T. 
418;  Graham  v.  Robertson,  2  T.  R.  R.  619. 

282. 

676 


CH.  Ill,  SEC.  II.]      ACTIONS   BETWEEN    PARTNERS.  *290 

a  bankrupt  partner  is  not  required  to  join  the  solvent  part- 
ners in  suing  on  a  joint  contract  made  with  the  firm;  (A) 
and  it  is  presumed  that  the  trustee  of  the  bankrupt  partner 
need  not  be  joined  in  such  a  case.  But  the  trustee  may 
join  in  the  action  if  authorized  to  do  so  by  the  bankruptcy 
court;  (i)  and  his  joinder  is  necessary  where  an  act  of  the 
bankrupt  is  sought  to  be  impeached,  (k) 

Actions  against  bankrupt. —  As  regards  actions  against 
a  firm,  one  or  more  of  the  members  of  which  have  become 
bankrupt,  it  need  hardly  be  observed  that  there  is  no  remedy 
by  action  against  trustees  in  respect  of  liabilities  of  the 
bankrupt  they  represent.  The  only  remedy  is  by  proof 
against  his  estate,  or  by  proof  and  by  an  action  against  him 
if  he  has  not  obtained  his  order  of  discharge,  or  if  his 
order  of  discharge  is  no  bar.  When,  therefore,  it  is  desired 
to  recover  a  debt  due  from  a  firm,  and  all  the  partners  are 
bankrupt,  an  action  is  not  the  remedy  unless  the  partners 
have  not  obtained  their  discharge,  or  unless  the  debt  could 
not  have  been  proved  in  bankrupcy.  If,  however, 
some  only  of  *the  partners  are  bankrupt,  the  solv-  [*290] 
ent  partners  only  need  be  sued;  (I) x  and  the  court  of 
bankruptcy  can  restrain  an  action  against  the  bankrupt 
partner,  (m) 

Section  II. —  Of  Set-off. 

Closely  connected  with  the  subjects  discussed  in  the  pre- 
ceding section  is  the  right  of  a  defendant  to  set  up,  in 
opposition  to  the  claim  made  against  him,  a  counter-claim, 
which  the  defendant  might  himself  make  the  subject  of  a 

(h)  See  46]  and  47  Vict.  ch.  52,  §  against  two  partners,  one  of  them 

114.  is  adjudged  a  bankrupt,  and  the 

(i)  Ibid.  §  113.  action  continued  as  to  him  until 

(fc)  See  Heilbut  v.  Nevill,  L.  R.  5  the  question  of  his    discharge    ia 

C.  P.  478.  determined,  the  action  may  still 

(Z)  46  and  47  Vict.  ch.  52,  §  114;  proceed  as  to  the  other.     Hogen- 

Hawkins  v.  Ramsbottom,  6  Taunt,  dobler  v.  Lyon,  12  Kan.  276. 
178.  (to)  46  and  47  Vict.  ch.  52,  §  10  (2). 

1  If,  while  an  action  is  pending  See  Ex  parte  Mills,  6  Ch.  594. 

677 


*291  KIGIITS   AND    OBLIGATIONS.  [BOOK   II. 

cross-action  against  the  plaintiff.  The  power  of  a  defend- 
ant to  do  this  is  much  more  extensive  than  it  was;  for  by 
Order  XIX,  rule  3,  a  defendant  may  set  off  or  set  up  by 
way  of  counter-claim  any  right  or  claim,  whether  to  a  defi- 
nite amount  or  not;  but  provision  is  made  for  disallowing  a 
cross-claim  if  it  cannot  be  conveniently  disposed  of  in  the 
particular  action  in  which  it  is  set  up.  A  short  account, 
however,  of  the  law  as  it  stood  before  this  alteration  may 
still  be  useful.  N 

1.  Set-off  at  law. —  The  right  of  setting  off  one  claim 
against  another  appears  only  to  exist  at  common  law 
where  a  person  seeks  to  avail  himself  of  a  lien  on  goods  in 
his  possession,  but  of  which  he  is  not  the  owner.  But  by 
statute  2  George  2,  chapter  22,  where  there  were  mutual 
debts  between  the  plaintiff  and  the  defendant,  one  debt 
might  be  set  against  the  other,  (n)  The  statute,  however, 
only  applied  to  debts  in  the  narrow  sense  of  the  word,  i.  e., 
definite  and  ascertained  sums  of  money  owing  by  each 
party  to  the  other;  (o)  and  to  debts  owing  to  and  by  each 

party  in  the  same  capacity,  (p) 
[*291]       *2.  Set-off  in  equity. —  Courts  of  equity,  although 

governed  in  questions  of  set-off  by  principles  similar 
to  those  which  governed  courts  of  law,  went  further  than 
courts  of  law  in  applying  those  principles;  admitting  set- 
off in  some  cases  where  courts  of  law  did  not,  and  disallow- 
ing it  in  others  where  they  did.  (q) 

(n)  2  Geo.  2,  ch.  22.     And  see  3  v.  Mayor  of  Preston,  12  C.  B.  N.  S. 

Geo.   2,  ch.   24,  as  to  setting  off  535. 

simple  contract  debts  against  spe-        (q)  See,  generally,  as  to  set-off  in 

cialty  debts.  equity,  Ravvson  v.  Samuel,  Cr.  & 

(o)See  Boddington  v.  Castelli,  1  Ph.    161;   Clark  v.   Cort,   id.    154; 

E.    &    B.    66  and  879 ;    Attwooll  Freeman  v.  Lomas,  9  Ha.  109.   See, 

v.   Attwooll,   2  id.   23;   Luckie  v.  also,  Hunt  v.  Jessel,  18  Beav.  100, 

Bushby,  13  C.  B.  864;  and  Hutch-  as  to  set-off  between  creditors  and 

inson  v.  Sydney,  10  Ex.  438.  trustees  of  creditors'  deeds.     See, 

(p)  See   Hutchinson  v.    Sturges,  also,  Agra  and  Masterman's  Bank 

Willes,  261 ;  Watts  v.   Rees,  9  Ex.  v.  Hoffman,  5  N.  R.  214,  sed  qu. 

696,   and    11   id.    410;  Mardall  v.  this  case. 
Thellusson,  6  E.  &  B.  976 ;  Pedder 

678 


OH.  Ill,  SEC.  II.]       ACTIONS    BETWEEN    PARTNERS.  ';:29i 

Rules  as  to  set-off. —  The  combined  effect  of  the  rules  at 
law  and  in  equity  on  the  subject  of  set-off  so  far  as  it  is 
necessary  to  allude  to  them  in  the  present  treatise  are  as 
follows: 

1.  Joint  debts  owing  to  and  by  the  same  persons  in  the 
same  right  can  be  set  off  both  at  law  and  in  equity. 

2.  Separate  debts  owing  to  and  by  the  same  person  in  the 
same  right  can  also  be  set  off  both  at  law  and  in  equity. 

3.  Debts  not  owing  to  and  b}T  the  same  persons  in  the 
same  right  cannot  be  set  off  either  at  law  or  in  equity.  But 
before  the  Judicature  Acts,  and  in  considering  whether  debts 
were  so  owing,  courts  of  law  regarded  the  legal  right, 
whilst  courts  of  equity  regarded  the  equitable  right;  and 
this  led  to  the  following  amongst  other  important  practical 
and  different  results,  (r) 

Set-off  by  and  against  surviving  partners. —  For  ex- 
ample, if  a  surviving  partner  was  sued  at  law  for  a  non- 
partnership  debt,  he  could  set  off  a  partnership  debt  owing 
by  the  plaintiff  to  him  and  his  late  copartners ;  (s) l  and  in 
an  action  by  a  surviving  partner  for  a  debt  due  to  himself 
separately,  the  defendant  could  set  off  a  debt  due  to  himself 
from  the  plaintiff  and  his  late  partners,  (t) 2     In  equity, 

(r)  See  Fletcher  v.  Dyche,  2  T.  R.  ris  v.  Burrows,   34  Hun  (N.   Y.), 

32,  and  the  cases  in  the  next  two  104. 

notes.  One  of  two  partners  assigned  a 

(s)  Slipper   v.  Stidstone,  5  T.  R.  mortgage  to  the  other  and  died. 

493 ;  Golding  v.  Vaughan,  2  Chitty,  His    administrator    sued  the  sur- 

436.  vivor  for  the  amount  of  the  inort- 

1  Harris  v.  Pearce,  5  Bradw.  (111.)  gage,  on  a  bill  by  the  survivor  stat- 

622.  ing  that  deceased  was  indebted  to 

As  to  set-off  between  the  surviv-  the  firm  more  than  the  amount  of 

ing  partner  and  the  administrator  the    mortgage,   and    that    it    was 

of  the  deceased  partner,  see  Mack  agreed  that  it  should  be  applied  to 

v.  Woodruff,  87  111.  570.  the  use  of  the  firm,  and  that  he 

Upon  the  judicial  settlement  of  had  so  applied  it;  the  administra- 

his  accounts,  an  executor  is  enti-  tor  was  enjoined  from  proceeding 

tied  to  set  off  against  a  legacy  a  in  the  suit.     Williams  v.  Stevens, 

debt  due  to  his  testator  from  the  5  N.  J.  Eq.  119. 

firm  of  which  the  legatee  was  at  (t)  French  v.  Andrade,  6  T.  R.  582. 

the  time  of  the  death  of  the  testa-  2  Harris  v.  Pearce,  5  Bradw.  (111.) 

tor  a  sole  surviving  partner.     Fer-  622. 

679 


*292  EIGHTS   AND   OBLIGATIONS.  [BOOK    II. 

however,  this  could  not  have  been  done.  "When  a  creditor 
of  a  firm  seeks  to  obtain  payment  of  his  debt  out  of  the 
estate  of  a  deceased  partner,  that  creditor  cannot  set  off  a 
debt  due  from  himself  to  the  deceased  on  a  separate  account; 
the  creditor  must  pay  this  last  debt  in  full,  and  then,  as  re- 
gards the  debt  in  respect  of  which  he  sues,  rank  as  any 
other  creditor  of  the  firm  against  the  assets  of  the 
[*292]  deceased,  (u)  It  is  obvious  that  if  in  such  *a  case 
the  two  debts  werexset  against  each  other,  the  sepa- 
rate creditors  of  the  deceased  would  be  paying  a  joint  cred- 
itor of  the  firm,  unless  the  assets  of  the  deceased  were 
sufficient  to  pay  both  classes  of  creditors  in  full. 

On  the  other  hand,  debts  which  were  really  debts  owing 
to  and  by  a  firm  could  be  set  off  in  equity  although  not  at 
law.  Thus,  in  Smith  v.  Parkes,  (x)  a  firm  of  three  part- 
ners covenanted  to  pay  a  certain  sum  of  money  to  the  de- 
fendant Parkes,  who  was  indebted  to  the  firm  in  certain 
other  sums  on  another  account.  By  the  death  of  two  of 
the  members  of  the  firm  the  plaintiff  Smith  had  become  the 
sole  surviving  partner,  and  he  was  sued  by  Partes  on  the 
covenant,  and  judgment  was  obtained.  It  was  held  that, 
notwithstanding  the  judgment  and  its  effect  at  law,  Smith 
was  entitled  in  equity  to  set  off  against  the  judgment  debt 
the  amount  of  what  was  due  from  Parkes  to  the  late  firm; 
and  it  was  also  held  that  Smith  had  this  right  not  only  as 
against  Parkes,  but  also  against  persons  to  whom  he  had 
assigned  the  debt  due  to  him. 

Setting  off  joint  debts  against  separate,  and  vice  versa. 
4.  Except  under  special  circumstances  a  debt  due  to  or  from 
several  persons  jointly  cannot  be  set  off  against  a  debt  due 
from  or  to  one  of  such  persons  separately,  (y) x     This  rule, 

(u)  Addis  v.  Knight,  2  Mer.  117.  sen  v.  East  and  "West  India  Dock 
(x)  16  Beav.  115.  Co.  L.  R.  10  C.  P.  800. 
(y)  See  Kinnerley  v.  Hossack,  2        l  The  private  debt  of  one  copart- 
Taunt.    170;   Cheetham   v.  Crook,  ner    cannot    be    set  off  against   a 
McLel.    &    Y.    307;    Vulliarny    v.  copartnership    demand,  and    con- 
Noble,  3  Mer.  618.     See,  also,  Jeb-  versely.    Powrie  v.  Fletcher,  2  Bay, 

680 


CH.  Ill,  SEC.  II.]       ACTIONS    BETWEEN    PAKT>TEKS. 


*292 


which  is  really  involved  in  the  last,  also  prevailed  before 
the  Judicature  Acts,  both  at  law  and  in  equity,  (s)  and  was 


146;  Ladue  v.  Hart,  4  Wend.  583; 

Seaton  v.  Merchants'  Bank,  6  Can. 

L.  T.  442 ;  Love  v.  Rhyne,  85  N.  C. 

576;  Clark  v.  Taylor,  68  Ala.  453; 

Coates    v.   Preston,    105    111.   470; 

Coleman  v.  Elmore,  31  Fed.  Rep. 

391;  Ingols  v.  Plympton,   16  Pac. 

Rep.  (Colo.)  155;  Nipper  v.  Jones, 

27    Mo.    App.    538;  International 

Bank  v.   Jones,  9  N.  E.  Rep.  885; 

S.  C.   7  West.    Rep.  693;  Rush  v. 

Thompson,  112  Ind.  158;  Wood  v. 

Brush,  72  Cal.  224 ;  Watts  v.  Sayre, 

76    Ala.    397;    Boehm    v.   United 

States,    20    Ct.    CI.    142;  Weil    v. 

Jones.  70  Mo.  560;  Payne  v.  O'Shea, 

84  Mo.  129.     See,  also,  Donnell  v. 

R.  R.  Co.  76  Me.  33. 

The  holder  of  a  claim  against  an 

individual  member  of  a  firm,  who 

purchases  from  such  member  what 
he  knows  to  be  partnership  goods, 
cannot,  in  an  action  by  the  part- 
ners or  their  assignee  for  the 
amount  of  such  goods,  plead  such 
claim  either  in  payment  or  set-off 
against  the  partners,  unless,  by 
their  assent,  the  copartnership 
property  was  delivered  in  payment 
of  the  individual  partner's  debt. 
Wise  v.  Copley,  36  Ga.  508.  See, 
also,  Warder  v.  Newdigate,  11  B. 
Mon.  174 ;  ante,  277,  note. 

Partners  may  set  off  claims  held 
jointly,  but  not  individually.  Sager 
v.  Tupper,  38  Mich.  259.  See,  how- 
ever, Jones  v.  Jones,  12  Ala.  244. 

A  member  of  a  firm  may,  with 
the  assent  of  his  copartners,  set  off, 
in  an  action  against  them  individ- 
ually, a  debt  due  to  the  firm  by 


the  plaintiff  in  the  action.  Proof 
of  the  account  and  of  the  assent 
of  partners  to  its  use  are  all  that  is 
required;  it  is  not  necessary  that 
the  account  should  be  assigned  to 
the  defendant.  Montz  v.  Morris, 
89  Pa.  St.  392. 

In  suit  by  three  plaintiffs,  as 
partners,  defendants  may  plead 
that  two  of  plaintiffs  only  were 
partners,  and  may  set  up  a  coun- 
ter-claim against  them.  Rush  v. 
Thompson,  112  Ind.  158. 

The  individual  debt  of  a  partner 
cannot  be  charged  to  a  firm  with- 
out its  consent,  which,  however, 
may  be  shown  by  agreement,  ac- 
ceptance or  acquiescence.  Camp- 
bell v.  District  of  Columbia,  19  Ct. 
of  CI.  160. 

According  to  the  construction 
placed  upon  the  statute  of  Ala- 
bama, allowing  partners  to  be  sued 
severally,  it  does  not  authorize  a 
demand  due  by  the  firm  to  be  set 
off  against  a  separate  debt  due  to 
one  of  the  partners.  Hoyt  v.  Mur- 
phy, 18  Ala.  316. 

In  an  account  between  the  ad- 
ministrator of  a.  partner  deceased, 
insolvent,  and  a  surviving  partner, 
the  individual  claim  of  the  sur- 
vivor against  the  deceased  cannot 
be  taken  into  the  account  and  de- 
ducted from  the  balance  in  the 
survivor's  hands.  Berry  v.  Powell, 
18  111.  98. 

By  operation  of  law  a  partner- 
ship debt  is  not  extinguished  or 
compensated  by  the  indebtedness 
of  the  creditor  to  one  of  the  part- 


(z)  It  cannot  be  done  in  equity  even  in  cases  of  fraud. 
v.  Pollock,  20  Eq.  515. 

681 


See  Middleton 


•292 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


of  great  importance  to  partners.     It  scarcely  requires  to  be 
pointed  out  that  to  allow  a  set-off  of  such  debts  would  be  to 


ners ;  although  such  partner  may, 
by  way  of  defense  or  by  exception, 
as  it  is  termed  in  the  practice  of 
Louisiana,  offset  or  oppose  the 
compensation  of  his  demand  to 
that  of  the  creditor.  Beauregard 
v.  Case,  91  U.  S.  134. 

Defendant  purchased  cerbain 
cattle  of  plaintiff,  supposing  that 
they  were  the  property  of  E.  and 
the  plaintiff  as  copartners.  At 
the  request  of  E.  he  subsequently 
took  up  a  note  signed  by  both  E. 
and  the  plaintiff  as  makers,  al- 
though in  fact  plaintiff  was  but  a 
surety.  As  a  matter  of  fact  there 
was  no  copartnership  existing  be- 
tween E.  and  the  plaintiff.     Held, 

1.  That  E.  and  the  plaintiff  were 
not  bound  to  join  in  an  action  for 
the  purchase  price  of  the  cattle. 

2.  That  the  defendant  should  have 
made  inquiry  whether  in  fact  the 
plaintiff  was  principal  on  the  note. 

3.  That  there  being  no  partnership 
in  fact,  defendant  could  not  set  off 
his  payment  of  the  debt  of  E. 
against  the  claim  of  plaintiff.  Enix 
v.  Hays,  48  Iowa,  86. 

It  has  been  held  that  a  defendant 
may  set  up  in  his  defense,  under 
the  general  issue,  that  the  plaintiff 
is  one  of  a  partnership,  and  that 
the  firm  is  indebted  to  him  in  a 
larger  sum  than  that  which  the 
plaintiff  demands,  it  being  a  part 
of  the  same  transaction.  Bucking- 
ham v.  Burgess,  3  McLean,  364. 

A.,  the  partner  of  B.,  assigned 
all  his  interest  in  the  partnership 
effects  to  B.,  with  power  to  settle 
and  compromise.  Held,  that  B. 
might  set  off  a  debt  due  to  the  firm 
against   a   debt    due    by    himself 


alone.  Craig  v.  Henderson,  2  Pa. 
St.  261. 

Where  one  partner  executed  a 
bond  in  the  name  of  the  firm, 
under  seal,  for  a  debt  due  by  the 
firm,  in  an  action  by  the  obligee 
on  such  bond,  held,  that  a  debt  due 
by  the  obligee  to  the  firm  was  a 
good  set-off,  notwithstanding  the 
plaintiff  was  allowed  to  enter  a  nol. 
prus.  as  to  one  of  the  firm,  and 
proved  that  only  the  partner  re- 
tained as  defendant  signed  the 
instrument.  Sellers  v.  Streator,  5 
Jones'  L.  261. 

The  plaintiff,  one  partner  of  a 
firm,  upon  disso'.utk n  thereof  sold 
all  his  interest  in  the  property  and 
debts  due  the  firm  to  the  defendant, 
the  other  partner,  and  the  defend- 
ant gave  the  plaintiff  a  promissory 
note  and  a  bond  of  indemnity 
against  the  liabilities  of  the  firm. 
Held,  that  the  defendant  could  not 
set  off  against  said  note  an  account 
due  from  the  plaintiff  to  the  firm 
at  its  dissolution.  Lesure  v.  Norris, 
11  Cush.  328. 

Where  a  partner  retired  from  the 
firm,  and  a  new  firm  was  formed, 
which  undertook  to  pay  the  debts 
of  the  old  firm,  but  failed,  leaving 
debts  of  the  old  firm  unpaid,  which 
the  retiring  partner  had  to  pay, 
held,  that  he  might  set  off  such 
payment  against  a  bond  which  he 
had  given  to  the  new  firm,  and 
which  they  had  assigned  to  A.  for 
value.  Hupp  v.  Hupp,  6  Gratt. 
310. 

In  an  action  by  the  members  of 
an  alleged  special  partnership,  for 
the  proceeds  of  goods  claimed  to 
have  been  sold  by  defendants  for 


682 


OH.  Ill,  SEC.  II.]       ACTIONS    BETWEEN    PARTNERS. 


*292 


enable  a  creditor  to  obtain  payment  of  what  is  due  to  him 
from  persons  in  no  way  indebted  to  him.  As  a  rule,  there- 
plaintiffs,  defendants  may  show  in 
defense  that  the  pretended  partner- 
ship was  a  sham  to  prevent  the 
creditors  of  the  active  partner  from 
reaching  his  property ;  and  that  he 
is  in  fact  the  sole  person  interested 
in  the  business;  and  by  way  of 
offset  may  set  up  an  individual 
indebtedness  of  such  active  partner 
to  the  defendant.  Rosenberg  v. 
Block,  102  N.  Y.  255;  reversing 
S.  C.  50  N.  Y.  Super.  Ct.  357. 

Where  the  assignee  of  an  insolv- 
ent firm  sought  to  recover  from 
the  defendant  moneys  held  in  trust 
for  one  partner,  to  the  possession 
of  which  he  had  become  entitled 
after  the  assignment,  and  the  indi- 
vidual debts  of  the  partners  had 
been  paid  out  of  their  private  prop- 
erty, and  at  the  time  of  the  assign- 
ment the  firm  was  indebted  to 
defendant  for  trust  moneys  depos- 
ited with  it,  held,  that  the  defend- 
ant was  entitled  to  set  off  the 
amount  due  from  the  firm  against 
the  amount  due  to  said  partner. 
Shipman  v.  Lansing,  25  Hun  (N.  Y.), 
290. 

In  an  action  upon  a  note  belong- 
ing to  the  estate  of  a  decedent, 
claims  growing  out  of  partnership 
dealings  between  the  decedent  and 
defendant  are  not  a  proper  subject 
of  set-off  where  there  has  been  no 
accounting  or  final  settlement. 
Tomlinson  v.  Nelson,  49  Wis.  679. 
See,  also,  Love  v.  Rhyne,  86  N.  C. 
576. 

As  to  the  duty  of  one  partner  in 
paying  a  firm  debt  to  set  off  a  debt 
from  the  creditor  to  the  firm,  see 
Cockrell  v.  Thompson,  85  Mo.  510. 

One    who    has    sold    stock    and 


leased  a  store  to  a  firm,  and  has 
then  taken  an  interest  in  the  busi- 
ness, can  offset  the  amount  due 
him  on  such  sale  and  lease  in  an 
action  brought  against  him  by  the 
firm,  and  need  not  leave  it  to  a 
partnership  accounting  already 
pending.  Kinney  v.  Robison,  52 
Mich.  389. 

As  a  general  rule  set-offs  must 
be  mutual ;  but  in  Texa-,  where  one 
of  a  plaintiff  firm  is  insolvent,  the 
defendant  in  an  action  by  the  firm 
may  set  off  a  claim  against  the  in- 
solvent partner.  Hahn  v.  Cook,  1 
Tex.  App.  (Civ.)  378;  Singer  Mfg. 
Co.  v.  Wood,  1  Tex.  App.  (Civ.)  972. 
See,  also,  Greathouse  v.  Great- 
house,  60  Tex.  597. 

In  Pennsylvania  a  member  of  a 
firm  may,  with  the  assent  of  his 
copartners,  set  off,  in  an  action 
against  him  individually,  a  debt 
due  to  the  firm  by  the  plaintiff  in 
the  action;  proof  of  the  account 
and  of  the  assent  of  the  partners  to 
its  use  are  all  that  is  required ;  it  is 
not  necessary  that  the  account 
should  be  assigned  to  the  defend- 
ant. Montz  v.  Morris,  89  Pa.  St.  392. 

Action  by  two,  as  partners,  for 
goods  sold  and  delivered.  The  de- 
fendant showed  that  both  had 
boarded  together  with  him,  and 
each  had  told  him  that  "what  one 
might  call  for  would  be  the  same 
as  if  both  should  order  it,"  and 
filed  his  counter-claim  for  liquors 
and  cigars  furnished  each  while 
they  were  boarding  with  him,  and 
it  was  allowed  in  defense,  pro 
tanto.  Hartung  v.  Siccardi.  3  E. 
D.  Smith,  560. 

In  Jones  v.  Blair,  57  Ala.  457,  the 


683 


^93 


EIGHTS    AND    OBLIGATIONS. 


[book  II. 


fore,  a  debt  owing  by  one  of  the  members  of  a  firm  cannot 
be  set  off  at  law  against  a  debt  owing  to  him  and  his  co- 
partners; (a)  nor  can  a  debt  owing  to  one  of  the  members 
of  a  firm  be  set  off  against  a  debt  owing  by  him  and  his  co- 
partners, (b)  And  this  rule  applies  even  where  one 
[*293]  partner  only  has  been  dealt  with,  and  *the  debts 
sought  to  be  set  against  each  other  are  a  debt  owing 
by  him  and  a  debt  owing  to  him  and  others,  but  arising  out 
of  transactions  with  him*  alone. 

This  last  point  is  well  illustrated  by  Gordon  v.  Ellis,  (c) 
There  an  action  was  brought  by  three  partners  for  the  re- 
covery from  the  defendant  of  moneys  received  by  him  for 
goods  of  the  plaintiffs  sold  by  the  defendant  on  their  ac- 
count. The  defendant  pleaded,  in  effect,  that  he  had  been 
employed  by  A.  only,  that  A.  sent  the  goods  for  sale  as  if 
they  were  his  own,  and  that  the  goods  were  sold  by  the 
defendant  as  A.'s  goods,  and  that  A.  was  indebted  to  the 
defendant  in  a  larger  amount  than  that  sought  to  be  recov- 


court  disapproves  the  intimation  in 
Taylor  v.  Bass,  5  Ala.  110,  that  the 
mere  assent  of  the  other  partners 
to  the  exclusive  use  and  appropria- 
tion of  a  debt  due  the  firm  by  one 
of  the  partners  may  convert  such 
debt  into  a  proper  subject  of  set-off 
by  liim,  when  sued  alone  on  an  in- 
dividual liability. 

Against  the  separate  debt  by 
promissory  note  between  two  part- 
ners, the  maker  cannot,  in  the  ab- 
sence of  special  circumstances,  set 
off  in  equity  the  balance  due  him 
from  the  firm  on  the  settlement  of 
its  account.  Glover  v.  Hembree, 
82  Ala.  324. 

In  an  action  brought  by  the  as- 
signees of  a  person  who  is  a  bank- 
rupt individually,  but  a  member  of 
a  solvent  firm,  against  the  other 
member  of  the  firm  for  an  account- 
ing, the  defendant  may  properly 


claim  to  his  credit  amount  ad- 
vanced by  him  individually  to  such 
bankrupt.  Warren  v.  Burnham, 
3t  Fed.  Rep.  579. 

In  an  action  for  labor  and  serv- 
ices, an  equitable  set-off  of  a  judg- 
ment assigned  to  a  defendant 
against  plaintiff  and  other  mem- 
bers of  a  defunct  and  insolvent 
firm  may  properly  be  allowed. 
Seligmann  v.  Heller  Bros.  Cloth- 
ing Co.  34  West.  Rep.  (Wis.)  232. 

(a)  Gordon  v.  Ellis,  2  C.  B.  821 ; 
France  v.  White,  8  Scott,  257. 

(o)  Arnold  v.  Bainbridge,  9  Ex. 
153;  McGillivray  v.  Simson,  2  Car. 
&  P.  320 ;  Boswell  v.  Smith,  6  C.  & 
P.  60. 

(c)  2  C.  B.  821.  And  see  the  same 
case,  7  Man.  &  Gr.  607,  where  it 
will  be  observed  the  plea  was  ma- 
terially different. 


684 


OH.  Ill,  SEC.  II.]       ACTIONS    BEi'WEEN    PARTNERS.  "X"294 

ered  in  the  action.  It  was  admitted  that  if  B.  and  C.  had, 
by  their  conduct,  induced  the  defendant  to  believe  that  A. 
was  the  sole  owner  of  the  goods  in  question,  and  to  deal 
with  A.  on  that  supposition,  the  defendant  would  have  had  a 
o-ood  defense  to  the  action ;  but  it  was  held  that,  as  the  de- 
fendant  did  not  allege  that  such  had  been  the  case,  his  plea 
was  a  mere  attempt  to  set  off  a  debt  due  from  one  member 
of  the  firm  against  a  debt  due  to  the  firm  itself,  and  was  bad. 

In  strict  analogy  to  the  above  rule,  it  has  been  decided  in 
equity  that  if  the  members  of  a  firm  have  separate  private 
accounts  with  the  bankers  of  the  firm,  and  a  balance  is  due 
to  the  bankers  from  the  firm  on  the  partnership  account, 
the  bankers  have  no  lien  for  such  balance  on  what  may  be 
due  from  themselves  to  the  members  of  the  firm  on  their 
respective  separate  accounts;  and  that  the  debt  due  to  the 
bankers  from  the  partners  jointly  cannot  be  set  off  against 
the  debts  due  from  the  bankers  to  the  partners  sepa- 
rately, (d). 

Effect  of  Judicature  Acts. —  The  Judicature  Acts  have 
extended  the  equitable  principles  of  set-off  to  all  actions  in 
the  high  court;  (e)  and,  notwithstanding  the  rules  relating 
to  joint  and  to  several  claims,  (/)  the  old  rule  precluding 
the  set-off  of  a  joint  against  a  separate  debt,  or  vice  versa,  is 
still  in  force,  (g) 

^Exceptions  to  general  rule. —  To  the  general  [*294] 
rule  which  precludes  the  set-off  of  a  debt  due  to  a 
firm  against  a  debt  owing  by  one  of  its  members,  and  vice 
versa,  there  are,  however,  a  few  exceptions. 

Agreement. —  If  it  can  be  shown  that  all  the  parties 
concerned  have  expressly  or  impliedly  agreed  that  a  debt 

(d)  See  Watts  v.  Christie,  11  D.  540.  However,  in  Manchester, 
Beav.  546 ;  Cavendish  v.  Geaves,  24  Sheffield  &  Line.  Rail.  Co.  v. 
id.  173.  Brooks,  2  Ex.    D.  243,  a  separate 

(e)  See  §§  24  and  25  (6)  (11)  of  the  debt  was  allowed  to  be  pleaded  by 
Judicature  Act,  1873.  way  of  set-off  to  an  action  for  a 

(/)  Odr.  xvi,  rr.  1,  4,  6,  ante,  joint  debt.  This  can  hardly  have 
p.  282.  been  right. 

(g)  Bowyear  v.  Pawson,  6  Q.  B. 

685 


*295  EIGHTS    AND    OBLIGATIONS.  [BOOK    II. 

owing  by  one  of  them  only  shall  be  set  off  against  a  debt 
owing  to  them  all,  or  vice  versa,  effect  will  be  given  to  that 
agreement,  and  the  application  of  the  general  doctrine  in 
question  will  thereby  be  precluded.  Eegard,  therefore, 
must  be  had  to  any  agreement  which  the  parties  themselves 
may  have  come  to,  and  to  their  course  of  dealing  with  each 
other,  (h) 

So,  if  a  joint  and  several  promissory  note  is  made  by  part- 
ners, and  one  of  them  sues  the  payee  for  some  separate 
demand,  the  defendant  can  set  off  the  note;  for,  exhypothesi, 
it  is  the  several  note  of  the  partner  suing  him.  (i) 

An  agreement  by  one  partner  that  a  debt  due  from  him- 
self separately 'shall  be  set  off  against  a  debt  due  to  him  and 
to  his  copartners  jointly  is  prima  facie  a  fraud  on  them; 
and  a  set-off  founded  on  such  an  agreement  cannot,  it  is  ap- 
prehended, be  maintained  in  the  absence  of  special  circum- 
stances, rendering  such  an  agreement  binding  on  the  other 
partners,  (k) 

Another  exception  occurs  where  one  partner  has  been 
allowed  by  his  copartners  to  act  as  if  he  were  a  principal 
and  not  an  agent  of  the  firm. 

Set-off  where  there  is  a  dormant  partner. —  It  has  been 
seen  that  dormant  partners  may  join  their  copartners  in 
sums:  on  contracts  entered  into  in  form  with  the  latter 
only.  But  dormant  partners  cannot,  by  coming  forward 
and  suing  on  such  contracts,  deprive  the  defendant  of  any 
right  of  set-off  of  which  he  might  have  availed  himself  if 
the  non-dormant  partners  only  had  been  plaintiffs. 
[*295]  This  was  held  by  *Lord  Kenyon  in  Stracey  v.  Deey,  (I) 

(h)  See  Vulliamy  v.  Noble,  3  Mer.  of  pleading,  which  are  now  abol- 

593 ;  Downam  v,  Matthews,  Prec.  ished.     See  ante,  p.  269 ;  Piercy  v. 

in  Ch.  580;  Cheetham  v.   Crook,  Fynney,    12    Eq.    60;    Nottidge  v. 

McLel.    &  Y.    307 ;    Kinnerley  v.  Pritchard,  2  CI.  &  Fin.  379. 

Hossack,  2  Taunt.  170.  (1)  7  T.  R.  361,  note,  and  2  Esp. 

(i)  See  Owen  v.  Wilkinson,  5  C.  469.     See,  too,  Teed  v.  Elworthy, 

B.  N.  S.  526.  14  East,  212,   and  De  Mautort  v. 

(k)  Wallace  v.  Kelsall,  7M.&W.  Saunders,  1  B.  &  Ad.  398,  over- 

264,  is  the  other  way,  but  is  to  be  ruling  Dubois  v.  Ludert,  5  Taunt, 

explained  by  the  old  technical  rules  609. 

686 


OH.  Ill,  SEC.  II.]       ACTIONS    BETWEEN   PARTNERS. 


•295 


where  the  plaintiffs,  Stracey,  Eoss,  and  others,  were  in 
partnership  as  grocers,  and  Ross  was  the  only  person  who 
appeared  to  the  public  as  concerned  in  the  partnership 
business.  The  defendant  had  dealt  with  Ross,  and  had 
become  indebted  for  grocery  supplies  by  him.  On  the  other 
hand,  the  defendant  had  expended  money  for  Ross,  and  had 
done  so  on  the  supposition  that  the  moneys  thus  expended 
could  be  set  off  against  what  was  due  for  the  grocery.  The 
plaintiffs,  however,  contended  that  this  set-off  could  not  be 
made;  but  Lord  Kenyon  held  that  as  the  defendant  had  a 
good  defense  by  way  of  set-off  against  Ross,  and  had  been 
by  the  conduct  of  the  plaintiffs  led  to  believe  that  Ross  was 
the  only  person  he  contracted  with,  they  could  not  pull  off 
the  mask  and  claim  payment  of  debts  supposed  to  be  due  to 
Ross  alone,  without  allowing  the  defendant  the  same  ad- 
vantages and  equities  in  his  defense  as  he  would  have  had 
in  an  action  brought  by  Ross  solely,  (m) 

In  this  case,  all  the  partners  except  Ross  were  dormant 
and  by  the  terms  of  the  agreement,  into  which  all  had 
entered,  Ross  alone  was  to  be  the  apparent  trader.  His 
copartners  were  therefore  simply  in  the  position  of  undis- 
closed principals,  and  were  treated  accordingly  by  the 
court. 

Cases  where  one  partner  only  has  been  dealt  with.— 
In  Gordon  v.  Ellis,  (n)  which  has  been  before  referred  to, 
an  attempt  was  made  to  extend  the  principle  on  which 
Lord  Kenyon  decided  Stracey  v.  Deey  to  all  cases  in  which 
one  partn  er  only  transacts  the  business  of  the  firm,  and  be- 
comes himself  indebted  to  the  person  with  whom  he  deals. 
But  it  was  held,  and  rightly,  that  a  person  liable  to  be  sued 
by  a  firm  cannot  set  off  a  debt  due  from  one  only  of  its 
members,  on  the  ground  that  he  only  was  dealt  with  by  the 
defendant,  unless  it  can  be  shown  that  the  other  members 
of  the  firm  induced  the  defendant  by  their  conduct  to  treat 

(m)  See  Cooke  v.  Eshelby,  12  App.  359;  Borries  v.  Imperial  Ottoman 
Ca,  271 ;  George  v.  Clagett,  7  T.  R.     Bank,  L.  R.  9  C.  P.  38. 

(n)  2  C.  B.  821,  ante,  p.  293. 
687 


*29G  EIGHTS    AND    OBLIGATIONS.  [BOOK   II. 

their  copartner  as  the  only  person  with  whom  the  defend- 
ant had  to  do.  (p)  l 
[*296]  -  *But  here  again  it  is  to  be  observed  that  if  the  debt 
due  from  one  partner  can  be  treated  as  due  from  the 
firm,  that  debt  may  be  set  off  against  another  debt  due  to 
it.  This  is  illustrated  by  the  same  case  of  Gordon  v. 
Ellis,  (p)  where,  in  an  action  by  a  firm  for  money  due  to  it 
from  the  defendant  for  goods  of  the  firm  sold  by  him,  the 
latter  was  held  entitled  to  set  off  a  debt  due  to  him  for  an 
advance  made  by  him  to  one  of  the  partners  on  account  of 
those  goods.  The  court  thought  that,  although  the  money 
was  advanced  to  one  partner  only,  the  defendant  had  a 
rio-ht  to  treat  it  as  an  advance  to  the  firm  made  on  that 
partner's  requisition,  whilst  acting  within  the  scope  of  his 
apparent  authority  as  agent  of  the  firm.  In  point  of  fact,  the 
defendant,  instead  of  waiting  until  he  had  sold  the  goods, 
and  then  handing  over  the  money  produced  by  their  sale, 
made  a  payment  on  account;  and  he  sought  nothing  more 
than  to  have  the  amount  so  prepaid  deducted  from  the  sum 
for  which  he  sold  the  goods. 

Attempt  to  avoid  set-off  by  suing  one  partner. —  It 
sometimes  happens  that,  in  order  to  avoid  a  defense  of  set- 
off, a  plaintiff  who  is  indebted  to  a  firm  sues  one  of  its 
members  alone  for  a  debt  owing  to  the  plaintiff  by  the 
firm.  In  such  a  case  the  defendant  may  require  his  copart- 
ners to  be  joined,  (q)  Again,  if  a  firm  holds  the  note  of  a 
person  to  whom  it  is  itself  indebted,  and  in  order  to  deprive 
him  of  his  right  of  set-off  indorses  the  note  to  one  of  its 
members,  and  he  alone  sues  on  it,  a  defense  disclosing  the 

(o)  See  Ramazotti  v.  Bowring,  7  suing,  a  set-off  will  be  allowed  of 

C.  B.  N.  S.  851 ;  Bon  field  v.  Smith,  a  demand  against  the  firm.     Piatt 

12  M.  &  W.  403;  ante,  p.  280;  and  v.  IJalen,  23  Wend.  456. 

Baring  v.  Corrie,  2  B.  &  A.  137.  (p)  7  Man.  &  Gr.  607. 

i  Where  an  action  is  brought  by  (q)  Ord.  xvi,  r.  11.  See  Stack- 
one  of  two  partners  of  a  law  firm  wood  v.  Dunn,  3  Q.  B.  823,  and 
for  business  which  has  uniformly  Bonfield  v.  Smith,  12  M.  &  W. 
been  done  in  the  name  of  the  party  405. 

688 


CH.  Ill,  SEC.  II.]       ACTIONS    BETWEEN   PAKTNEKS.  *297 

facts  and  setting  off  the  debt  owing  to  the  defendant  by 
the  firm  will  be  good,  (r) 

Set-off  where  there  has  been  an  assignment.—  The  pro- 
vision of  the  Judicature  Acts  relating  to  the  assignment  of 
debts  (ante,  p.  285)  has  greatly  facilitated  defenses  by  wa}' 
of  set-off  where  there  has  been  a  change  in  a  firm.  The 
principles  applicable  to  such  cases  are  well  illustrated  by  the 
following  decision. 

In  Cavendish  v.  Geaves,  (s)  the  plaintiff  was  indebted  on 
bonds  to  a  firm  of  bankers.  Many  changes  in  the 
firm  took  *place,  and  the  bonds  in  question  were  on  [*297] 
each  change  assigned  by  the  old  to  the  new  firm. 
The  plaintiff  had  an  account  with  the  bank  as  one  of  its 
customers,  and  when  the  bank  stopped  payment  a  balance 
was  owing  to  him  on  that  account;  but  the  bonds  had  been 
previously  assigned  to  third  parties,  without  notice,  how- 
ever, to  the  plaintiff.  The  question  then  arose,  whether, 
notwithstanding  the  various  changes  in  the  firm,  and  the 
assignment  of  the  bonds,  the  plaintiff  was  entitled  to  set  off 
against  the  debt  due  from  him  on  the  bonds  the  amount 
due  to  him  as  a  customer  of  the  bank,  and  it  was  held  that 
he  was.  The  judgment  in  this  case  is  peculiarly  instructive, 
and  the  following  extract  from  it  is  submitted  to  the  reader 
without  apology. 

Effect  of  assignments  and  of  changes  in  Arm  on  right  of  set-off— 

"  If  a  customer  borrow  money  from  his  bankers  and  give  a  bond  to  se- 
cure it,  and  afterwards,  on  the  balance  of  his  general  banking  account, 
a  balance  is  due  to  the  customer  from  the  same  bankers,  who  are  the 
obligees  of  the  bond,  a  right  to  set  off  the  balance  against  the  money 
due  on  the  bond  will  exist  both  at  law  and  in  equity,  (t) 

"If  the  firm  were  altered  and  the  bond  assigned  by  the  original 
obligees  to  the  new  firm,  and  notice  of  that  assignment  were  given  to 

(r)  Puller  v.  Roe,  1  Peake,  N.  P.  debt  after  notice  of  the  assignment, 

260.  Watson  v.  Mid-Wales  Rail.  Co.  L. 

(s)  24  Beav.  163.     See,  also,  Jef-  R  2  C.  P.  593. 

ferys    v.    Agra    and  Masterman's  (t)  Roxburghe  v.  Cox,  17  Ch.  D. 

Bank,  2  Eq.  674 ;  and  as  to  set-off  520. 
at  law  as  against  the  assignee  of  a 

Vol.  1  —  44  689 


*298  EIGHTS    AND    OBLIGATIONS.  [BOOB.   II. 

the  debtor,  and  if  after  this  a  balance  were  due  to  him  from  the  new 
firm  (the  assignees  of  the  bond),  then  no  right  of  set-off  would  exist  at 
law,  because  the  assignment  of  the  chose  in  action  would  be  inoperative 
at  law,  and  the  obligees  of  the  bond,  and  the  debtor  on  the  general  ac- 
count, would  be  different  persons ;  but  as  in  equity  the  persons  entitled 
to  the  bond,  and  the  debtors  on  the  general  account,  would  be  the  same 
persons,  a  right  to  set-off  would  exist  in  this  court,  and  the  customer 
would  in  equity  be  entitled  to  set  off  the  balance  due  to  him  against  the 
bond  debt  due  from  him. 

"  If  after  the  bond  had  been  given  it  had  been  assigned  to  strangers, 
and  no  notice  of  that  assignment  had  been  given  to  the  original  debtor 
(the  obligor  of  the  bond),  then  his  rights  would  remain  the  same.  Thus, 
if  the  assignment  had  been  made  to  the  stranger  before  any  alteration 
of  the  firm,  then  the  right  of  set-off  would  still  remain  at  law,  where 
the  obligees  of  the  bond  and  the  debtors  on  the  general  account  would 
be  the  same  persons,  and  in  equity,  also,  if  the  matter  on  account  were 
brought  here,  as  the  assignees  of  the  chose  in  action  would  be  bound 
by  the  equities  affecting  their  assignors. 

"But  if  notice  of  that  assignment  had  been  given  to  the  original 
debtor,  no  right  of  set-off  would  exist  in  this  court  for  the  balance  sub- 
sequently due  by  the  bankers  to  the  obligor ;  because  the  persons  enti- 
tled to  the  bond  would,  as  the  obligor  knew,  be  different  persons  from 
the  debtors  to  him  on  the  general  account  with  whom  he  had  continued 
to  deal. 

"If  the  assignment  of  the  bond  had  been  made  to  the  new  firm 
[*298]  with  *notice  to  the  obligor,  they  would,  if  debtors  on  the  general 
account,  be  liable  to  the  same  rights  of  set-off  in  equity  as  if  they 
had  been  the  obligees. 

Effect  of  assignments  and  changes  in  firm  on  right  of  set-off.— 
"If,  after  the  alteration  of  the  firm  and  after  the  assignment  of  the 
bond  to  the  new  firm,  with  notice  to  the  debtor  or  obligor  of  that  assign- 
ment, an  assignment  had  been  made  of  the  bond  to  strangers,  and  no 
notice  of  that  second  assignment  given  to  the  obligor,  then  the  rights  of 
set-off  would  still  remain  to  him  in  equity  as  against  the  first  assignees, 
of  whose  assignment  he  had  notice,  and  the  second  assignees  would  in 
equity  be  bound  by  it,  because,  as  I  have  stated,  the  assignees  of  the 
bond  take  it  subject  to  all  the  equities  which  affect  the  assignors." 

The  court,  after  laying  down  these  general  propositions,  came  to  the 
conclusion,  on  the  evidence  in  the  case,  that  the  plaintiff  was  informed 
that  the  successive  firms  with  which  he  dealt  as  customers  were  his 
creditors  in  respect  of  the  bonds,  but  that  he  had  no  notice  of  their  as- 
signment by  the  firm  which  stopped  payment  to  the  holders  of  them, 
and  that  therefore  he  was  entitled,  even  as  against  such  holders,  to  set 
off  what  was  due  to  him  as  a  customer  of  the  bank  when  it  stopped 
payment. 

690 


CH.  Ill,  SEC.  III.]       ACTIONS    BETWEEN    PARTNERS.  *299 

The  above  decisions  are  sufficient  to  show  that,  in  allow- 
ing debts  to  be  set  off  against  each  other,  courts  of  equity 
went  far  beyond  courts  of  law,  although  they  did  nott intro- 
duce any  new  principle  of  set-off.  The  truth  of  this  was 
still  more  apparent  from  the  cases  in  which  set-off  was 
not  allowed,  one  of  the  debts  being  joint  and  the  other  sev- 
eral only. 

Section  III. —  Of   Execution  against  Partners  for  the 
Debts  of  the  Firm. 

Execution  against  partners.—  If  a  judgment  has  been 
obtained  against  several  persons  sued  jointly,  the  writ  of 
execution  founded  on  the  judgment  must  be  against  all  of 
them,  and  not  against  some  or  one  of  them  only;  for  the 
judgment  does  not  warrant  such  a  writ,  (u) x  But,  although 
the  writ  of  execution  on  a  joint  judgment  must  be  joint  in 
form,  it  may  [when  the  rights  of  individual  creditors  are 
not  involved2]  be  levied  upon  all  or  any  one  or  more  of  the 
persons  named  in  it;  for  each  is  liable  to  the  judgment  cred- 
itor for  the  whole,  and  not  for  a  proportionate  part 
of  the  *sum  for  which  judgment  is  obtained,  (x)3  [*299] 

(it)  See  Penoyer  v.  Brace,  1  Lord  J.  Eq.  313;  Stout  v.  Baker,  32  Kan. 

Raymond,  244;  Clarke  v.  Clement,  113.     See  Clayton  v.  May,  68  Ga. 

6  T.  R.  526;  2  Wins,  Saund.  72Z;  27:  also  ante. 

Bac.  Ab.  Exec.  G.  1.  As  to  the  manner  of  serving  an 

1  As  to  the  rights  of  creditors  to  execution  against  firm  levied  upon 
levy  upon  goods  belonging  to  a  a  crop  belonging  to  the  firm,  and 
partnership  entered  into  by  a  hus-  mortgaged  by  one  partner  as  to  his 
band  with  money  furnished  by  his  interest,  see  Sheehy  v.  Graves,  58 
wife,  see  Clay  v.   Vanwinkle,  75  Cal.  449. 

Ind.  239.  Where  one  party  claims  title  to 

2  Preston  v.  Colby,  6  West.  Rep.  personal  property  under  a  sale  from 
33_  one  of  two  partners,  such  title  is 

(x)  See  per  De  Grey.  C.   J.,  in  good  as  against  a  title  under  an 

Abbot  v.   Smith,  2  Wm.    Blacks,  execution  against  the  firm  levied 

949 ;  and    Herries  v.   Jamieson,  5  after  the  sale.     Blakey  v.  Douglass, 

T.  R.  556,  per  Lord  Kenyon.  5  Cent.  R.  274. 

3  See  Foster  v.  Barnes,  81  Penn.  Where  a  sheriff,  attaching  firm 
St.  377 ;  Randolph  v.  Daly,  15  N.  goods  as  the  property  of  one  part- 

691 


*299 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    II. 


The  consequence  of  this  is  that  the  sheriff  may  execute 
a  writ  issued  against  several  partners  jointly,  either  on 

ner,  takes  a  receipt  therefor  from 
another  partner  and  leaves  them 
with  the  firm,  the  paramount  part- 
nership title  is  a  defense  in  an  ac- 
tion upon  the  receipt.  Tucker  v. 
Adams,  63  N.  H.  301;  S.  C.  1  N. 
Eng.  241. 

:  Money  raised  by  sale  of  firm 
property  upon  executions  against 
the  firm  should  be  applied  to  these 
in  preference  to  other  executions 
against  the  individual  members  of 
the  firm  jointly,  but  not  against 
them  as  a  partnership.  Commer- 
cial Bank  v.  Mitchell,  58  Cal.  42. 

An  execution  on  a  judgment  ren- 
dered against  a  firm  sued  by  its 
firm  name  under  the  statute,  with- 
out naming  the  individual  part- 
ners, can  be  levied  only  on  the  firm 
property.  Yarbrough  v.  Bush,  69 
Ala.  170. 

A  levy  upon  and  sale  of  firm 
property  under  a  joint  judgment 
against  all  the  members  of  a 
firm,  recovered  upon  a  claim  out- 
side of  the  firm  business,  is  good 
as  against  a  subsequent  levy  un- 
der a  judgment  against  the  firm. 
Saunders  v.  Reilly,  10  East.  Rep. 
459. 

Where  A.,  B.  and  C.  enter  into 
an  agreement  whereby  A.  and  B. 
are  to  have  one-half  the  net  profits 
of  a  certain  business  which  was  to 
be  carried  on  in  the  name  of  C. 
alone,  and  they  permit  C.  to  have 
the  ostensible  ownership  of  the 
'  whole  property,  and  he  obtains 
credit  on  the  strength  of  his  pre- 
sumed ownership,  A.  and  B.  can- 
not prevent  levy  and  sale  of  such 
property  for  C.'s  debts  on  a  judg- 


ment against  him  alone.    Callender 
v.  Robinson,  96  Pa  St.  454. 

A  levy  by  firm  creditors  on  the 
interest  of  one  partner  does  not 
give  them  priority  over  a  deed  of 
trust  on  the  personal  property  of 
the  firm  executed  by  a  member  of 
the  firm  for  the  benefit  of  its  cred- 
itors generally,  even  though  at- 
taching creditors  have  no  notice  of 
such  deed.  Scruggs  v.  Burruss,  25 
W.  Va.  670. 

Where  a  partnership  owns  stock 
in  an  insolvent  corporation,  amem- 
ber  of  the  firm  will  be  liable  to  an 
execution  against  himself  individ- 
ually as  a  stockholder  upon  the 
motion  of  a  creditor  of  the  corpora- 
tion in  all  cases  where  the  firm 
would  be  subject  to  such  liability. 
Bray  v.  Seligman,  75  Mo.  31. 

So  long  as  the  legal  title  of  the 
partnership  property  remains  in 
the  copartners,  a  creditor  of  the 
firm  may  pursue  his  remedy  against 
it.  in  an  action  at  law,  in  the  same 
manner  as  against  an  individual 
debtor.  But  if  the  legal  title  has 
been  conveyed  to  a  third  person 
bona  fide,  the  creditor  can  pursue 
the  property  only  by  a  bill  in  equity 
to  marshal  the  assets  and  enforce 
his  equitable  lien.  Stokes  v.  Stev- 
ens, 40  Cal.  391. 

Judgment  was  obtained  and  exe- 
cution issued  against  an  individual 
doing  business  in  his  own  name, 
but  who  had  at  the  time  a  secret 
partner;  afterwards  a  judgment 
was  obtained  and  an  execution  is- 
sued against  both  partners.  Held, 
that  the  property  of  the  partner- 
ship was  liable  to  pay  both  debts, 


692 


OH.  Ill,  SEC.  III.]      ACTIONS    BETWEEN    PARTNERS. 


'299 


their  joint  property  or  on  the  separate  property  of  any  one 
or  more  of  them,  or  both  on  their  joint  and  on  their  respective 


but  that  the  creditor  whose  execu- 
tion was  first  in  the  hands  of  the 
sheriff  had  priority.  Brown's  Ap- 
peal, 17  Pa.  St.  480. 

A  judgment  was  recovered 
against  a  partnership  on  confession 
of  one  of  the  partners.  Execution 
was  issued  thereon,  and  the  part- 
ners paid  the  amount  to  the  sheriff 
after  a  levy  on  partnership  prop- 
erty. Afterwards  the  judgment 
was  reversed  as  to  the  party  who 
was  not  a  party  to  it.  Held,  that  the 
plaintiff  in  execution  was  entitled 
to  recover  of  the  sheriff  the  amount 
received  by  him  on  the  execution. 
Harper  v.  Fox,  7  Watts  &  S.  142. 

S.  and  T.,  trading  as  partners, 
made  several  assignments,  each  of 
his  private  property  and  interest  in 
the  firm,  on  successive  days,  to  the 
same  assignees,  who  accepted  both 
trusts.  Afterward  a  firm  creditor 
issued  execution  and  levied  upon 
the  partnership  property.  Held, 
that,  in  the  absence  of  proof  to  the 
contrary,  the  assignment  of  the 
firm  property  to  assignees  by  one 
of  the  firm  was  assented  to  by  the 
other,  and  that  the  partnership 
property  vested  in  the  assignees, 
and  could  not  be  levied  upon  by 
the  sheriff  after  the  assignments 
had  been  made  and  accepted. 
McNutt  v.  Strayhorn,  39  Pa.  St. 
269. 

The  mere  insolvency  of  a  part- 
nership does  not,  of  itself,  work 
such  a  legal  or  equitable  appropria- 
tion of  its  effects,  in  the  absence  of 
any  proceedings  for  a  pro  rata 
distribution,  as  to  prevent  a  judg- 
ment   creditor   from   making    his 


debt  out  of  the  effects  by  execu- 
tion, or  to  prevent  him  from  re- 
moving fraudulent  obstructions  or 
assignments  intended  by  the  debtor 
to  hinder  the  execution.  Greene 
v.  Breck,  32  Barb.  73. 

A.,  residing  in  the  country,  and 
B.  in  the  city  of  New  York,  both 
produce  dealers,  made  an  arrange- 
ment by  which  they  carried  on 
their  business  in  connection,  the 
profits  at  both  places  to  be  divided 
between  them,  intentionally  con- 
cealing the  arrangement  made.  B. 
incurred  a  debt  to  C.  in  the  course 
of  his  business,  confessed  a  judg- 
ment, and  the  execution  was  lev- 
ied on  the  property  used  in  the 
business  carried  on  by  B.  A. 
claimed  the  property  as  partner- 
ship property.  Held,  that  the  levy 
was  just  and  legal,  the  creditor  C. 
having  a  right  to  look  to  the  prop- 
erty of  A.  to  pay  his  debt.  Van 
Valen  v.  Russell,  13  Barb.  590. 

M.  and  K.,  in  their  articles  of 
partnership,  agreed  that  K.  should 
furnish  at  first  all  the  necessary 
capital,  and  have  the  exclusive 
ownership  of  it  until  M.  should 
contribute  certain  sums  as  agreed 
on.  Before  M.  had  contributed 
any  funds,  T.  obtained  a  judgment 
against  K.,  which  was  levied  on 
the  whole  property  constituting 
the  capital  stock;  and  afterward 
the  York  County  Bank  obtained  a 
judgment  against  M.  &  Co.,  which 
was  levied  on  the  same  property. 
The  property  was  sold  for  less  than 
T.'s  debt  and  the  money  paid  into 
court  for  distribution.  Held,  that 
T.  was  entitled   to  the   whole  of 


693 


:299 


EIGHTS    AND    OBLIGATIONS. 


[BOOK  II. 


separate  properties;  and  so  long  as  there  is,  within  the  sher- 
iff's bailiwick,  any  property  of  the  partners  or  any  of  thera, 
a  return  of  nulla  bona  is  improper,  (y)  Of  course,  if  the 
judgment  creditor  has  had  execution  and  satisfaction  against 
one  of  the  partners,  he  cannot  afterwards  go  against  any  of 
the  others;  (z)  but  the  important  point  to  observe  is  that 
the  sheriff  is  not  bound  to  levy  on  the  goods  of  the  firm 
before  having  recourse  to  the  separate  properties  of  its 
members,  and  that  they  cannot  require  the  sheriff  to  exe- 
cute the  writ  in  one  way  rather  than  another. 

Similar  rules  are  applicable  to  attachments  of  debts  under 
the  Common  Law  Procedure  Act,  1854  (17  and  18  Yict.  ch. 
125,  §  61),  it  having  been  determined  that  a  judgment  cred- 
itor of  three  persons  can,  under  the  act  in  question,  attach 
debts  owing  to  anyone  or  more  of  his  judgment  debtors,  (a) 

The  extent  to  which  to  levy  execution  against  the  effects 
of  a  firm  is  affected  by  bankruptcy  will  be  examined  here- 
after. 


it.  Appeal  of  York  County  Bank, 
32  Pa.  St.  446. 

Where,  by  articles  of  dissolution 
of  a  partnership  between  A.  and 
B.,  A.  took  the  property  of  the 
partnership  and  agreed  to  pay  the 
debts  of  the  firm,  and  a  creditor  of 
the  partnership  having  obtained  a 
judgment  against  the  firm  for  a 
debt,  levied  his  execution  upon  the 
real  and  personal  estate  of  both  A. 
and  B. ,  and  afterward  assigned  the 
judgment  to  C,  the  father-in-law 
of  A.,  and  A.  afterward  sold  his 
personal  estate  so  levied  on  to  D. , 
and  C,  by  writing  under  seal,  re- 
leased his  interest  therein  to  D. 
with  full  knowledge  of  the  terms 
of  dissolution,  held,  that  the  judg- 
ment could  not  be  enforced  against 
B.     Bell  v.  Hall,  5  N.  J.  Eq.  477. 

A  judgment  obtained  by  one  firm 


against  another,  each  of  which  is 
constituted  in  part  of  members  be- 
longing to  both  firms,  thus  being 
both  plaintiff  and  defendant,  can- 
not be  executed  by  a  levy  upon  the 
separate  property  of  an  individual 
member  of  the  defendant  firm. 
Tassey  v.  Church,  6  Watts  &  S. 
465. 

An  attorney  holding  moneys  be- 
longing to  a  late  firm  of  three  per- 
sons is  chargeable  on  trustee  pro- 
cess in  a  suit  against  a  new  firm 
comprising  two  members  of  the 
old  firm  and  another  person,  unless 
some  interposing  claim  be  made  by 
the  creditors  of  the  old  firm.  Bur- 
nell  v.  Weld,  59  Me.  423. 

(y)  See  Jones  v.  Clayton,  4  M.  & 
S.  349. 

(z)  See  Com.  Dig.  Execution,  H. 

(a)  Miller  v.  Mynn,  1  E.  &  E.  1075. 


694 


CH.  Ill,  SEC.  III.]       ACTIONS    BETWEEN    PARTNERS.  *300 

The  procedure  on  a  judgment  against  a  firm  (b)  is  regu- 
lated by  order  XLII,  rule  10,  which  is  as  follows: 

Execution  against  partners  on  judgment  against  firm.— Where  a 

judgment  or  order  is  against  a  firm,  execution  may  issue : 

(a)  Against  any  property  of  the  partnership. 

(6)  Against  any  person  who  has  appeared  in  his  own  name  under  order 
XII,  rule  15,  or  who  has  admitted  on  the  pleadings  that  he  is,  or  has 
been  adjudged  to  be,  a  partner. 

(c)  Against  any  person  who  has  been  served  as  a  partner  with  the  writ 
of  summons,  and  has  failed  to  appear. 

If  the  party  who  has  obtained  judgment  or  an  order  claims  to  be  en- 
titled to  issue  execution  against  any  other  person  as  being  a  member  of 
the  firm,  he  may  apply  to  the  court  or  a  judge  for  leave  so  to  do ;  and 
the  court  or  judge  may  give  such  leave  if  the  liability  be  not  dis- 
puted, or,  if  such  liability  *be  disputed,  may  order  that  the  lia-  [*300] 
bility  of  such  person  be  tried  and  determined  in  any  manner  in 
which  any  issue  or  question  in  an  action  may  be  tried  and  determined. 

It  is  not  clearly  said  in  this  rule  that  execution  must 
first  be  levied  against  the  joint  estate  of  the  firm  before 
having  recourse  to  the  separate  estates  of  the  members;  and, 
having  regard  to  the  previous  well-established  practice,  the 
rule  cannot  be  construed  as  rendering  such  a  course  neces- 
sary. 

The  proper  mode  of  entering  up  judgment  has  been  al- 
ready considered,  ante,  p.  2G6. 

Execution  on  judgment  against  firm.— If  judgment  is 
entered  up  against  a  firm  in  its  mercantile  name,  execution 
can  only  issue  without  leave  against  the  property  of  the 
firm,  (c)  or  against  those  persons  specially  mentioned  in 
order  XLII,  rule  10 ;  other  persons  sought  to  be  made  lia- 
ble must  be  proceeded  against  in  some  other  way,  and  some 
judgment  or  order  must  be  obtained  against  them  establish- 
ing their  liability  before  execution  can  issue  against  them,  (d) 
An  action  founded  on  the  judgment  may  be  brought  against 

(b)  The  firm  here  means  the  part-  tion  must  be  made  to  the  court, 
ners  when  the  cause  of  action  ac-  Kewney  v.  Attrill,  34  Ch.  D.  345. 
crued.   Ante,  p.  265.  (d)  Davis  v.  Morris,  10  Q.  B.  D. 

(c)  If  there  is  a  receiver,  applica-  436. 

695 


*300  EIGHTS    AND    OBLIGATIONS.  [BOOK  II. 

them,  and  it  is  not  necessary  to  proceed  by  an  issue  and 
an  order  under  the  rule,  (e)  But  the  judgment  cannot  be 
made  the  foundation  of  a  debtor's  summons  in  bankruptcy 
against  them  if  they  dispute  their  liability;  for  in  the  case 
supposed  their  liability  in  respect  of  the  judgment  has  not 
yet  been  established,  (f) 

The  mode  of  taking  in  execution  the  share  of  one  part- 
ner on  a  separate  judgment  against  him  will  be  examined 
hereafter  (see  bk.  Ill,  ch.  5,  §  4). 

(e)  Clark  v.  Cullen,  9  Q.  B.  D.  124;  Ex  parte  Blain,  12  Ch.  D.  522, 
355.  where  the   alleged  debtor  was  a 

(/)  Ex  parte  Young,  19  Ch.  D.     foreigner  residing  abroad. 

696 


*BOOK  III.  [*301] 

OF  THE  EIGHTS  AND  OBLIGATIONS  OF  MEM- 
BERS OF  PARTNERSHIPS  BETWEEN  THEM- 
SELVES. 


CHAPTER  I. 


OF  THE  RIGHT  TO  TAKE  PART  IN  THE  MANAGEMENT  OF  THE 
AFFAIRS  OF  THE  FIRM. 


Each  member  of  partnership  entitled  to  take  part  in 
its  management.—  In  partnerships  the  good  faith  of  the 
partners  is  pledged  mutually  to  each  other  that  the  business 
shall  be  conducted  with  their  actual  personal  interposition, 
so  that  each  may  see  that  the  other  is  carrying  it  on  for 
their  mutual  advantage,  (a) 

In  the  absence  of  an  express  agreement  to  the  contrary 
the  powers  of  the  members  of  a  partnership  are  equal,  even 
although  their  shares  may  be  unequal;  and  there  is  no  right 
on  the  part  of  one  or  more  to  exclude  another  from  an 
equal  management  in  the  concern.  (J) l  \  Moreover,  if  two 

(a)  Per  Lord  Eldon,  in  Peacock  v.  sonal  services  of  a  particular  part- 
Peacock,  16  Ves.  51.  ner,  and  he  fails  to  perform  them, 

(6)  Rowe  v.  Wood,  2  Jac.  &  W.  it  is  a  breach  of  contract;  yet  the 

558.    See,  too,  Lloyd  v.  Loaring,  6  damages  for  such  breach  will  be 

Ves.  777.  but  nominal  if  another  party  shall 

1  In      law    partnerships     either  perform  the  duty  with  due  profes- 

partner  may  attend  to  business  in-  sional  skill  and  without  injury  to 

trusted  to  the  firm.     But  if  a  firm  the  client.     Smith  v.  Hill,  13  Ark. 

contract  with  a  client  for  the  per-  173. 

697 


EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

persons  are  in  partnership,  and  one  of  them  mortgages  all 
his  share  and  interest  therein  to  the  other,  the  latter  will 
not  be  permitted,  during  the  continuance  of  the  partner- 
ship, to  avail  himself  of  his  rights  as  a  mortgagee  and  to 
exclude  his  copartner  from  interference  in  the  partner- 
ship, (c)  Indeed,  speaking  generally,  it  may  be  said  that 
nothing  is  considered  as  so  loudly  calling  for  the  interfer- 
ence of  the  court  between  partners  as  the  improper  exclu- 
sion of  one  of  them  by  the  others  from  taking  part  in  the 

management  of  the  partnership  business,  (d) 
[*302]      ^Unless   otherwise   agreed. —  It  need,  however, 

hardly  be  observed  that  it  is  perfectly  competent  for 
partners  to  agree  that  the  management  of  the  partnership 
affairs  shall  be  confided  to  one  or  more  of  their  number 
exclusively  of  the  others ;  and  that  where  such  an  agree- 
ment is  entered  into  it  is  not  competent  for  those  who  have 
agreed  to  take  no  part  in  the  management  to  transact  the 
partnership  business  without  the  consent  of  all  the  other 
partners.1  But,  as  was  seen  in  an  earlier  part  of  the  treat- 
ise, every  member  of  an  ordinary  firm  is  prima  facie  its 

(c)  Rowe  v.  "Wood,  2  Jac.  &  W.  Evidence,  both  direct  and  cir- 
558.  cumstantial,  is  admissible  to  prove 

(d)  See,  in  addition  to  the  cases  that  the  sole  power  of  conducting 
last  cited,  Goodman  v.  "Whitcomb,  the  business  of  a  firm  has  been 
1  Jac.  &  W.  589 ;  Marshall  v.  Col-  given  to  one  partner.  Such  power 
man,  2  id.  266.  may  be  inferred  from  the  conduct 

1  If  any  one  of  the  partners  of  of  the  partners  for  a  series  of  years, 
a  copartnership  give  his  assent  to  as  that  one  has  exclusively  con- 
the  acts  of  their  agent,  such  assent  ducted  the  business  of  the  firm, 
would  be  good  evidence  affecting  and  the  other  partner  has  never 
the  rest,  unless,  by  the  articles  or  questioned  his  acts  or  assumed  to 
constitution  of  the  company,  the  conduct  the  business  himself.  It 
whole  concern  and  management  is  proper  to  show  any  reason  exist- 
should  be  intrusted  to  a  committee  ing  or  expressed  by  the  partners 
or  board  of  managers,  in  which  why  it  was  not  desirable  or  desired 
case  the  assent  must  be  proved  to  that  the  other  should  conduct  the 
have  been  given  by  them,  or  some  business,  as  that  he  had  little  inter- 
of  them,  pursuant  to  the  authority  est  in  the  concern,  while  the  inter- 
delegated  to  them  by  the  company,  est  of  the  managing  partner  was 
Odiorne  v.  Maxcy,  13  Mass.  178 ;  S.  large.  Anthony  v.  Wheatons,  7  R. 
C.  15  id.  39.  I.  49. 

698 


MANAGEMENT. 


502 


CH.  I.] 

agent  for  carrying  on  its  business  in  the  usual  way ;  (e)  and 
persons  dealing  with  a  partner  within  the  limits  of  his  ap- 
parent authority  are  entitled  to  hold  the  firm  answerable 
for  his  conduct  unless  such  persons  had  distinct  notice  that 
his  real  authority  was  less  extensive  than  they  had  a  right 
to  assume  it  to  be. 

(e)  Ante,  book  ii,  ch.  1. 

699 


[*303] 


^CHAPTER  II. 


OF  THE  GENERAL  DUTY  OF  PARTNERS  TO  OBSERVE  GOOD 

FAITH. 


Section  I. —  Preliminary  Remarks. 

High  standard  of  honor  requisite  among  partners,  and 
among-  those  about  to  become  partners,  and  among  those 
who  have  ceased  to  be  partners. —  In  societatis  contracti- 
hus  fides  exuberet.  (a)  —  The  utmost  good  faith  is  due  from 
every  member  of  a  partnership  towards  every  other  mem- 
ber; and  if  any  dispute  arise  between  partners  touching 
any  transaction  by  which  one  seeks  to  benefit  himself  at 
the  expense  of  the  firm,  he  will  be  required  to  show,  not 
only  that  he  has  law  on  his  side,  but  that  his  conduct  will 
bear  to  be  tried  by  the  highest  standard  of  honor,  (b)1 


(a)  Cod.  iv,  tit.  37, 1.  3. 

(b)  See  Blisset  v.  Daniel,  10  Ha. 
522,  536.  Compare  Cassels  v.  Stew- 
art, 6  App.  Ca.  64,  noticed  infra, 
which  shows  how  difficult  it  is  to 
apply  this  general  principle. 

1  See,  generally,  First  Nat.  Bk. 
t'.  Bissell,  2  McCrary,  73 ;  S.  C.  4 
Fed.  Rep.  694,  and  the  cases  cited 
below. 

A  partner  who  makes  a  profit 
from  the  use  of  partnership  funds 
must  account  therefor  to  the  firm. 
Gill  v.  Wilson,  2  Tex.  App.  (Civ.) 
330. 

Partners  stand  in  the  relation  of 
trustees  to  each  other,  and  can  ac- 
quire the  property  of  the  firm  only 
for  the  benefit  of  the  firm;  and 
purchasers    from    them,    charged 


with  notice  of  the  fact,  occupy  no 
better  position  than  their  vendors. 
Lamar  v.  Hale,  79  Va.  147. 

The  rights  of  a  firm,  under  a 
mortgage  held  by  it,  are  not  af- 
fected by  the  purchase  of  the 
equity  of  redemption  by  one  of  the 
partners  for  himself.  Gordon  v. 
Tyler,  53  Mich.  629. 

Where  patents  belonging  to  the 
firm  are  taken  in  the  name  of  one 
or  more  members,  such  members 
or  their  personal  representatives, 
upon  their  decease,  may  be  com- 
pelled in  equity  to  transfer  the 
same  to  the  surviving  partners. 
Berolzheimer  v.  Strauss,  51  N.  Y. 
Super.  Ct.  96;  S.  C.  7  Civ.  Proc. 
(N.  Y.)  225. 

It  is  a  question  to  be  submitted 


700 


CH.  II,  SEC.  I.]      DUTY    TO    OBSERVE    GOOD    FAITH. 


*303 


Thus,  if  one  partner  knows  more  about  the  state  of  the 
partnership  accounts  than  another,  and,  concealing  what  he 


4 


to  the  jury,  where  there  is  evidence 
to  raise  it,  whether  the  acts  of  the 
majority  were  in  bad  faith  towards, 
and  in  wanton  violation  of  the 
rights  of,  the  minority.  "Western 
Stage  Co.  v.  Walker,  2  Iowa,  504. 

Where  one  partner,  who  is  in 
sound  health,  is  made  sole  agent 
of  the  partnership  by  another  who 
is  not,  and  who  relies  on  him 
wholly  for  true  accounts,  and  the 
party  thus  made  agent  manages 
the  business  at  a  distance  from  the 
other,  communicating  to  him  no 
information,  the  relation  of  part- 
ners, whatever  it  may  be  in  gen- 
eral, becomes  fiduciary,  and  the 
law  governing  such  relations  ap- 
plies. Brooksg.  Martin,  2  Wall.  70. 
-fe~arT  action  against  a  partner- 
ship, if  process  be  served  on  one 
partner  and  judgment  recovered, 
and  execution  levied  on  the  part- 
nership property,  it  is  the  duty  of 
such  partner  to  give  notice  of  it  to 
his  copartners,  and  a  neglect  to  do 
so  subjects  him  to  an  action.  De- 
vall  v.  Burbridge,  6  Watts  &  S. 
529. 

Two  partners  carry  on  an  exten- 
sive business,  embracing  various 
subjects,  and  they  keep  no  regular 
set  of  books.  One  of  them  attends 
exclusively  to  the  outdoor  busi- 
ness, makes  the  contracts  and  ex- 
ecutes notes  for  the  firm,  of  which 
no  regular  account  is  kept.  They 
at  length  quarrel,  and  the  indoor 
partner  insists  upon  a  dissolution 
of  the  partnership,  and  there  is  a 
proposition  to  buy  or  sell.  The 
outdoor  partner,  in  making  an  esti- 
mate of  the  value  of  the  partner- 
ship property,  for  his  own  guid- 


ance in  any  proposition  he  may 
make  or  receive,  attempts  to  make 
out  a  list  of  the  debts  due  from  the 
concern,  and  he  estimates  them  at 
about  one-half  what  they  turn  out 
to  be,  but  it  does  not  appear  that 
he  represents  them  to  his  copartner 
at  any  amount,  or  that  his  partner 
did  or  would  have  confided  in  any 
representation  that  he  made  after 
making  his  estimate ;  he  makes  an 
offer  to  sell  or  buy  at  a  specific 
price,  and  his  partner  agrees  to 
buy  at  the  price  offered;  and  the 
contract  is  executed.  Held,  that 
under  the  circumstances  the  sell- 
ing partner  was  bound  to  the  ut- 
most good  faith  on  his  part.  He 
was  bound  not  only  to  disclose 
truly  any  information  in  his  pos- 
session that  might  be  called  for, 
but  if  he  perceived  that  the  pur- 
chasing partner  was  laboring  un- 
der incorrect  views  in  reference  to 
the  amount  of  the  debt  due  by  the 
concern,  by  which  he  might  be 
misled  into  too  high  an  offer  for 
the  interest  to  be  sold,  it  was  his 
duty  to  furnish  all  the  data  he 
might  have  by  which  such  views 
might  be  corrected  and  the  mis- 
chief prevented;  and  in  this  case 
he  does  not  appear  to  have  violated 
his  duty.  Sexton  v.  Sexton,  9 
Grat.  204. 

A.  and  B.  being  partners,  A., 
without  the  consent  of  B.,  bor- 
rowed money  at  an  extra  rate  of 
interest,  on  the  credit  of  the  com- 
pany, to  pay  his  private  debts,  and 
credited  the  company  with  the 
money  so  applied  and  the  legal  in- 
terest only.  Held,  that  the  excess 
of  interest  thus  paid  by  the  com- 


701 


503 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    III. 


knows,  enters  into  an  agreement  with  that  other,  relative 
to  some  matter  as  to  which  a  knowledge  of  the  state  of  the 
accounts  is  material,  such  agreement  will  not  be  allowed  to 
stand,  (c) 

This  obligation  to  perfect  fairness  and  good  faith  is, 
moreover,  not  confined  to  persons  who  actually  are  part- 
ners. It  extends  to  persons  negotiating  for  a  partnership, 
but  between  whom  no  partnership  as  yet  exists;  {d)1  and 
also  to  persons  who  have  dissolved  partnership,  but  who 
have  not  completely  wound  up  and  settled  the  partner- 
ship affairs;  (e)2    and   most   especially    is    good    faith    re- 


pany  beyond  the  amount  credited 
to  the  company  was  a  proper 
charge  against  A.  Tomlinson  v. 
Ward,  2  Conn.  396. 

Where  one  member  of  a  copart- 
nership made  a  promise  to  another 
firm  having  dealings  and  open  ac- 
counts with  his  firm,  in  which  he 
individually  had  an  interest  ad- 
verse to  that  of  his  firm,  that  upon 
closing  the  accounts  certain  con- 
cessions would  be  made  by  his  firm 
favorable  to  the  other  parties,  held, 
that  such  promise,  being  made 
without  the  knowledge  of  his  co- 
partners, and  made  clearly  in  his 
own  interest,  and  to  the  pecuniary 
prejudice  of  his  copartners,  was 
not  binding  upon  them;  it  appear- 
ing that  the  accounts  had  been  reg- 
ularly rendered,  and  the  charges 
made  in  the  accounts  were  the 
same  as  those  against  other  dealers 
with  the  firm.  Goodwin  v.  Ein- 
stein, 51  How.  Pr.  9. 

Equity  will  scrutinize  agree- 
ments between  partners  closely 
and  watchfully,  and  will  not  per- 
mit them  to  stand,  if  it  appears 
that  they  were  brought  about  by 
concealment,  unfairness  or  other 
unconscionable  conduct.     The  sup- 


pression of  material  facts  by  one 
partner,  though  there  may  be  no 
intent  to  defraud,  will,  in  equity, 
be  sufficient  to  warrant  relief 
against  a  transfer  from  one  part- 
ner to  the  other.  Hasberg  v.  Mc- 
Carty,  13  Daly,  415. 

(c)  See  Maddeford  v.  Austwick, 
1  Sim.  89. 

(d)  See  Hichens  v.  Congrove,  1 
R.  &  M.  150;  Fawcett  v.  White- 
house,  id.  132. 

1  It  is  not  contrary  to  equity  for 
partners  in  an  existing  firm,  upon 
taking  in  a  new  member,  to  put  in 
the  stock  and  machinery  of  the  old 
business  at  a  price  fixed  arbitrarily 
between  the  parties,  as  one  of  the 
conditions  of  the  new  arrange- 
ment. There  is  no  confidential  re- 
lation between  parties  until  the 
partnership  is  formed.  In  the  ne- 
gotiations concerning  it  the  parties 
deal  as  strangers.  Uhler  v.  Semple, 
20  N.  J.  Eq.  288. 

See  post. 

(e)  See  Lees  v.  Laforest,  14  Beav. 
250;  Clegg  v.  Fish  wick,  1  Mac.  & 
G.  294;  Perens  v.  Johnson,  3  Sm. 
&  G.  419;  Clements  v.  Hall,  2 
De  G.  &  J.  173. 

2  After  a  dissolution  of  copart- 


702 


CH.  II,  SEC.  I.]      DUTY    TO    OBSEEVE    GOOD    FAITH. 


304 


quired  to  be  observed  when  one  *partner  is  endeav-  [-304] 
oring  to  get  rid  of  another  or  to  buy  hiin  out.  (/) 


nership  each  partner  becomes  a 
trustee  for  the  others  as  to  the 
partnership  funds  in  his  hands  in 
order  to  effect  a  fair  settlement 
and  just  distribution  of  the  effects, 
and  he  will  not  be  allowed  to  make 
a  bargain  with  his  former  copart- 
ners advantageous  to  himself;  but 
before  dissolution  no  such  relation- 
ship exists.  Stephens  v.  Orman, 
10  Fla.  9.     See  ante. 

If  partners,  during  the  existenca 
of  the  partnership,  are  trustees  for 
each  other,  that  relation  certainly 
ceases  when  the  firm  is  dissolved 
and  the  business  is  closed.  Pierce 
v.  McClellan,  93  111.  245.  See, 
however,  ante. 

In  Farman  v.  Brooks,  9  Rich.  212, 
it  was  held  that  a  settlement  by  an 
insurance  broker  with  the  admin- 
istrators of  his  former  principal 
or  partner  will  be  sustained,  if  it 
is  not  actually  or  constructively 
fraudulent,  although  advantageous 
to  the  party ;  in  this  he  differs  from 
one  who  is  strictly  a  trustee,  such 
a  one  being  scarcely  allowed  to 
purchase  at  all  of  his  cestui  que 
trust. 

Where  one  of  two  copartners 
sold  out  his  interest  in  the  copart- 
nership assets  to  the  other,  taking 
back  an  agreement  that  the  pur- 
chaser would  pay  the  partnership 
debts,  and  the  latter,  instead  of 
paying  them,  caused  them  to  be 
bought  up  in  the  name  of  a  con- 
federate, and  judgment  to  be  ob- 
tained thereon,  on  which  the  lands 


of  the  other  copartner  were  sold  to 
such  confederate,  held,  that  those 
sales  should  be  set  aside  as  fraudu- 
lent and  void  on  behalf  of  one  to 
whom  the  owner  had  conveyed  the 
lands,  and  that  it  was  not  neces-^ 
sary  for  the  complainant  to  show 
that  he  had  purchased  and  paid 
a  valuable  consideration  for  the 
lands.  Reed  v.  Wessel,  7  Mich.  139. 
M.  and  A.  formed  a  partnership 
to  set  up  a  flour  mill  in  W.  and 
bought  machinery  for  it,  but  aban- 
doned the  project,  and  agreed  that 
A.  should  take  the  property  at  cost 
provided  he  used  it  in  business  in 
W.  He  gave  up  entering  into  busi- 
ness, sold  the  property,  and  ren- 
dered an  account,  accounting  for  a 
sale  of  an  engine  and  boiler  at 
$4,000;  whereas  he  had  sold  them 
to  P.  to  resell  and  divide  the  profits, 
which  P.  did  for  $5,250,  and  di- 
vided the  profits.  Held,  that  A. 
was  M.'s  trustee,  and  must  account 
for  the  profits  of  the  resale.  Math- 
ewson  v.  Allen,  10  R.  I.  156. 

After  the  dissolution  of  a  firm, 
one  of  its  members  cannot  act  as 
the  agent  of  a  creditor  of  the  firm, 
in  holding  obligations  due  the  firm, 
as  collateral  security  for  a  note  due 
from  the  firm  to  such  creditor,  and 
taking  a  conveyance  of  land  in  set- 
tlement of  such  an  obligation ;  and, 
in  such  a  case,  the  creditor,  in  an 
action  on  the  firm  note,  is  not 
bound  to  account  for  the  value  of 
such  land,  or  of  such  alleged  col- 
laterals, where  it  appears  they  were 


(/)  Blisset  v.  Daniel,  10  Ha.  493 
Maddeford  v.  Austwick,  1  Sim.  89 
Perens  v.  Johnson,  3  Sm.  &  G.  419 


Chandler  v.   Dorsett,    Finch,   431. 
As  to  withholding  information,  see 
McLure  v.  Ripley,  2  Mac.  &  G.  274. 
703 


*304 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


Each  must  do  his  duty. —  Notwithstanding  the  universal 
application  to  partners  of  the  rule  requiring  perfect  good 
faith,  if  one  partner  repudiates  the  contract  of  partnership 
and  will  not  perform  his  duty  towards  his  copartners,  he 
cannot  justly  complain  if  they  in  return  decline  to  treat 
him  on  a  footing  of  equality  with  themselves,  (g)  As  ob- 
served by  Lord  Eldon  in  Const  v.  Harris,  "  A  partner  who 
complains  that  the  other  partners  do  not  do  their  duty  to- 
wards him  must  be  ready  at  all  times  and  offer  himself  to 
do  his  duty  towards  them."  (h)  But  if  a  partner  has  been 
set  at  defiance  by  his  copartners;  if  they  have  denied  that 
he  is  a  partner,  and  that  he  has  any  right  to  interfere  in  the 
partnership,  they  can  derive  no  advantage  from  the  circum- 
stance that  he  has  not  performed  his  duty  to  them,  (i) 

A  partner  whose  rights  are  denied  should  be  prompt  in 
asserting  them  or  he  may  be  seriously  prejudiced.  This 
subject  will  be  further  adverted  to  in  that  part  of  the  work 


never  in  his  possession,  that  he 
never  authorized  such  alleged 
agent  to  hold  them  for  him,  and 
never  received  any  payments 
thereon,  and  that  the  land  was  not 
conveyed  to  him,  but  to  such  al- 
leged agent.  Pray  v.  Morse,  41 
Wis.  343. 

Where  one  partner,  after  the  dis- 
solution of  the  firm  by  the  death 
of  a  copartner,  falsely,  with  the 
intent  to  prevent  a  proposed  settle- 
ment, represented  to  the  other  sur- 
viving copartners  that  he  had  be- 
come the  owner  of  the  interest  of 
the  deceased  and  thus  prevented 
the  purchase  by  them  of  such  in- 
terest, it  was  held  that  he  could 
not  compromise  a  suit  brought  by 
one  to  whom  the  interest  of  his 
deceased  partner  was  assigned 
against  all  the  surviving  copart- 
ners for  an  accounting,  acquire  the 
interest  of  the  deceased  and  main- 


tain, for  his  own  benefit,  a  suit 
against  the  remaining  members  of 
the  firm  to  enforce  the  claim  for 
the  full  amount  of  the  profits 
which  would  have  been  due  to  the 
estate  of  the  deceased  copartner. 
The  purchase  of  the  deceased's  in- 
terest in  such  case  must  be  held  to 
have  been  made  for  the  benefit  of 
the  plaintiff  and  defendants,  and, 
after  repaying  the  amount  ex- 
pended by  the  plaintiff  in  compro- 
mising the  claim,  the  residue  of  the 
profits  should  be  divided  among  all 
the  survivors  according  to  their 
respective  interests.  Warren  v. 
Schainwald,  62  Cal.  56. 

(g)  See  McLure  v.  Ripley,  2  Mac. 
&  G.  274;  Reilly  v.  Walsh,  11  Ir. 
Eq.  22. 

(h)  Turn.  &  R.  524. 

(i)  See  Dale  v.  Hamilton,  2  Ph. 
276. 


704 


CH.  II,  SEC.  II.]      DUTY    TO    OBSERVE    GOOD    FAITH.  *305 

which  relates   to  the  defenses   to   actions   between   part- 
ners, (k) 

Principle  of  good  faith  the  basis  of  the  internal  law 
of  partnership. —  The  foregoing  general  principles  may  be 
regarded  as  the  basis  of  the  law  of  partnership,  so  far  as  it 
relates  to  the  rights  and  obligations  of  partners  as  between 
themselves,  and  they  will  be  found  to  be  more  or  less  illus- 
trated throughout  the  whole  of  the  present  book.  Those 
cases,  however,  which  more  especially  relate  to  the  obliga- 
tion of  partners  not  to  benefit  themselves  at  the  expense  of 
their  copartners,  and  to  the  rights  of  majorities,  require  to 
be  specially  noticed. 

*Section  II. —  Of  the  Obligation  of  Partners  Not  [-305] 
to  Benefit  Themselves  at  the  Expense  of  Their 
Copartners. 

No  partner  allowed  to  benefit  himself  at  the  expense  of 
the  firm. —  Good  faith  requires  that  a  partner  shall  not  ob- 
tain a  private  advantage  at  the  expense  of  the  firm.  He  is 
bound  in  all  transactions  affecting  the  partnership  to  do  his 
best  for  the  common  body,  and  to  share  with  his  copartners 
any  benefit  which  he  may  have  been  able  to  obtain  from 
other  people,  and  in  which  the  firm  is  in  honor  and  con- 
science entitled  to  participate:1  Semper  enim  turn  id  quod 

(k)  Infra,  ch.  10,  §  3.  301 ;  Coursen's  Appeal,  79  id.  220; 

1  See  Todd  v.  Rafferty,  30  N.  J.  Solomon  v.  Solomon,  2  Ga.  18,  and 
Eq.  254 ;  Gray  v.  Portland  Bank,  3  the  cases  cited  below. 
Mass.  364 ;  Lockwood  v.  Beckwith,  Where  one  of  two  copartners 
6  Mich.  168 ;  Kilbourn  v.  Latta,  5  having  the  means  to  pay  his  share 
Mack.  (D.  C.)  304;  Hodge  v.  Twitch-  of  a  note  given  on  the  joint  pur- 
ell,  33  Minn.  389 ;  Anderson  v.  chase  of  land,  in  order  to  force  the 
Whitlock,  2  Bush,  398 ;  Lowry  i>.  forfeiture  of  the  contract,  and 
Cobb,  9  La.  Ann.  592 :  Stoughton  without  notice  to  his  copartner  of 
v.  Lynch,  1  John.  Ch.  467 ;  S.  C.  2  his  intent  not  to  pay  his  share, 
id.  209 ;  Herrick  v.  Ames,  8  Bosw.  places  the  sum  due  in  the  hands  of 
115 ;  Eason  v.  Cherry,  6  Jones'  Eq.  a  third  party  to  enable  him  to  take 
261;  Lane  v.  Carpenter,  30  Ind.  advantage  of  the  forfeiture  and 
284 ;  Scruggs  v.  Russell,  McCahon,  purchase  the  right  forfeited,  a 
39 ;  Bart's  Appeal,  70  Penn.  St.  fraud  is  thereby  committed  on  the 
Vol.  I  — 45                        705 


*305 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


privatim  interest  unius  ex  sociis  servari  solet,  sed  quod  soci- 
etati  expedit.  (I) 


co-obligor,  and  the  third  party 
purchasing  with  knowledge  of  the 
facts  would  be  so  far  a  party  to  the 
default  that  he  cannot  hold  the 
rights  purchased  as  against  the 
parties  defrauded.  Hulett  17.  Fair- 
banks, 40  Ohio  St.  233. 

If,  on  the  dissolution  of  a  firm, 
one  partner  sells  the  assets  by  pub- 
lic auction  to  a  person  who  after- 
wards, in  pursuance  of  a  secret 
arrangement  made  with  him  be- 
fore the  sale,  reconveys  to  him,  he 
must  account  to  the  other  partner 
as  if  no  sale  had  been  made,  not- 
withstanding such  partner  was 
present  at  the  sale  and  made  a  bid 
for  the  assets  himself.  Jones  v. 
Dexter,  130  Mass.  380 ;  S.  C.  39  Am. 
Rep.  459. 

A  partner  cannot  by  purchase 
become  the  owner  of  an  outstand- 
ing note  against  the  partnership; 
such  a  transaction  amounts  to  the 
payment  of  the  note.  Easton  v. 
Strother,  57  la.  506. 

Where  one  partner,  after  disso- 
lution, but  before  settlement  of  ac- 
counts, buys  in  an  obligation  of  the 
firm  for  less  than  its  face  value,  he 
cannot  claim  credit  for  its  full 
amount  upon  the  final  account, 
but  only  for  the  amount  paid  there- 
for. Filbrun  v.  I  vers,  92  Mo.  388. 
The  purchase  of  partnership  lia- 
bility by  a  member  of  the  firm,  un- 
der ordinary  circumstances,  oper- 
ates as  a  payment,  and  gives  him 
no  right  against  his  copartners, 
except  to  demand  an  accounting 
and  contribution  according  to  his 
outlay,  and  lawful  interest.  Under 


some  circumstances,  however, 
when  it  can  be  done  without  preju- 
dice to  firm  creditors,  a  partner 
who  has  purchased  its  obligations 
may  keep  them  alive  in  order  to 
obtain  the  benefit  of  securities  in- 
cident thereto,  but  not  for  an 
amount  greater  than  his  outlay 
and  lawful  interest.  Coleman  v. 
Coleman,  78  Ind.  344. 

Where  a  prospecting  partnership 
has  been  dissolved  by  mutual  con- 
sent there  is  no  implied  duty  upon 
any  of  the  partners  to  go  on  and 
complete  defective  locations,  and 
having  done  so  they  are  not  charge- 
able as  trustees  of  the  others. 
Page  v.  Somers,  12  Pac.  Rep.  120. 
As  to  the  duty  of  disclosure  by 
one  partner  to  another  of  grounds 
of  suspicion  against  a  third,  see 
Pardee  v.  Markle,  111  Pa.  St.  548; 
S.  C.  17  Weekly  Not.  Cas.  211. 

Where  there  has  been  an  actual 
breach  of  the  articles  of  copart- 
nership by  one  partner,  the  act 
may  sometimes  be  affirmed  by  the 
innocent  partners,  who  may  de- 
mand an  accounting  and  a  share 
in  whatever  benefits  the  partner 
breaking  the  articles  may  have 
derived  from  their  violation.  See 
Moritz  v.  Phelps,  4  E.  D.  Smith, 
135. 

It  is  a  general  rule  of  partnership 
that  the  partners  shall  devc  fce  their 
time,  labor  and  skill  to  the  benefit 
of  the  firm  and  not  to  themselves, 
and  that  such  partners  cannot  pur- 
chase for  their  own  use  articles  in 
which  the  firm  necessarily  deals, 
and  if  they  do  so  they  do  it  at  the 


(I)  Dig.  xvii,  tit.  2,  pro  socio,  1.  65,  §  5. 

706 


CH.  II,  SEC.  II.]      DUTY    TO    OBSERVE    GOOD    FAITH. 


-305 


There  are  two  modes  in  which,  more  especially,  partners 
attempt  unfairly  to  acquire  gain  at  the  expense  of  their  co- 


risk  of  having  the  same,  and  the 
profits  arising  therefrom,  claimed 
by  the  firm  as  belonging  to  them. 
American  Bank  Note  Co.  v.  Edson, 
56  Barb.  84;  S.  C.  1  Lans.  388. 

One  partner  will  not  be  allowed 
to  stipulate,  clandestinely,  for  a 
private  advantage  or  benefit  to 
himself  to  the  exclusion  of  his 
partners,  in  matters  in  which  he 
has  been  dealing  on  behalf  of  the 
the  firm.  McMahon  v.  McCleman, 
10  W.  Va.  419 ;  Whitman  v.  Bow- 
den,  2  So.  East.  Rep.  (S.  C.)  630. 

And  though  the  articles  allow  a 
dissolution  at  the  will  of  either 
partner,  yet  a  partner  will  not  be 
allowed  in  equity  to  dissolve  the 
firm  for  the  purpose  of  securing  to 
himself  an  advantage  which  he 
has  gained  in  such  dealing;  but 
the  other  partners  may  enforce  a 
right  to  participate  in  the  beuefit 
on  contributing  to  the  expense. 
McMahon  v.  McCleman,  10  W.  Va. 
419. 

The  plaintiff  and  defendant  be- 
ing part  owners  of  a  vessel  of 
which  the  defendant  was  master, 
and  being  jointly  concerned  in  a 
whaling  voyage  undertaken  by 
such  vessel,  the  defendant,  in  the 
course  of  the  voyage,  landed  some 
prisoners  from  a  privateer,  and 
also  saved  some  articles  from  a 
wreck,  for  each  of  which  services 
he  received  a  compensation.  On 
his  return  he  settled  up  the  voy- 
age, but  without  rendering  any 
account  of  these  two  items  of  com- 
pensation. Held,  that  the  plaint- 
iff could  recover  her  proportion  of 
the  same  in  assumpsit.  Fanning 
v.  Chad  wick,  3  Pick.  420. 


If  two  persons  agree  to  divide 
the  profits  of  a  certain  transaction, 
it  is  fraud  for  one  to  receive  any 
commissions  thereon  from  third 
parties  apart  from  joint  profits. 
Dunlop  v.  Richards,  2  E.  D.  Smith, 
181;  Whitman  v.  Bowden,  2  So. 
East.  Rep.  (S.  C.)  630. 

Plaintiff  sold  defendants,  his 
partners,  his  one-third  interest  in 
certain  partnership  property  for 
$400,  and  conveyed  it  to  them  by 
deed.  The  defendants  the  same 
day  conveyed  by  deed,  placed  in 
escrow,  the  same  property  to  a 
third  party,  concealing  from  the 
plaintiff  at  the  time  of  his  sale  to 
them  that  such  negotiations  were 
pending.  Held,  that  the  conceal- 
ment of  the  negotiations  was  a 
fraud  upon  the  plaintiff,  and  that 
defendants  should  account  to  him 
for  one-third  of  the  proceeds  of 
the  sale.  Jennings  v.  Rickard, 
15  Pac.  Rep.  (Colo.)  677.  See,  also, 
Caldwell  v.  Davis  15  Pac.  Rep. 
(Colo.)  696. 

But  where  plaintiff  and  defend- 
ant jointly  purchase  certain  land 
for  resale,  plaintiff  having  an  un- 
divided one-third  and  defendant  a 
two-thirds'  interest,  and  defendant 
formed  a  syndicate  of  eight  per- 
sons, including  himself, to  which  he 
turned  over  his  interest  at  a  profit, 
and  there  was  no  agreement  be- 
tween plaintiff  and  defendant  re- 
straining either  from  disposing  of 
his  share,  held,  affirming  S.  C. 
9  Ont.  Rep.  139,  that  assuming 
plaintiff  and  defendant  to  have 
been  partners,  no  part  of  the  part- 
nership property  had  been  alien- 
ated or  taken  away  from  the  pur- 


707 


505 


EIGHTS  -AND    OBLIGATIONS. 


[BOOK    III. 


partners,  viz.,  1,  by  directly  making  a  profit  out  of  them ; 
and  2,  by  appropriating  to  themselves  benefits  which  they 


poses  of  the  firm,  and  therefore 
plaintiff  was  not  entitled  to  par- 
ticipate in  the  profits  made  by  the 
defendant  on  the  sale  of  his  undi- 
vided share.  Mitchell  v.  Gormully, 
7  Can.  L.  T.  189;  S.  C.  21  Can. 
L.  J.  (N.  S.)  220;  23  Can.  L.  J. 
(N.  S.)  129;  14  Ont.  App.  55;  5  Can. 
L.  T.  283. 

Evidence  that  the  defendant 
made  $2,100  during  six  months 
that  he  kept  a  boarding-house 
alone,  and  that  the  expenses  were 
less  and  the  receipts  more  than 
when  it  was  kept  by  the  plaintiif 
and  himself  together,  was  held  not 
to  be  admissible  to  prove  that  the 
plaintiff  was  guilty  of  a  fraud  in 
returning  a  less  sum  as  the  profits 
for  six  months  in  which  it  was 
kept  by  them  together.  Thayer  v. 
Barney,  12  Minn.  502. 

One  of  two  partners  is  not  enti- 
tled to  share  in  the  fees  received  by 
the  other  as  administrator,  merely 
because  that  other  is  shown  to  have 
intended  to  share  such  fees  with 
him.    King  v.  Whiton,  15  Wis.  684. 

Where  a  partnership  was  formed 
by  two  individuals  for  the  purpose 
of  cutting  and  conveying  to  mar- 
ket pine  timber,  and  all  the  pine 
timber  upon  certain  lots  of  land 
was  purchased  in  the  name  of  one 
member  of  the  firm,  for  the  bene- 
fit of  the  firm,  and  paid  from 
the  property  of  the  firm,  and 
the  contract  contained  a  provis- 
ion that  the  timber  should  be 
cut  and  taken  from  the  land  by 
a  time  specified,  which  was  not 
done,  but  the  owner  of  the  land 
did  not  insist  upon  any  forfeiture, 
but    subsequently    conveyed    the 


land,  for  the  mere  price  of  the  land 
exclusive j  of  the  timber,  to  the 
member  of  the  firm  with  whom 
the  original  contract  was  made. 
Held,  that  the  timber  remaining 
upon  the  land  still  continued  the 
property  of  the  firm,  and  that  the 
avails  of  timber  subsequently  cut 
upon  the  land  by  the  one  who 
made  the  purchase,  exclusive  of 
expenses,  must  be  accounted  for 
by  him  as  firm  assets.  Washburn 
V.  Washburn,  23  Vt.  577. 

A.  and  B.  entered  into  a  written 
partnership  agreement  concerning 
a  herd  of  cattle  furnished  by  A., 
and  to  be  cared  for  by  B.  A.  also 
advanced  money  for  further  invest- 
ment in  the  enterprise,  a  portion 
only  of  which  B.  used  for  that 
purpose.  A.  told  B.  to  invest  the 
remainder  in  "something  that 
would  pay,  and  not  let  it  be  idle." 
B.  afterwards  rented  land  in  his 
own  name,  raising  crops  of  wheat 
and  barley,  upon  which  a  judg- 
ment creditor  of  B.  levied.  A. 
brought  an  action  to  enjoin  a  sale 
under  the  levy,  setting  forth  his 
partnership  with  B.  in  the  cattle 
venture,  and  claimed  that  tiie 
crops  levied  on  were  part  of  the 
assets  raised  for  and  on  account  of 
the  partnership.  Held,  that  the 
partnership  did  not  extend  to  the 
crops  raised  by  B.  Brown  v. 
O'Brien,  4  Neb.  195. 

One  of  three  partners  who  de- 
clines to  pay  over  a  sum  claimed  by 
each  of  his  other  partners  cannot 
relieve  himself  from  the  payment 
of  interest  thereon  pending  the 
adjustment  of  the  claim,  if  it  ap- 
pears that  he  has  meanwhile  used 
i08 


CH.  II,  SEC.  II.]       DUTY    TO    OBSERVE    GOOD    FAITH. 


*305 


ought  to  have  acquired,  if  at  all,  for  the  common  advantage 
of  the  firm.  It  will  be  convenient  to  advert  to  each  of 
these  modes  in  turn. 

1.  Deriving  profit  from  dealings  with  the  firm  —  Sale 
to  firm. —  In  the  first  place,  then,  it  may  be  laid  down  as  a 
general  rule  that  one  partner  is  not  allowed  to  derive  profit 
at  the  expense  of  the  firm  from  any  dealings  between  him 
and  the  partnership,  unless  it  is  clearly  agreed  that  he  is  to 
have  such  profit.  For  example,  if  a  partner  is  buying  or 
selling  for  a  firm,  he  cannot  sell  to  it  or  buy  from  it  at  a 
profit  to  himself.1 


the  money  for  his  own  purposes. 
Coddington  v.  Idell,  30  N.  J.  Eq. 
540. 

Where  a  firni  whose  business  was 
"  a  general  produce  business " 
owned  a  mortgage  on  real  estate, 
which  real  estate  itself  the  firm 
desired  to  purchase  under  the 
mortgage,  and  intrusted  the  sub- 
ject generally  to  one  of  the  firm, 
held,  that  the  legal  obligation  of 
the  partner  intrusted  being  only 
to  get  payment  of  the  mortgage, 
he  might  make  an  arrangement 
for  his  own  benefit  for  a  third  per- 
son, without  the  knowledge  of  his 
partners,  by  which  such  third  per- 
son should  buy  the  mortgaged 
estate,  giving  him,  the  intrusted 
partner,  an  interest  in  it;  and  if 
the  mortgage  debt  was  fully  paid 
by  such  partner  into  the  firm  ac- 
count, that  there  was  no  breach  of 
partnership  or  other  fiduciary  re- 
lation in  the  transaction;  or  at 
least,  that  no  partner  could  recover 
from  him  a  share  of  profits  made 
by  a  sale  of  the  real  estate;  all 
parties  alike  having  been  originally 
engaged  in  a  scheme  to  get  the  real 
estate  by  depreciating  its  value 
through     a    process    of    entering 


judgment  for  a  large  nominal 
amount  and  by  deceiving  or 
"bluffing  off"  other  creditors. 
Wheeler  v.  Sage,  1  Wall.  518. 

A  partner  in  possession  of  firm 
property  must  pay  taxes  thereon, 
which  are  a  joint  liability  on  the 
property ;  and  he  is  not  discharged 
from  so  doing  by  copartner's  state- 
ment that  he  would  not  repay  him. 
Chapin  v.  Streeter,  124  U.  S.  (31  L. 
ed.)  475;  S.  C.  26  Cent.  L.  J.  468. 

A  partner,  renting  his  copart- 
ner's share  of  the  firm  property, 
and  permitting  it  to  be  sold  for 
taxes  of  the  latter  and  af  terwarda 
renting  it  from  the  tax  purchaser, 
cannot  be  allowed  rent  paid  the 
latter  in  an  action  by  copartner  to 
recover  rent  due  him.  Chapin  v. 
Streeter,  124  U.  S.  (31  L.  ed.)  475. 

1  See,  generally,  Ewell's  Evana 
on  Agency,  ch.  Ill;  Hodge  v. 
Twitchell,  33  Minn.  389. 

Although  one  partner  may  sell 
the  property  of  th  e  firm  and  give 
a  good  title  to  a  third  party,  he 
cannnot  sell  to  himself.  Such  a 
sale  is  simply  void ;  no  right  or  in- 
terest passes;  the  legal  and  equi- 
table title  remains  as  it  was  before 
the  attempted  transfer.    Comstock 


709 


*305 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


In  Bentley  v.  Craven,  (m)  one  of  the  several  partners  was 
employed  to  purchase  goods  for  the  firm.     He,  unknown  to 


v.  Buchanan,  57  Barb.  127 ;  Nelson 
v.  Hayner,  66  111.  487. 

Thus,  where  stock  belonging  to 
a  copartnership  was  surrendered 
by  one  of  the  partners,  without 
,the  knowledge  or  consent  of  his 
partner,  to  the  company,  he  rep- 
resenting to  the  secretary  that  he 
had  authority  from  and  the  con- 
sent of  his  partner  to  do  so,  and 
procured  new  scrip  to  be  issued  to 
him  in  his  own  name,  in  lieu 
thereof,  held,  that  the  transfer 
was  fraudulent  and  void.  Corn- 
stock  v.  Buchanan,  supra. 

The  trust  relation  existing  be- 
tween partners  is  not  terminated 
by  dissolution  but  continues  until 
a  final  settlement  of  the  partner- 
ship affairs.  Filbrum  v.  Ivers,  92 
Mo.  338;  Kimball  v.  Lincoln,  5 
Bradw.  316. 

One  purchasing  at  a  judicial  sale 
for  a  surviving  partner  and  trans- 
ferring to  him  renders  surviving 
partner  liable  to  account.  Klotz  v. 
Macrudy,  2  So.  Rep.  (La.)  203. 

So,  a  purchase  by  a  surviving 
partner  from  the  administrator  of 
the  deceased  partner's  interest  in 
the  firm  is  subject  to  the  liabiiity 
of  being  set  aside  at  the  suit  of  the 
heirs-at-law,  and  such  purchase 
cannot  be  set  up  as  a  bar  to  a  bill 
brought  for  an  accounting  of  the 
partnership  assets  and  business. 
Kimball  v.  Lincoln,  5  Bradw.  (III.) 
316. 

If  a  member  of  a  partnership 
enters  into  a  transaction  in  his 
own  behalf,  which  is  within  the 
scope  of  the  partnership  business, 


his  copartner  may  claim  the  bene- 
fits resulting  from  it;  this  right, 
however,  belongs  to  the  partner 
alone;  third  parties  cannot  avail 
themselves  of  it,  when  no  such 
claim  has  been  asserted,  to  fix  a 
liability  on  the  partnership.  Lock- 
wood  v.  Beckwith,  6  Mich.  168. 

Where  a  bill  is  filed  by  a  partner 
against  his  copartner  for  an  ac- 
count, and  one  of  the  partners  is 
appointed  receiver,  and  uses  the 
money  received  as  such  by  him, 
on  which  he  makes  a  profit,  the 
Other  partner  is  not  entitled  to  a 
share  of  such  profits,  the  money 
not  being  held  as  partner,  but  as 
receiver.  Whitesides  v.  Lafferty, 
3  Humph.  150. 

Where  a  partner  fraudulently, 
without  the  consent  of  his  copart- 
ners, applies  the  partnership  funds 
to  his  private  purposes  and  profit, 
or  invests  the  same  in  his  own 
name  and  for  his  own  use,  his  co- 
partners may,  if  they  can  distinctly 
trace  the  investment,  follow  it,  and 
treat  it  as  trust  property,  held  for 
the  benefit  of  the  firm  by  the  part- 
ner, or  by  any  person  in  whose 
hands  it  may  be,  except  a  bona 
fide  purchaser  without  notice. 
Kelleyy.  Greenleaf,  3  Story,  93; 
Croughton  v.  Forrest,  17  Miss.  131. 

Profits  made  by  a  partner  in  the 
purchase  and  sale  of  merchandise, 
in  which  his  copartners  are  entitled 
to  share,  give  them  no  privilege. 
Shropshire  v.  Russell,  2  La.  Ann. 
961. 

So  where,  after  the  death  of  a 
partner,    the     survivors,    one     of 


(m)  18  Beav.  75. 


710 


CH.  II,  SEC.  II.]      DUTY    TO    OBSERVE    GOOD    FAITH.  '::306 

his  copartners,  supplied  them,  at  the  market  price,  with 
goods  previously  bought  by  himself  when  the  price  was 
lower,  and  he  so  made  a  considerable  profit.  But  it  was 
held  that  the  transaction  could  not  be  sustained,  and  that 
he  was  accountable  to  the  firm  for  the  profit  thus  made. 
The  master  of  the  rolls,  in  delivering  judgment,  observed: 
"The  case  is  this:  Four  partners  established  a  partnership- 
for  refining  sugar;  one  of  them  is  a  wholesale  grocer,  and 
from  his  business  is  peculiarly  cognizant  with  the  variations 
in  the  sugar-market,  and  has  great  skill  in  buying  sugar  at 
a  right  and  proper  time  for  the  business.  Accord- 
ingly the  business  of  selecting  and  purchasing  the  [*306] 
sugar  for  the  sugar  refinery  is  intrusted  to  him.  He 
being  the  person  to  buy,  it  is  his  duty  and  business  to  em- 
ploy his  skill  in  buying  for  the  sugar  refinery  at  the  time 
he  thinks  most  beneficial.  Having  according  to  his  skill 
and  knowledge  bought  sugar  at  a  time  when  he  thought  it 
likely  to  rise,  and  it  having  risen,  and  the  firm  being  in 
want  of  some,  he  sells  his  own  sugars  to  the  firm  without 
letting  the  partners  know  that  it  was  his  sugar  that  was 
sold."     Being  the  agent  for  the  firm  for  buying  sugars  he 

whom  was  the  executor  of  the  will  ing  firm,  although  said  firm  took 

of   the  deceased  partner,   formed  the  coal  to  fill  contracts  for  delivery 

themselves    into  a  new  firm,  and  at  a  larger  price  than  they  paid  for 

purchased    from    themselves    the  it.     Freck  v.  Blackiston,  83  Pa.  St. 

whole  of  the  interest  of  the   de-  474. 

ceased  at  ten  per  cent,  below  its        A  firm    made    and  sold  stoves 

appraised  value,  to  be  paid  for  in  containing  improvements  covered 

four     equal     instalments,    in   six,  by  patents  owned  by  a  member  of 

twelve,  eighteen  and  twenty-four  the  firm,  under  circumstances  im- 

months,  without  interest  or  secu-  plying  a  license  to  do  so.     Upon 

rity,  the  sale  was  held  void.  Nelson  dissolution  the  receiver  was  pro- 

v.  Hayner,  66  111.  487.  ceeding  to  sell  the  stoves  made  by 

A  member  of  one  firm  sold  coal  the    firm    before    its    dissolution, 

thereof  to  another  firm  of  which  when    a    copartner,    owning    the 

he  was  a  member,  with  notice  to  patents,  filed  a  bill  to  enjoin  him 

his  partner,  and  at  the  full  market  from  so  doing.     Held,  that  the  in- 

value.     Held,  that  he  was  not  lia-  junction  ought  not  to  have  been 

ble  to  account  for  profits  received  granted.     Montross    v.    Mabie,   24 

by  him  as  partner  in  the  purchas-  Blatch.  282. 

711 


*307  EIGHTS   AND    OBLIGATIONS.  [BOOK   III. 

sold  his  own  sugars  to  the  firm  and  made  a  profit,  and  the 
firm  was  held  entitled  to  that  profit  accordingly. 

Purchase  from  firm. —  In  Dunne  v.  English,  (n)  the 
plaintiff  and  the  defendant  had  agreed  to  buy  a  mine  for 
50,000/.,  with  a  view  to  resell  it  at  a  profit.  It  was  ulti- 
mately arranged  that  the  defendant  should  sell  it  to  certain 
persons  for  60,000/.,  and  that  the  profit  of  10,000/.  should 
be  equally  divided  between  the  plaintiff  and  the  defendant. 
The  defendant,  however,  in  fact  sold  the  mine  for  much 
more  than  60,000/.  to  a  company  in  which  he  himself  had  a 
large  interest.  The  plaintiff  was  held  entitled  to  one-half 
of  the  whole  profit  made  by  the  resale. 

Full  disclosure  necessary. —  There  was  in  this  case  some 
evidence  that  the  plaintiff  knew  that  the  defendant  had 
some  interest  in  the  purchase  beyond  his  share  of  the  known 
profit  of  10,000/.;  but  the  plaintiff  did  not  know  what  that 
interest  was,  and  the  real  truth  was  concealed  from  him. 
It  was  held  that  the  defendant  being  the  plaintiff's  partner, 
and  expressly  intrusted  with  the  conduct  of  the  sale,  was 
bound  fully  to  disclose  the  real  facts  to  the  plaintiff,  and 
not  having  done  so,  could  not  exclude  him  from  his  share 
of  the  profits  which  the  defendant  realized  by  the  sale,  (o) 

Authority  to  sell  at  a  given  price  no  waiver  of  share 

of  higher  price. —  This  case  also  shows,  what  indeed  is 

obvious  enough  without  authority,  that  one  partner  who 

authorizes  another  to  sell  partnership  property  at  a  given 

price  does  not  thereby  deprive  himself  of  his  right  to  share 

a  higher  price  if  a  higher  price  should  be  realized.  ( p) 

[*307]      *2.  Obtaining  benefits  which  in  honor  belong 

to  the  firm. — The  same  principles  apply  to  attempts 

made  by  partners  to  secure  for  themselves  benefits  which  it 

was  their  duty  to  obtain,  if  at  all,  for  the  firm  to  which 

they  belong,  (q) 

(n)  18  Eq.  524.  10  Ch.  96,  and  De  Bussche  v.  Alt, 

(o)  See,  also,  Imp.  Merc.  Credit    8  Ch.  D.  286.     And  see  id.  p.  317, 

Assoc,  v.  Coleman,  L.  R.  6  H.  L.     as  to  a  custom  authorizing  such  a 

189.  practice. 

Cp)  See,  also,  Parker  v.  McKenna,        (q)  Parker  v.  Hills,  5  Jur.  N.  S. 

712 


CH.  II,  SEC.  II.]       DUTY    TO    OBSERVE    GOOD    FAITH.  *307 

Thus,  in  Carter  v.  ffor?ie,  if)  the  plaintiff  and  the  defend- 
ant agreed  for  the  purchase  of  an  estate  in  moieties  between 
them.  The  estate  was  subject  to  several  incumbrances, 
which  were  to  be  discharged  out  of  the  purchase  money. 
The  defendant  had  abatements  made  to  him  by  some  of 
the  incumbrancers  of  several  sums  due  for  interest  and  other- 
wise, which  they,  in  consideration  of  services  and  friend- 
ship, agreed  should  be  to  his  own  use.  However,  on  a  bill 
brought  against  him  by  his  co-purchaser  for  an  account  of 
the  rents  and  profits,  the  court  would  not  allow  the  defend- 
ant the  exclusive  benefit  of  these  abatements,  but  held  that 
he  must  account  for  them;  the  purchase  being  made  for 
the  equal  benefit  of  both  parties,  and  on  a  mutual  trust 
between  them. 

Renewing  leases  —  Clandestine  renewal. —  It  has  been 
decided  more  than  once  that  if  one  partner  obtains  in  his 
own  name,  either  during  the  partnership  or  before  its  assets 
have  been  sold,  a  renewal  of  a  lease  of  the  partnership 
property,  he  will  not  be  allowed  to  treat  this  renewed  lease 
as  his  own  and  as  one  in  which  his  copartners  have  no  in- 
terest.1    This  was  laid  down  and  acted  on  by  Sir  ¥m. 

809,  is  not  opposed  to  these  cases,  Loughery,  6  Cent.  Rep.  278 ;  S.  C. 

for  there  the  money  was  paid  for  a  8  Atl.  Rep.  36. 

lease  which  was  held  to  belong  to  The  fact  that  a  lease  of  premises 

one  partner  only.  used  by  a  firm  for  copartnership 

(r)  1   Eq.  Ab.   7.     See,  also,   De  purposes  is  to  one  of  the  copart- 

Bussche  v.  Alt,  8  Ch.  D.  286 ;  Mori-  ners   does    not  authorize    him  to 

son  v.  Thompson,  L.  R.  9  Q.  B.  480,  take  a  renewal  thereof  in  his  own 

as  to  the  right  of  a  principal  to  name    and    for    his  own  benefit; 

profits  made  by  his  agent  or  sub-  such    renewal   will    inure  to    the 

agent.     Compare    Great  Western  benefit  of  the    firm.     Mitchell  v. 

Insur.  Co.  v.  Cunliffe,  9  Ch.  525,  and  Read,  84  N.  Y.  556;  S.  C.  19  Hun 

Baring  v.  Stanton,  3  Ch.  D.  502,  (N.  Y.),  418. 

where  the  agent's  profits  were  part  So,  where  the  firm  is  dissolved, 

of  his  remuneration.  and  after  such  dissolution  the  part- 

iSee    Anderson    v.     Lemon,     4  ner  causing  the  same  procures  a 

Sandf.    552 ;  S.    a    8    N.   Y.    236 ;  renewal  of  such  leases  in  his  name 

Struthers  v.  Pearce,  51  N.  Y.  357 ;  and  the  name  of  a  new  partner, 

Mitchell    v.    Read,   61   Barb.    310;  without  the  consent  of  the  other 

S.    C.    61   N.    Y.    123 ;  Mitchell  v.  partners,  such  lessees  will  hold  the 

Read,    19    Hun,    418;  Johnson   v.  term  as  trustees  for  the  firm,  and 

713 


*307 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Grant  in  the  celebrated  case  of  Feather stonhaugh  v.  Fen- 
wick,  (s)  where  two  partners,  having  obtained  in  their  own 


this  though  the  original  lease  con- 
tained no  covenant  of  renewal. 
Spiess  v.  Rosswog,  G3  How.  Pr.  401 ; 
S.  C.  48  N.  Y.  Super.  Ct.  135; 
Loughery  v.  Johnson,  42  Leg.  Intel. 
425.  See,  however,  Pierce  v. 
McClellan,  93  111.  245 ;  Chittenbeck 
v.  Witbeck,  50  Mich.  401. 

The  fact  that  the  landlord  would 
not  have  granted  the  new  lease  to 
the  other  partners  or  to  the  firm 
is  immaterial.  Mitchell  v.  Reed, 
61  N.  Y.  123. 

A  purchase  by  one  partner  of 
property  hired  by  the  partnership 
inures  to  the  benefit  of  all  on  pay- 
ment of  their  shares  of  the  pur- 
chase money.  Laffan  v.  Naglee,  9 
Cal.  662. 

Thus,  where  a  copartnership  oc- 
cupies real  estate  under  a  lease  for 
years,  and  one  partner,  secretly, 
while  the  other  partner,  with  his 
concurrence,  is  negotiating  to  buy 
it  for  the  firm,  purchases  it  for 
himself,  lie  will  be  decreed  to  hold 
it  in  trust  for  the  firm.  Anderson 
v.  Lemon,  8  N.  Y.  236. 

If  a  partner  take  a  lease  of  lands 
in  his  own  name  for  the  purposes 
of  the  partnership  he  will  be  con- 
sidered in  equity  a  trustee  of  such 
lease  for  himself  and  his  copart- 
ners. But  in  Otis  v.  Sill,  8  Barb. 
102,  where  a  lease  was  taken  by 
one  member  of  a  firm  in  his  own 
name,  there  being  no  evidence  that 
it  was  taken  for  the  firm  and  with 
express  reference  to  its  business, 
beyond  the  fact  that  the  partner- 


ship commenced  at  the  date  of  the 
lease  and  was  carried  on  upon  the 
demised  premises,  it  was  held  that 
the  lease  did  not  belong  to  the 
firm ;  and  it  was  also  held  that 
parol  evidence  was  inadmissible  to 
show  that  the  lease  was  executed 
for  the  benefit  of  the  firm,  for  the 
reason  that  by  such  evidence  it  was 
sought  to  create  a  trust  in  real  es- 
tate by  parol  which  was  prohibited 
by  statute.  Chamberlain  v.  Cham- 
berlain, 44  N.  Y.  Super.  Ct.  (12 
Jones  &  Sp.)  116. 

Where  one  partner  during  the 
partnership  negotiates  respecting, 
and  obtaius  the  exclusive  use  of,  a 
right  in  which  the  firm  was  inter- 
ested, he  will  be  declared  to  hold 
such  use  in  trust  for  the  firm. 
Weston  v.  Ketcham,  39  N.  Y. 
Super.  Ct.  54. 

A  member  of  a  partnership  pur- 
chased from  one  of  its  employees 
the  patent-right  in  an  article  of 
use  and  value  in  the  firm  business, 
and,  without  disclosing  or  being 
asked  to  disclose  the  terms  upon 
which  he  had  purchased,  offered 
to  sell  it,  at  an  advance,  to  the 
firm ;  the  firm  declined  to  buy, 
preferring  to  pay  a  royalty  for  the 
use  of  the  article,  which  it  did. 
Held,  that  the  rights,  if  any,  which 
the  firm  originally  had  to  claim  the 
purchase  as  for  its  benefit  could  not 
be  insisted  on  after  its  dissolution. 
American  Bank  Note  Co.  v.  Edson, 
56  Barb.  84;  1  Lans.  388. 

Where  one  partner  expends  the 


(s)  Featherstonlnugh  v.  Fen  wick, 
17  Ves.  298.  In  such  cases  the 
other  partners  cannot  restrain  the 
landlord  from  granting  the  lease  to 


the  one  partner  only.  Their  remedy 
is  to  treat  the  lessee  as  a  trustee  for 
the  firm.  Alder  v.  Fouracre,  3 
Swanst.  489. 


714 


CH.  II,  SEC.  II.]       DUTY    TO    OBSERVE    GOOD    FAITH. 


*307 


names  a  renewal  of  the  lease  of  the  partnership  premises, 
immediately  dissolved  the  partnership,  and  sought  to  ex- 
purchase  roust  have  been  made  at 
the  time  with  partnership  funds, 
or  on  partnership  responsibility. 
The  payment,  incidentally,  out  of 
those  funds,  of  an  instalment  due 
upon  an  antecedent  contract  on  in- 
dividual responsibility,  does  not 
raise  such  a  trust,  or  give  title 
to  anything  but  reimbursement. 
Wheatly  v.  Calhoun,  12  Leigh,  264. 
On  a  sale  of  partnership  land, 
under  an  execution  against  the 
firm,  one  partner  cannot,  by  pur- 
chasing at  such  sale,  extinguish  the 
title  of  the  other  partner.  Farmer 
v.  Samuel,  4  Litt.  187.  See,  how- 
ever, Baird  v.  Baird,  1  Dev.  &  B. 
Eq.  524. 

A.  and  B.  being  partners,  A., 
under  a  power  of  attorney  from  B., 
executed  a  bond  for  a  partnership 
debt,  with  warrant  of  attorney  to 
confess  judgment.  B.  afterwards 
sold  land  bound  by  the  judgment, 
and,  upon  a  subsequent  dissolution 
of  the  partnership,  funds  were  de- 
posited in  the  hands  of  A.  for  pay- 
ment of  the  partnership  debts,  and 
especially  of  the  bond  aforesaid. 
Judgment  was  subsequently  en- 
tered upon  the  bond,  and  the  land 
sold  by  B.  having  been  sold  upon 
an  execution  upon  the  judgment, 
A.  became  the  purchaser.  Held, 
that  his  purchase  must  be  presumed 
to  have  been  made  with  the  part- 
nership funds,  and  that  it  would 
inure  to  the  benefit  of  B.'s  grantee. 
Swift  v.  Dean,  6  Johns.  522. 

Where  one  partner  buys  in  a 
paramount  or  outstanding  title  to 
lands  of  the  partnership,  the  rule 
is  that  he  buys  in  behalf  of  all; 
and  the  others,  on  contributing  to 


partnership  funds  in  the  purchase 
of  property  in  his  own  name,  he 
will  hold  the  same  in  trust  for  the 
partnership.  Evans  v.  Gibson,  29 
Mo.  223 ;  Smith  v.  Ramsey,  1  Gilm. 
373;  Coder  v.  Huling,  27  Pa.  St. 
84;  Catron  v.  Shepherd,  8  Neb.  308; 
Phillips  v.  Crammond,  2  Wash. 
C.  C.  441. 

The  rule  is  the  same  even 
though  the  purchasing  partner 
takes  the  title  in  the  name  of  his 
wife.  Partridge  v.  Wells,  30  N.  J. 
Eq.  176. 

C.  and  S.  were  in  partnership  in 
the  business  of  fattening  cattle,  C. 
conducting  the  sales  and  receiving 
the  money.  About  the  6th  of 
April,  1875,  C.  having  a  consider- 
able amount  of  partnership  funds 
in  his  hands  and  being  about  to 
sell  all  the  stock  owned  by  the 
partnership,  purchased  a  claim 
against  S.  for  about  twenty-five 
cents  on  the  dollar,  and  in  his  set- 
tlement with  S.,  sought  to  apply  it 
against  the  amount  of  partnership 
funds  in  his  hands  due  S.  at  its 
face  value.  In  an  action  on  the 
claim,  held,  that  C.  could  recover 
no  more  than  he  paid  for  the  claim. 
Catron  v.  Shepherd,  supra. 

A  partner  may,  however,  pur- 
chase with  his  own  funds,  and 
outside  of  the  partnership  business, 
a  judgment  or  other  evidence  of 
indebtedness  against  his  copartner 
and  enforce  its  collection  by  a 
levy  upon,  and  sale  of,  the  interest 
of  the  other  in  the  firm  assets. 
McKenzie  v.  Dickinson,  43  Cal.  119. 
In  order  to  raise  an  implied  trust 
in  favor  of  the  partnership  by  a 
joint  purchase  of  real  property,  the 


715 


*30S  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

elude  the  plaintiff,  their  copartner,  from  all  interest  in  the 
new  lease;  but  in  taking  the  accounts  of  the  partnership 
the  new  lease  was  held  to  be  part  of  the  assets  of  the  firm. 
Clegg  v.  Fishwich  (I)  is  another  case  to  the  same 
[*308]  effect.  *There  the  plaintiff  was  the  administratrix 
of  one  of  several  partners  in  a  coal  mine,  and  she 
filed  a  bill,  some  years  after  the  death  of  the  deceased, 
against  the  surviving  partners,  for  an  account  and  a  disso- 
lution, and  for  a  declaration  that  a  renewed  lease,  which 
had  been  obtained  by  the  defendants,  might  be  declared 
subject  in  equity  to  a  trust  for  the  benefit  of  the  partner- 
ship. A  twofold  defense  was  set  up,  viz. :  first,  that  the  old 
partnership  ended  with  the  old  lease,  and  that  the  plaintiff 
could  not  therefore  claim  any  interest  in  the  new  lease; 
and  secondly,  that  she  had,  some  time  before  the  filing  of 
the  bill,  assigned  all  the  share  of  the  deceased  to  his  chil- 
dren; and  that  she,  therefore,  at  any  rate,  had  no  right  to 
institute  proceedings  respecting  such  share.  It  was,  how- 
ever, decided  first,  that  the  old  lease  was  the  foundation  for 
the  new  one,  and  that  parties  interested  jointly  with  others 

the  cost,  are  entitled  to  the  benefit  A  member  of  an  insolvent  firm, 
of  the  purchase.  This  rule  applies  while  acting  as  agent  for  the  cred- 
ia  favor  of  heirs  of  a  deceased  itors  in  the  settlement  of  the  part- 
partner.  Forrer  v.  Forrer,  29  nership  affairs,  assisted  another 
Gratt.  134.  party  to  purchase  from  the  cred- 
A.  and  B.,  owning  land  in  part-  itors  their  claims,  together  wfth 
nership,  agreed  to  purchase  an  out-  their  rights  to  certain  pledged 
standing  title ;  A.  purchased  and  assets  of  the  firm.  Held,  that  the 
paid  for  it,  and  took  the  convey-  purchase  did  inure  to  the  benefit 
"ance  to  himself ;  B.  having  then  of  the  firm,  and  that  the  transac- 
done,  or  advanced  for  the  firm,  tion  did  not  come  within  the  oper- 
more  than  his  share,  refused  to  tion  of  the  general  rule  of  equity 
pay  anything.  Held,  that  the  title  that  a  trustee  cannot  buy  trust 
taken  by  A.  was  taken  for  the  property  for  himself,  or  act  as 
partnership;  and  that  B.'s  refusal  agent  in  buying  it  for  another  per- 
to  pay  a  part  of  the  purchase  son.  "Westcott  v.  Tyson,  38  Pa.  St. 
money  did  not  deprive  him  of  the  389. 

right  of  having  the  benefit  of  the  (t)  1  Mac.   &  G.   294.     See,  too, 

purchase,  nor  was   it  evidence  of  Clements  v.  Hall,  2  De  G.  &  J.  173, 

a  dissolution   of    the   partnership,  and  24  Beav.  333. 
Eakin  v.  Shumaker,  12  Tex.  51. 

716 


CH.  II,  SEC.  II.]       DUTY   TO    OBSERVE    GOOD    FAITH.  "309 

in  a  lease  could  not  take  the  benefit  of  a  renewal  to  the 
exclusion  of  those  others ;  and  secondly,  that  what  had  been 
assigned  by  the  plaintiff  was  the  share  of  the  deceased  in 
the  partnership,  which  share  had  never  been  ascertained; 
and  that  the  effect  of  the  assignment  was  merely  to  consti- 
tute her  a  trustee  of  the  share  for  the  assignees  after  she 
had  got  it  in,  and  not  to  deprive  her  of  her  power  to  call 
for  a  realization  of  the  partnership  property. 

Open  renewal. —  In  both  of  these  cases  the  renewal  of 
the  lease  was  clandestine.  Bat  that  is  not  an  essential  feat- 
ure. In  the  more  recent  and  very  important  case  of  Clegg 
v.  Edmo?idson,(u)  the  partnership  was  at  will;  the  manag- 
ing partners  gave  notice  of  dissolution  and  of  their  intention 
to  renew  the  old  lease  for  their  own  benefit.  They  after- 
wards did  so,  the  other  partners  protesting,  and  there  was  evi- 
dence to  show  that  the  landlord  objected  to  renew  to  any 
persons  except  the  managing  partners,  (x)  It  was  held, 
however,  that  it  was  not  competent  for  the  managing  part- 
ners thus  to  acquire  for  themselves  alone  the  benefit  of  the 
renewed  lease,  (y) 

Right  to  reject  renewed  lease. —  A  partner,  by  re- 
newing a  lease  against  the  will  of  his  co*partners,  [*309] 
cannot  force  it  on  them  and  compel  them  to  treat 
the  property  comprised  in  it  as  acquired  by  the  firm,  unless 
there  is  some  agreement  binding  them  so  to  do.  (s) 

Benefits  derived  from  use  of  partnership  property.— 
The  principle  which  precludes  a  partner  from  retaining  for 
himself  benefits  which  he  ought  to  share  with  his  copart- 
ners is  applied  to  cases  in  which  unfairness  and  misconduct 
are  by  no  means  so  apparent  as  in  those  just  cited.  A  high 
standard  of  honor  requires  that  no  partner  shall  derive  any 
exclusive  advantage  by  the  employment  of  the  partnership 

(u)  8  De  G.  Mc.  &  G.  787.  plaintiffs.     On  this  point  the  case 

{x)  See  as  to  this,  Fitzgibbon  n.  will  be  noticed  hereafter.  See  book 

Scanlan,  1  Dow.  269.  iii.  ch.  10,  §  3. 

(y)  At  the  same  time  relief  against  (z)  Clements  v.  Norris,  8  Ch.  D. 

them  was  refused  on  the  ground  of  129,  where  an  attempt  of  this  sort 

laches  and  delay  on  the  part  of  the  was  defeated. 

717 


#310  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

property,  or  by  engaging  in  transactions  in  rivalry  with  the 
firm. 

Profits  of  tally-shop.—  Thus,  in  Burton  v.  WooTcey,  (a)  the 
plaintiff  and  the  defendant  were  partners  as  dealers  in  lapis 
calaminaris.  The  defendant,  who  was  also  a  shop-keeper^ 
lived  near  the  mines  in  which  the  ore  was  got,  and  he  pur- 
chased it  of  the  miners.  Instead,  however,  of  paying  them 
with  money,  he  paid  them  with  shop  goods,  and  in  his  ac- 
count with  the  plaintiff  charged  him  as  for  cash  paid  to  the 
amount  of  the  selling  price  of  the  goods.  The  plaintiff  con- 
tended that  the  price  of  the  ore  ought,  as  between  himself 
and  the  defendant,  to  be  considered  as  being  the  cost  price 
of  the  goods  given  in  exchange  for  it,  and  that  the  profit 
made  by  the  exchange  ought  to  be  accounted  for  to  the 
partnership.  The  court  adopted  this  view,  holding  that  it 
was  the  duty  of  the  defendant  to  buy  the  ore  at  the  lowest 
possible  price,  and  to  charge  the  partnership  with  no  more 
than  he  actually  gave  for  the  goods  bartered  for  the  ore. 
An  account  of  the  profit  made  by  the  defendant  in  his  bar- 
ter of  the  goods  was  decreed  accordingly. 

Part  owners  of  ships. —  Again,  in  Gardner  v.  MoCutcn- 
eon,  (b)  a  ship  of  which  the  plaintiffs  and  the  defendant 

were  part  owners  and  the  defendant  was  master  was 
[*310]  employed  for  the  common  benefit  of  all  in  *trading 

and  carrying  under  charter.  The  defendant,  during 
the  time  the  ship  was  thus  employed,  traded  on  his  own  ac- 
count and  made  considerable  profit.  It  was  held  that  he 
was  bound  to  account  for  the  profits  thus  obtained.  He 
was  bound  to  trade  to  the  best  of  his  ability  for  the  joint 

(a)  6  Madd.  367.  were  held  to  belong  to  him  who 

(6)  4  Eeav.  534.     See,  too,  Benson  made  them.     In  Moffatt  v.  Farqu- 

v.  Heathorn,  1  Y.  &  C.  C.  C.  326,  harson,  2  Bro.  C.   C.   338,  a  part 

and  2  Coll.  309;  Miller  v.  Mackay,  owner  of  a  ship  was  held  to  be  ex- 

31  Beav.  77;  Shallcross  v.  Oldham,  clusively  entitled  to  money  paid 

2  J.  &  H.  609 ;  and  as  to  commis-  him   for  his  vote  in  the  appoint- 

sions,  Holden  v.  Webber,  29  Beav.  ment  of  a  master.    But  see  on  tbat 

117.     Compare  Miller  v.  Mackay,  case  the  note  to  it  in  Mr.  Belt's  edi- 

34    Beav.   295,    where  the    profits  tion.     See  infra,  ch.  4,  §  1. 

718 


CH.  II,  SEC.  II.]   DUTY  TO  OBSERVE  GOOD  FAITH.  "310 

interest  of  himself  and  co-owners;  he  had  no  right  to  em- 
ploy the  partnership  property  in  a  private  speculation  for 
his  own  benefit;  and  although  he  alleged  that  the  profits 
were  made  solely  by  the  employment  of  his  own  private 
capital,  and  that  by  custom  masters  of  ships  were  allowed 
to  trade  for  their  own  benefit,  the  court  declined  to  recog- 
nize an}'  such  custom,  and  considered  that  the  profits  had 
been  made  by  the  employment  of  what  was  not  the  defend- 
ant's exclusively,  and  that  the  plaintiffs  had  therefore  a 
rijrht  to  share  them. 

Benefits  resulting  from  connection  with  the  firm. —  A 
partner,  moreover,  is  not  allowed,  in  transacting  the  part- 
nership affairs,  to  carry  on  for  his  own  sole  benefit  any  sep- 
arate trade  or  business  which,  were  it  not  for  his  connection 
with  the  partnership,  he  would  not  have  been  in  a  position 
to  carrj'  on.1  Bound  to  do  his  best  for  the  firm,  he  is  not 
at  liberty  to  labor  for  himself  to  their  detriment;  and  if  his 
connection  with  the  firm  enables  him  to  acquire  gain,  he 
cannot  appropriate  that  gain  to  himself  on  the  pretense 
that  it  arose  from  a  separate  transaction  with  which  the 

1  Where  a  partner  in  the  ware-  of  a  special  contract  or  custom,  to 

house  business  also  owns  and  man-  share  in  sums  realized  by  the  other 

ages  the  wharf-boat,  receiving  fees  as  commissions  for  sales  of  stock 

from  steamboats  in  matters    not  in    a    railroad  company,   nor  for 

connected  with  the  warehouse  busi-  sums    realized    in    services    other 

ness,    the     other    partner    in    the  than  those  which  belong  to  their 

warehouse  business  will  have   no  professional  relations.     Where  he 

joint  claim  upon  the  fund  arising  alleges  that  a  sum  was  realized  by 

from  such  fees.     Northrup  v.  Phil-  his  copartner  for  professional  serv- 

lips,  99  111.  449.  ices  the  burden  of  proof  is  upon 

Where  an  attorney -at-law  re-  him  to  establish  it.  Where,  how- 
fuses  to  act  as  partner,  or  as  such  ever,  such  sales  of  stock  are  em- 
to  prosecute  a  cause  intrusted  to  braced  in  the  ordinary  usages  and 
his  firm,  and  repudiates  his  obliga-  customs  of  the  business  of  attor- 
tion,  he  is  not  entitled  to  any  part  neys-at-law,  in  the  locality  where 
of  the  fees  subsequently  earned  by  it  is  carried  on,  each  partner  has  a 
his  partners  in  the  cause.  Denver  right  to  share  in  the  commissions. 
v.  Roane,  99  U.  S.  355.  Sanderson    v.    Sanderson,    17  Fla. 

One  of  two  partners  as  attorneys-  820 ;  S.  C.  20  Fla.  292. 
at-law  has  no  right,  in  the  absence 

719 


*311  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

firm  had  nothing  to  do.  This  is  well  exemplified  by  the 
cases  as  to  renewed  leases  which  have  been  already  referred 
to,  (c)  and  by  Russell  v.  Austwick,  which  also  shows  that 
the  same  principles  apply  wherever  there  is  an  agreement 
to  share  profits. 

Carriers  not  partners  inter  se. —  In  Russell  v.  Aust- 
wick,  (d)  several  persons  agreed  to  carry  on  business  as  car- 
riers between  London  and  Falmouth;  but  they  expressly 
stipulated  that  no  partnership  should  subsist  between  them, 
and  that  each  should  have  a  certain  portion  of  the  road 
over  which  he  was  to  carry.  Business  was  commenced  and 
carried  on  by  the  parties  to  this  agreement  under  the  name 
of  Messrs.  Russell  &  Co.,  and  they  were  employed  to  carry 

bullion  from  Falmouth  and  Plymouth  to  London. 
[*311]  On  the  *issue  of  a  new  silver  coinage  by  the  Bank 

of  England,  Austwick,  who  appears  to  have  been  the 
London  agent  of  the  carriers,  entered  into  a  contract  with 
the  master  of  the  mint  for  the  carriage  of  the  new  coin  to 
towns  on  the  road  between  London  and  Falmouth.  Shortly 
afterwards  he  entered  into  another  contract  with  the  mas- 
ter of  the  mint  for  the  conveyance  of  more  new  coin  to 
towns  in  Middlesex  and  the  adjoining  counties.  None  of 
these  last  towns  lay  on  the  road  leading  from  London  to 
Falmouth,  and  many  of  them  were  only  accessible  by  cross 
country  roads,  and  in  consequence  of  the  increased  risk  of 
carriage  along  these  roads  the  mint  authorities  agreed  to 
pay  7s.  6d.  per  cent,  for  all  the  coin  sent  from  the  mint,  in- 
stead of  5s.  per  cent.,  which  was  the  remuneration  agreed 
on  in  the  first  contract.  Austwick  contended  that  he  was 
entitled  to  the  whole  benefit  of  this  second  contract,  be- 
cause (except  as  to  the  extra  2s.  6d.)  it  had  nothing  to  do  with 
the  carrying  business  between  London  and  Falmouth;  and 
because,  as  to  the  2s.  Qd.,  that  sum,  although  calculated  on  all 

(c)  Ante,  p.  307.  situate  in  his  own  land,  but  used 

(d)  1  Sim.  52.  See,  also,  as  to  for  the  mine,  Clegg  v.  Clegg,  3 
benefits  derived  by  one  co-owner    Giff.  322. 

of  a  mine  from  the  use  of  a  shaft 

720 


CH.  II,  SEC.  II.  1      DUTY   TO   OBSERVE   GOOD    FAITH.  *312 

the  coin  carried,  whether  under  the  first  or  second  agree- 
ment, was  in  fact  paid  by  the  mint  in  consideration  only  of 
the  extra  risk  attending  the  carriage  to  the  towns  specified  in 
the  second  contract.  On  the  other  hand  it  was  contended 
and  held  that  the  second  agreement  ought  to  be  considered 
as  made  on  account  of  all  the  persons  interested  in  the  first 
agreement;  because,  although  the  common  concern  had  no 
connection  with  the  provincial  roads  which  were  the  occa- 
sion of  the  second  agreement,  yet  this  agreement  was  en- 
tered into  by  the  officers  of  the  mint  as  connected  with,  and 
a  continuation  of,  the  first  agreement,  and  in  confidence  of 
the  responsibility  of  the  parties  to  it. 

This  case  of  Russell  v.  Austwick  shows  how  difficult  it  is 
for  a  partner  to  benefit  himself  exclusively  by  dealings 
which  in  honor  he  ought  not  to  have  engaged  in  except  for 
the  common  benefit  of  the  firm. 

Distinct  businesses. —  Lock  v.  Lynam,,  which  came  before 
the  court  of  chancery  in  Ireland,  affords  another  instructive 
example  of  the  application  of  the  same  wholesome 
doctrine.  In  this  case  (e)  the  plaintiff  *and  the  de-  [*312] 
fendant  had  agreed  to  share  the  profit  and  loss  aris- 
ing from  contracts  taken  by  the  defendant  for  the  supply  of 
meat  and  bread  to  Her  Majesty's  forces  in  Ireland.  Whilst 
this  agreement  was  in  force  the  defendant  entered  into 
secret  agreements  with  other  persons  to  share  with  them 
the  profit  and  loss  accruing  in  respect  of  similar  contracts 
entered  into  and  taken  by  them.  The  plaintiff  claimed  a 
share  in  the  profits  made  by  the  defendant  under  these 
secret  agreements;  whilst  the  defendant  contended  that  he 
was  entitled  to  retain  them  for  his  own  exclusive  benefit. 
The  lord  chancellor  observed  that  in  all  cases  of  this  kind 
the  real  question  was  whether,  from  the  nature  of  the 
transaction  between  the  partners,  there  was  any  express  or 
implied  contract  against  other  dealings  of  a  like  character; 

(e)  Lock  v.  Lynam,  4  Ir.  Ch.  188.     295 ;  and  see  Somerville  v.  Mackay, 
Compare  this  and    the    last  case     18  Ves.  382. 
with  Miller  v.  Mackay,  34  Beav. 

Vol.  I  — 46  721 


"312  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

and  that  although  there  was  no  engagement  not  to  enter 
into  any  other  partnership  of  the  same  kind,  still  it  never 
could  have  been  in  the  contemplation  of  either  of  the  par- 
ties that  one  partner  should,  in  his  own  name  or  in  that  of 
any  other  person,  adopt  contracts  to  the  prejudice  of  the 
other's  interest.  A  decree  was  accordingly  made  directing 
an  inquiry  whether,  during  the  period  for  which  any  part- 
nership between  the  plaintiff  and  the  defendant  existed,  the 
defendant,  either  alone  or  jointly  with  any  other  person  or 
persons,  separately  from  the  plaintiff,  entered  into,  or  was 
beneficially  interested  in,  any  other  contract  or  dealing  of 
the  like  nature  with  those  in  which  the  plaintiff  and  the 
defendant  were  engaged  as  partners. 

One  partner  competing  with  firm. —  After  the  decisions 
to  which  attention  has  now  been  drawn,  there  can  be  little 
doubt  that  a  partner  cannot,  either  openly  or  secretly,  law- 
fully carry  on  for  his  own  benefit  any  business  in  rivalry 
with  the  firm  to  which  he  belongs.^)1  But  where  a 
partner  carries  on  a  business  not  connected  with  or  com- 
peting with  that  of  the  firm,  his  partners  have  no  right  to 

(/)  See  Glassington  v.  Thwaites,  and  fixtures,  and  the  other  should 

1   Sim.    &   Stu.    124;    England    v.  keep  the  books  and  devote  himself , 

Curling,   8   Beav.    129,   in  which,  his  time  and  talents,  to  the  busi- 

however,    there     was     something  ness.      Buildings    were  furnished 

more  than  mere  rivalry.  and  the  business  prosecuted  until 

1  Equity  will  enjoin  one  of  sev-  these  were  fully  occupied  with  cot- 

eral  partners  in  a  business  enter-  ton  stored;  and  the  partner  who 

prise,  who  by  the  partnership  con-  engaged  for  the  buildings  declined 

tract  has  undertaken  to    superin-  to  supply  any  more  for  an  increase 

tend    and    manage    the  business,  of    business.      The  other    partner 

from  carrying  on  the  same  busi-  then  put  up  buildings  at  his  own 

ness,  at  the  same  place,  in  a  sepa-  expense,   and  received   cotton    in 

rate  establishment  for  his  sole  bene-  store  in  them  upon  his  individual 

fit,  even  though  there  be  no  express  account ;  he  did  not,  however,  at 

covenant  restraining  him  from  so  all  neglect  the  partnership  stores 

doing.      Marshall  v.   Johnson,    33  and  business.     Held,  that  this  was 

Ga.  500.  no  breach  of  good  faith,  nor  was 

A  partnership  was  formed  for  a  his  copartner  entitled  to  share  in 

commission  and  warehouse  busi-  the  profits  of  the  individual  store, 

ness,  the  agreement  being  that  one  Parnell  v.  Robinson,  58  Ga.  26. 
partner  should  furnish   buildings 

722 


CH.  II,  SEC.  II.]       DUTY    TO    OBSERVE    GOOD    FAITH.  *313 

the  profits  he  thereby  makes,  even  if  he  has  agreed  not  to 
carry  on  any  separate  business,  (g) 

-Buying  share. —  Again,  it  has  been  held  compe-  [*313] 
tent  for  one  partner  to  acquire  for  himself  the  share 
of  a  copartner  in  the  partnership  business  without  inform- 
ing the  other  partners  of  the  purchase  and  without  giving 
them  an  opportunity  of  acquiring  it.  (A)  The  articles  of 
partnership  did  not  forbid  such  a  purchase,  nor  was  it  any 
part  of  the  business  of  the  firm  to  buy  the  shares  of  its 
members. 

Partnership  not  yet  formed. —  The  same  obligation  to 
act  with  good  faith  exists  between  persons  who  have  agreed 
to  become  partners;  and  if  one  of  them,  in  negotiating  for 
the  acquisition  of  property  for  the  intended  firm,  receives 
a  bonus  or  commission,  he  must  account  for  it  to  the  firm 
when  formed.  (*') l  He  cannot  retain  it  for  himself  on  the 
ground  that  it  was  paid  him  for  personal  services  rendered 
to  the  vendor  before  any  partnership  existed.  Having  ob- 
tained the  benefit  whilst  negotiating  for  himself  and  his 
future  partners  he  must  share  such  benefit  with  them,  (k) 

(g)  Dean  v.  Macdowell,  8  Ch.  D.  an  association,  or  are  dealing  in 

345.     An  injunction   might    have  contemplation  of  one,   then  they 

been  obtained,  and  perhaps  dam-  stand  in  a  confidential  relation  to 

ages  for  a  breach  of  covenant.  each  other  and  to  all  who  may 

(h)  Cassels  v.  Stewart,  6  App.  Ca.  subsequently    become      members; 

64.  and    they    cannot    purchase     any 

(i)  Fawcett  v.  "Whitehouse,  1  R.  property  and  sell  it  to  the  com- 

&  M.  132.  pany  at  an  advance,  without  a  full 

1  The  owner  of  any  property  may  disclosure  of  all  the  facts.  If  they 
form  an  association  or  partnership  do  so,  the  company  may  compel 
with  others  and  may  sell  the  them  to  account  for  the  profit, 
property  to  the  company  at  any  Densmore  Oil  Co.  v.  Densmore, 
price  agreed  on,  provided  there  be  supra.  See,  also,  Short  v.  Steven- 
no  fraudulent  representations  made  son,  63  Penn.  St.  95;  Doris  v. 
by  them,  and  no  such  confidential  French,  4  Hun,  292;  S.  C.  6  Thomp. 
relation  arises  as  to  make  them  &  C.  581.  See  Ewell's  Evans  on 
liable  to  account  for  any  profits  Agency,  *283. 
realized  on  such  sale.  Densmore  (k)  Ibid.  See,  also,  Hichens  v. 
Oil  Co.  v.  Densmore,  64  Pa.  St.  43;  Congreve,  1  R.  &  M.  150,  and  other 
S.  C.  9  Am.  Law  Reg.  (N.  S.)  96.  cases  of  that  class,  relating  to  pro- 

But  where  persons  have  formed  moters  of  companies.- 

723 


*314:  EIGHTS    AND    OBLIGATIONS.  [BOOK    III, 


Section  III. —  Of  the  Powers  of  a  Majority  of  Partners. 

Disputes  between  partners. —  In  the  event  of  a  differ- 
ence arising  between  partners,  it  becomes  necessary  to  con- 
sider whether  there  is  any  method  of  determining  which 
of  them  is  to  give  way  to  the  other.  It  is  not  uncommonly 
supposed  that  the  minority  of  the  partners,  if  they  are  un- 
equally divided,  must  submit  to  the  majority.  But  this  is 
by  no  means  the  case ;  for,  as  will  be  seen  presently,  the 
majority  cannot  oblige  the  minority  except  within  certain 
limits. 

How  to  be  settled. —  The  first  point  to  determine  is 
whether  the  partnership  articles  do  or  do  not  contain  any 
express  provision  applicable  to  the  matter  in  question;  for 
if  they  do,  such  provision  ought  to  be  obeyed.  (I) l 
[*314]  If  they  do  not,  then  the  nature  of  the  *question  at 
issue  must  be  examined ;  for  there  is  an  important 
distinction  between  differences  which  relate  to  matters  in- 
cidental to  carrying  on  the  legitimate  business  of  a  part- 
nership, and  differences  which  relate  to  matters  with  which 
it  was  never  intended  that  the  partnership  should  concern 
itself. 

1.  Disputes  on  matters  arising  in  ordinary  course  of 
business. —  With  respect  to  the  first  class  of  differences  re- 
gard must  be  had  to  the  state  of  things  actually  existing ; 
for,  as  a  rule,  if  the  partners  are  equally  divided,  those  who 
forbid  a  change  must  have  their  way:  in  re  communi  potior 
est  conditio  prohibentis.  (m)  Upon  this  principle  it  is  that 
one  partner  cannot  either  engage  a  new  or  dismiss  an  old 
servant  against  the  will  of  his  copartner;  (n)2  nor,  if  the 

(Z)  As  to  the  construction  of  part-  ping,  p.  82,  ed.  9,  and  p.  58,  ed.  12 ; 

nership  articles,  see  infra,  ch.  9.  and  as  to  completing  contracts  al- 

1  See  Waterbury  v.  Express  Co.  ready  entered    into,    Butchart    v. 

50  Barb.   157;   3  Abb.  Pr.  (N.  S.)  Dresser,  4  De  G.  M.  &  G.  545. 

163.  (n)  See  Donaldson  v.  Williamson, 

(m)  But  see   as  to  the  employ-  1  Cr.  &  M.  345. 

ment  of  a  ship,  Abbott  on  Ship-  2  As  to  when  one  subscriber  is 

724 


CH.  II,  SEC.  III.]      DUTY    TO    OBSERVE    GOOD    FAITH. 


(-3i4 


lease  of  the  partnership  place  of  business  expires,  insist  on 
renewing  the  lease  and  continuing  the  business  at  the  old 
place,  (o) 

Tower  of  majority  in  such  cases.—  If,  however,  in  a 
case  of  this  description,  unprovided  for  by  previous  agree- 
ment, the  partners  are  unequally  divided,  the  minority 
must,  the  author  apprehends,  give  way  to  the  majority,  {p)  l 


liable  for  the  services  of  one  em- 
ployed by  less  than  a  majority  of 
the  subscribers,  in  an  agreement  to 
join  in  the  boring  of  oil  wells,  see 
Still  v.  Holbrook,  23  Hun  (N.  Y.), 
517. 

(o)  Clements  v.  Norris,  8  Ch.  D. 
129.  N.  B.— The  partnership  had 
not  expired. 

(p)  See  Gregory  v.  Patchett,  33 
Beav.  595;  Const  v.  Harris,  T.  & 
R.  518;  Robinson  v.  Thompson,  1 
Vern.  465 ;  as  to  opening  accounts, 
Morgan's  Case,  1  M.  &  G.  235. 

!In  directing  the  business  of  a 
partnership  a  majority  shall  gov- 
ern, notwithstanding  the  dissent  of 
the  minority.  Peacock  v.  Cu  tu- 
rnings, 5  Phila.  253;  46  Pa.  St.  434; 
Kirk  v.  Hodgson,  3  John.  Ch.  400 ; 
Waterbury  v.  Express  Co.  50  Barb. 
157;  S.  C.  3  Abb.  Pr.  (N.  S.)  163; 
Peacock  v.  Cummings,  46  Penn. 
St.  434;  Johnston  v.  Dutton,  27 
Ala.  245;  Campbell  v.  Bo  wen,  49 
Ga.  417.  See,  also,  Livingston  v. 
Lynch,  4  John.  Ch.  573;  Western 
Stage  Co.  v.  Walker,  2  Iowa,  504 ; 
Irvine  v.  Forbes,  11  Barb.  587. 
See,  however,  Yeager  v.  Wallace, 
57  Penn.  St.  365. 

In  the  absence  of  fraud  the  ma- 
jority of  a  firm  can  make  a  valid 
sale  of  its  property  without  the 
consent  of  a  minority.  Staples  v. 
Sprague,  75  Me.  458. 

The  members  of  a  private  asso- 


ciation, as  a  telegraph  company, 
are  not  partners.  They  are  ten- 
ants in  common  of  the  property 
and  franchise  belonging  to  the 
company,  and  the  majority  cannot 
bind  the  minority  unless  by  spe- 
cial agreement.  Irvine  v.  Forbes, 
11  Barb.  587. 

Three  persons,  acting  together, 
borrowed  a  sum  of  money  from  a 
bank,  and  shipped  a  lot  of  cattle 
to  market  consigned  to  another 
person  to  sell,  who,  after  making 
sale,  and  paying  expenses  and 
charges  and  a  mortgage  on  the 
cattle,  held  about  half  of  the  pro- 
ceeds in  his  hands.  One  of  the 
partners  directed  him  to  pay  this 
balance  to  the  bank,  and  he  agreed 
to  hold  it  subject  to  the  order  of 
the  partners,  and  he  paid  it  to  one 
of  the  partners  by  his  and  the  di- 
rection of  another,  they  two  con- 
stituting a  majority.  Held,  that 
the  direction  of  one  partner  to  pay 
to  the  bank,  and  what  he  said, 
gave  the  bank  no  lien  on  the  fund. 
The  agent  was  authorized  to  pay  it 
as  he  did,  under  the  direction  of 
the  other  two  partners ;  and  as  he 
paid  the  money  before  the  bank 
filed  their  bill  to  enforce  payment 
out  of  the  fund,  there  was  nothing 
upon  which  an  equitable  lien  could 
attach.  Steele  v.  First  Nat.  Bank, 
60  111.  23. 

A  copartnership  had  been  estab- 


725 


*315  EIGHTS   AND   OBLIGATIONS.  [BOOK    ECTJ 

This  is  the  rule  applicable  to  companies  whether  incorpo- 
rated or  unincorporated;^)  it  is  the  rule  adopted  in  the 
Indian  Contract  Act;  (r)  and  it  is  practically  reasonable  and 
convenient.  The  only  alternative  is  to  hold  that  if  part- 
ners disagree,  even  as  to  trifling  matters  of  detail,  the 
minority  can  forbid  all  change,  and,  perhaps,  bring  the 
business  of  the  firm  to  a  dead-lock,  for  which  the  only  rem- 
edy is  a  dissolution.  At  the  same  time  the  author  is  not 
aware  of  an}7  clear  and  distinct  authority  in  support  of  the 
proposition  that  even  in  such  matters  a  dissentient  partner 
must  give  way  to  his  copartners.  ($) 

However,  a  majority  cannot,  against  the  will  of 
[*315]  the  minority,  ^delegate  to  a  manager  the  right  to 
sign  the  partnership  name;  (t)  and  it  is  doubtful 
whether  a  majority  can  decide  where  the  partnership  busi- 
ness shall  be  carried  on  when  the  lease  of  its  place  of  busi- 
ness expires,  (u) 

All  partners  entitled  to  be  heard. —  A  very  important 
rule  respecting  the  powers  and  votes  of  majorities  is  that 
a  majority,  to  have  any  weight,  must  act  and  be  constituted 

lished  to  purchase  Cherokee  lands,  bona  fide,  and  without  notice,  for 
and  to  work  them  for  mining,  etc.,  value,  from  such  fourth  partner; 
as  partners.     One  of  the  speciflca-  ail  they  can  ask  is  an  account  from 
tions  in  the  agreement  of  copart-  the  fourth  partner.     Rhea  v.  Van- 
nership    was    to     be    that      such  noy,  1  Jones'  Eq.  283 ;  id.  290. 
disposition    was    "  made    of  their  (q)  See  Stevens  v.  South  Devon 
property  as  a  majority  should  deem  Rail.    Co.   9  Ha.    326;  Simpson  v. 
advisable."     Two  of    the  partners  Westminster  Palace  Hotel  Co.    2 
having    become    insolvent,  and  a  De  G.  F.  &  J.  141 ;  Kent  v.  Jack- 
third    nearly  so,  and    all    having  son,  2  De  G.  M.  &  G.  49,  and  14 
abandoned  the  work  and  neglected  Beav.  367. 
payment   of  the    instalments    for  (r)  Sec.  253,  cl.  5. 
the  purchase  money,  leaving  the  (s)  Pollock's  Dig.  §  36,  adopts  the 
whole   burden    upon    the     fourth  author's   view,  but  apparently  on 
partner,    neither    of    these    three  his  authority. 

partners  has  a  right  to  complain  in  (t)  See   Beveridge  v.  Beveridge, 
equity  that  the  fourth  partner,  in  L.  R.  2  Sc.  App.  183. 
order  to  relieve  his  sureties,  has  (u)  See  Clements  v.  Norris,  8  Ch. 
disposed  of  the  land  without  the  D.  129,  but  note  there  the  firm  con- 
concurrence  of  a  majority.     Espe-  sisted  of  two  members  only, 
cially  is  this  true  as  to  a  purchaser 

726 


CH.  II,  SEC.  III.]      DUTY   TO    OBSERVE    GOOD    FAITH.  "'310 

with  perfect  good  faith ;  for  every  partner  has  a  right  to  be 
consulted  to  express  his  own  views,  and  to  have  those  views 
considered  by  his  copartners.  In  the  language  of  Lord 
Eldon,  "that  is  the  act  of  all  which  is  the  act  of  the  major- 
ity, provided  all  are  consulted,  and  the  majority  are  acting 
hona  fide,  meeting  not  for  the  purpose  of  negativing  what 
any  one  may  have  to  offer,  but  for  the  purpose  of  negativ- 
ing what,  when  they  are  met  together,  they  may,  after  due 
consideration,  think  proper  to  negative.  For  a  majority  of 
partners  to  say,  We  do  not  care  what  one  partner  may  say; 
we,  being  the  majority,  will  do  what  we  please,  is,  I  appre- 
hend, what  a  court  of  equity  will  not  allow."  (a?) 

Majorities  at  meetings. —  Moreover,  where  powers  are 
conferred  on  a  majority  present  at  a  meeting  of  not  less 
than  a  certain  number  of  persons,  unless  such  meeting  be 
duly  convened  and  the  requisite  number  bo  present  at  the 
meeting  the  powers  in  question  cannot  be  exercised;  and 
although  it  may  be  true  that  the  required  number  of  per- 
sons was  summoned,  and  that  the  absentees  could  not  have 
turned  the  scale,  this  will  not  render  valid  the  acts  of  the 
majority  of  those  actually  present,  for  that  is  not  such  a 
majority  as  was  originally  contemplated,  (y) 

2.  Disputes  on  matters  involving  a  change  in  the  nat- 
ure of  the  business  —  One  dissentient  can  forbid  a 
change. —  Passing  now  to  the  second  class  of  differences, 
viz.,  those  which  relate  to  matters  with  which  the  partner- 
ship was  never  intended  to  concern  itself,  it  has  been  over 
and  over  again  decided  that  no  majority,  however  large, 
can  lawfully  engage  the  partnership  in  such  matters  against 
the  will  of  even  one  dissentient  partner.1  Each 
partner  is  entitled  to  say  to  the  *others,  "  I  became  [*316] 

(a?)  Const  v.  Harris,  Turn.  &  R.  D.    223;    Howbeach    Coal    Co.    v. 

525 ;  and  see  id.  518,  and  Blisset  v.  Teague,  5  H.  &  N.  151 ;  Ex  parte 

Daniels,  10  Ha.  493 ;  Great  Western  Morrison,  De  G.  539. 
Rail.  Co.  v.   Rushout,  5  De  G.  &        l  See  Abbott  v.  Johnson,  32  N.  H. 

Sm.  310.  9 ;  Livingston  v.  Lych,  4  John.  Ch. 

(?/)  See  Re  London  &  Southern  573. 
Counties  Freehold  Land  Co.  31  Ch. 

727 


*316  EIGHTS    AND    OBLIGATIONS.  [uOOK    III. 

a  partner  in  a  concern  formed  for  a  definite  purpose, 
and  upon  terms  which  were  agreed  upon  by  all  of  us,  and 
you  have  no  right,  without  my  consent,  to  engage  me  in 
any  other  concern,  nor  to  hold  me  to  any  other  terras,  nor 
to  get  rid  of  rae,  if  I  decline  to  assent  to  a  variation  in  the 
agreement  by  which  you  are  bound  to  me  and  I  to  you." 
Nor  is  it  at  all  material  that  the  new  business  is  extremely 
profitable,  (z) 

In  companies  as  well  as  in  partnership. —  This  princi- 
ple is  applicable  to  all  partnerships  and  companies,  whether 
great  or  small,  and  is  evidently  one  which  requires  only  to 
be  stated  to  be  at  once  assented  to  as  being  just.1  No  cases 
upon  this  subject  can  be  referred  to  with  greater  advantage 
than  Natusch  v.  Irving  and  Const  v.  Harris,  both  of  which 
were  decided  by  Lord  Eldon.  (a) 

Fire  and  life  insurance  company  turning  into  a  mar- 
itime insurance  company. —  In  Natusoh  v.  Irving,  (b)  a 
company  was  formed  in  the  early  part  of  the  year  1824 
for  granting  fire  and  life  assurances.  The  capital  was 
5,000,000/.,  divided  into  fifty  thousand  100/,-shares.  The 
plaintiff  was  one  of  the  original  subscribers,  and  held  fifteen 
shares,  in  respect  of  which  he  had  paid  the  required  deposit, 
but  he  had  not  executed  the  company's  deed  of  settlement. 
In  conformity  with  the  rules  of  the  company  he  had  effected 
a  policy  with  it  on  his  life  for  1,500/.  In  the  summer  of  1824 
the  act  of  6  George  1,  prohibiting  companies  from  carry- 
ing on  the  business  of  marine  insurance,  was  repealed,  and 
shortly  afterwards  advertisements  appeared  in  the  news- 
papers stating  that  the  company  would  commence  the  busi- 
ness of  marine  insurance.  The  plaintiff,  in  answer  to  an 
inquiry  whether  this  announcement  was  authorized  by  the 

(z)  A.-G.  v.  Great  Northern  Rail,  ville,  1  Taunt.  241 ;  Glassington  v. 

Co.  1  Dr.  &  Sm.  154.  Thwaites,  1  Sim.  &  Stu.  131. 

1  See   Ang.   &    Ames    on    Corp.        (b)  Gow  on  Partnership,  App.  398, 

$§  391,  536  et  seq.  ed.  3.    See,  also,  The  Phoenix  Life 

(a)  See,  too,  Davis  v.  Hawkins,  3  Ins.  Co.  2  J.  &  H.  441. 
M.  &  S.  488;    Fennings  v.  Gren- 

728 


CH.  II,  SEC.  III.]       DUTY    TO    OBSERVE    GOOD    FAITH.  :'317 

directors,  was  informed  that  it  was,  and  that  if  he  objected 
to  the  course  about  to  be  pursued  he  might  receive  back  his 
deposit  with  interest,  and  have  his  policy  canceled  and  the 
premium  returned.  In  reply  to  this  the  plaintiff  stated  that 
he  was  ready  to  execute  any  deed  which  was  in  conformity 
with  the  prospectus;  that  he  conceived  it  competent  for 
him  to  insist  that  the  business  in  which  he  was  a 
partner  should  be  carried  *on  according  to  the  [*317] 
agreement  which  united  the  partners  together;  that 
he  could  not  think  his  doing  so  would  entitle  the  managers 
of  that  partnership  to  pay  him  out  his  capital,  and  deprive 
him  of  a  share  in  a  concern  of  which  he  had  the  highest 
opinion;  that  he  therefore  required  the  directors  to  abstain 
from  any  contracts  or  engagements  relating  to  marine  in- 
surance, as  not  being  contemplated  by  himself  and  those 
who  joined  the  company  upon  the  terms  of  the  prospectus, 
and  that  he  required  an  undivided  attention  on  the  part  of 
the  directors  to  the  objects  defined  therein.  The  plaintiff 
afterwards  attended  at  the  office  of  the  company  to  execute 
its  deed  of  settlement,  but  finding  that  it  contained  provis- 
ions enabling  the  company  to  carry  on  the  business  of 
marine  insurance,  he  refused  to  execute  it,  as  not  being  con- 
formable to  the  terms  on  which  the  company  was  formed. 
In  pursuance  of  the  advertisements  the  company  had  com- 
menced, and  it  was  carrying  on,  the  business  of  marine 
insurance;  but  there  was  no  evidence  to  show  acquiescence 
on  the  part  of  the  plaintiff,  and  there  was  evidence  to  show 
continued  opposition  by  him  to  the  carrying  on  of  such 
business.  The  plaintiff  applied  for  an  injunction  to  restrain 
the  directors  from  effecting  marine  insurance,  and  an  in- 
junction was  granted,  (c)     The  judgment  of  Lord  Elclon,  as 

(c)  The  bill  was  filed  by  the  to  restrain  the  defendants  from  ef- 
plaintiff  on  behalf  of  himself  and  fecting  marine  insurances  in  the 
all  others  the  shareholders  of  the  name  and  on  account  of  the  corn- 
company  against  the  directors,  and  pany,  and  from  using  the  name 
prayed  a  dissolution,  and,  if  neces-  and  from  applying  the  capital  of 
sary,  a  receiver,  and  an  injunction  the  company  for  such  purposes. 

729 


*318  EIGHTS    AND    OBLIGATIONS.  [COOK  IIT. 

far  as  it  relates  to  the  power  of  a  majority,  is  particularly 
valuable,  and  tbe  following  extracts  from  it  are  constantly 
referred  to: 

Answer  to  objection  that  dissentient  can  retire  — Dissentient  need 
not  accept  an  offer  of  indemnity.— With  respect  to  the  liberty  given 
to  the  plaintiff  to  retire  his  lordship  said:  "An  offer  is  made  to  the 
plaintiff  that  he  may  receive  back  his  deposit,  with  interest  from  the 
date  of  the  payment,  and  he  is  desired  to  consider  himself  as  having  re- 
ceived notice  thereof.  But  it  is  not,  I  apprehend,  competent  to  any 
number  of  persons  in  a  partnership  (unless  they  show  a  contract  render- 
ing it  competent  to  them)  formed  for  specified  purposes,  if  they  propose 
to  form  a  partnership  for  very  different  purposes,  to  effect  that  forma- 
tion by  calling  upon  some  of  their  partners  to  receive  their  subscribed 
capital  and  interest  and  quit  the  concern;  and  in  effect,  merely  by 
compelling  them  to  retire  upon  such  terms,  so  to  form  a  company. 

This  would,  as  to  partnerships,  be  a  most  dangerous  doctrine. 
[*318]  *Where  a  partnership  is  dissolved  (even  where  it  can  be  in  a  sense 

dissolved  the  instant  after  notice  to  dissolve  is  given,  if  there  be 
no  contract  to  the  contrary),  it  must  still  continue  for  the  purpose  of 
winding  up  its  affairs,  of  taking  and  settling  all  its  accounts,  and  con- 
verting all  the  property,  means  and  assets  of  the  partnership,  existing 
at  the  time  of  the  dissolution,  as  beneficially  as  may  be,  for  the  benefit 
of  all  who  were  partners,  according  to  their  respective  shares  and  inter- 
ests ;  and  the  other  partners  cannot  say  to  him  to  whom  they  have 
given  an  offer  of  his  deposit  and  interest,  Take  that,  and  we  are  a  new 
company,  keeping  the  effects,  means,  assets  and  property  of  the  old  as 
the  property  of  the  new  partnership.  The  company  will  indemnify  the 
plaintiff  against  loss  by  its  transactions  already  had,  or  hereafter  to  be 
had,  not  for  the  specified  purposes  of  the  institution.  But  the  right  of 
a  partner  is  to  hold  to  the  specified  purposes  his  partners  whilst  the 
partnership  continues,  and  not  to  rest  upon  indemnities  with  respect  to 
what  he  has  not  contracted  to  engage  in.  A  dissatisfied  partner  may 
sell  his  shares  for  double  what  he  originally  gave  for  them.  But  he 
cannot  be  compelled  to  part  with  them  for  that  reason ;  it  may  be  his 
principal  reason  for  keeping  them,  having  the  partnership  concern  car- 
ried on  according  to  the  contract.  The  original  contract  and  the  loss 
which  his  partners  would  suffer  by  a  dissolution  is  his  security  that  it 
shall  be  so  carried  on  for  him  and  them  beneficially,  and  with  augmented 
improvement  in  the  value  of  his  shares  and  their  shares." 

Answer  to  argument  that  the  change  was  warranted  by  statute.— 
"With  respect  to  the  alteration  of  the  law  enabling  companies  to  carry 
on  the  business  proposed  his  lordship  observed :  "  The  repeal  of  the  act 
6  George  1,  which  merely  made  it  lawful  for  societies  or  partnerships, 
however  numerous  their  members  might  be,  to  insure  against  marine 

730 


CII.  II,  SEC.  III.]       DUTY   TO    OBSERVE    GOOD    FAITH.  *319 

risks,  could  not  make  it  lawful  for  companies  or  societies,  which  were 
formed  for  specified  purposes  of  insurance  upon  lives  and  against  fire, 
to  insure  against  marine  risks,  unless  the  contracts  by  which  such  com- 
panies were  formed,  either  expressly  or  impliedly  (where  individual 
partners  did  not  consent  to  embarking  in  new  projects,  either  originally 
or  subsequently  to  the  formation  of  the  companies),  created  an  author- 
ity in  some  part  of  the  body  to  bind  all  the  body  to  the  adoption  of  such 
new  undertakings." 

Observations  on  powers  of  majorities. —  With  respect  to  the  power 
of  a  majority  his  lordship  laid  it  down  that,  "  If  six  persons  joined  in 
a  partnership  of  life  assurance,  it  seems  clear  that  neither  the  majority 
nor  any  select  part  of  them,  nor  five  out  of  the  six,  could  engage  that 
partnership  in  marine  insurances,  unless  the  contract  of  partnership 
expressly  or  impliedly  gave  that  power;  because  if  this  was  otherwise, 
an  individual  or  individuals,  by  engaging  in  one  specified  concern, 
might  be  implicated  in  any  other  concern  whatever,  however  different 
in  its  nature,  against  his  consent.  But  if  a  part  of  the  six  openly  and 
publicly  professed  their  intention  to  engage  the  partnership  in  another 
concern,  and  clearly  and  distinctly  brought  this  to  the  knowledge  of  one 
or  more  of  the  other  partners,  and  such  one  or  more  of  the  other  part- 
ners could  be  clearly  shown  to  have  acquiesced  in  such  intention,  and 
to  have  permitted  the  other  partners  to  have  entered  upon,  and  to  have 
engaged  themselves  and  the  body  in  such  new  projects,  and  thereby  to 
have  placed  their  partners  so  engaged  in  difficulties  and  embarrassments 
unless  they  were  permitted  to  proceed  in  the  farther  execution  of  such 
projects,  if  a  court  of  equity  would  not  go  the  length  of  holding 
that  such  conduct  was  *consent,  it  would  scarcely  think  parties  [*319] 
so  conducting  themselves  entitled  to  the  festinum  remedium  of 
injunction."  .  .  .  "  Courts  must  struggle  to  prevent  particular  mem- 
bers of  those  bodies  from  engaging  other  members  in  projects  in  which 
they  have  not  consented  to  be  engaged,  or  the  engaging  in  which  they 
have  not  encouraged,  assented  to,  or  empowered,  or  acquiesced  in,  ex- 
pressly or  tacitly,  so  as  to  make  it  not  equitable  that  they  should  seek 
to  restrain  them.  The  principles  which  a  court  would  act  upon  in  the 
case  of  a  partnership  of  six  must,  as  far  as  the  nature  of  things  will 
admit,  be  applied  to  a  partnership  of  six  hundred."  .  .  .  "They  who 
seek  to  embark  a  partner  in  a  business  not  originally  part  of  the  part- 
nership concern  must  make  out  clearly  that  he  did  expressly  or  tacitly 
acquiesce." 

Altering  principle  on  which  profits  should  he  dealt 
with. —  In  Const  v.  Harris,  (d)  the  proprietors  of  Covent 
Garden  Theater  agreed  that  the  profits  should,  be  exclusively 
appropriated,  to  certain  definite  purposes.     Afterwards,  the 

(d)  Turn.  &  R.  496. 

731 


*319  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

proprietors  of  seven  out  of  eight  shares  entered  into  an 
agreement  to  apply  the  profits  in  a  different  manner,  but 
they  had  not  consulted  the  owner  of  the  other  eighth  share, 
and  he  disapproved  of  the  alteration.  It  was  held  by  Lord 
Eldon  that  the  majority  had  no  power  to  depart  from  the 
terms  of  the  original  agreement;  and  upon  a  bill  filed  by 
the  one  dissentient  partner  for  a  specific  performance  of 
that  agreement,  a  receiver  of  the  profits  was  appointed.  In 
a  long  and  elaborate  judgment  Lord  Eldon  distinctly  rec- 
ognized the  principle  that  articles  which  had  been  agreed 
on  to  regulate  a  partnership  cannot  be  altered  without  the 
consent  of  all  the  partners,  (e) 

In  modern  times  the  same  principle  has  been  constantly 
recognized  and  followed.  Indeed  it  is  never  now  disputed, 
although  its  application  frequently  gives  rise  to  controversy. 
The  decisions  bearing  on  this  subject  relate,  however,  to 
companies,  and  are  not,  therefore,  further  noticed  in  the 
present  treatise,  (f) 

(e)  See  Turn.  &  R.  517,  523.  The  felt  it  necessary  to  make  extracts 
whole  judgment  is  well  worthy  of    from  it. 

attentive  perusal;  but  being  much  (/)  Auld  v.  Glasgow  Working 
to  the  same  effect  as  that  in  Na-  Men's  Building  Soc.  12  App.  Ca. 
tusch  v.  Irving,  the  writer  has  not    197,  is  one  of  the  most  recent  cases. 

732 


♦CHAPTER  III.  [*320] 

OF  THE  CAPITAL  OF  PARTNERSHIPS. 

Capital  of  partnerships. —  By  the  capital  of  a  partner- 
ship is  meant  the  aggregate  of  the  sums  contributed  by  its 
members  for  the  purpose  of  commencing  or  carrying  on  the 
partnership  business,  and  intended  to  be  risked  by  them  in 
that  business.  The  capital  of  a  partnership  is  not  therefore 
the  same  as  its  property:  the  capital  is  a  sum  fixed  by  the 
agreement  of  the  partners;  whilst  the  actual  assets  of  the 
firm  vary  from  day  to  day,  and  include  everything  belong- 
ing to  the  firm  and  having  any  money  value.  Moreover, 
the  capital  of  each  partner  is  not  necessarily  the  amount 
due  to  him  from  the  firm;  for  not  only  may  he  owe  the 
firm  money,  so  that  less  than  his  capital  is  due  to  him,  but 
the  firm  may  owe  him  money  in  addition  to  his  capital,  e.g., 
for  money  advanced  by  him  to  the  firm  by  way  of  loan,  and 
not  intended  to  be  wholly  risked  in  the  business.  The  dis- 
tinction between  a  partner's  capital  and  what  is  due  to  him 
for  advances  by  way  of  loan  to  the  firm  is  frequently  very 
material:  e.  g.,  with  reference  to  interest;  with  reference  to 
clauses  in  partnership  articles  fixing  the  amount  of  capital 
to  be  advanced  and  risked,  and  prohibiting  the  withdrawal 
of  capital;  and  above  all  with  reference  to  priority  of  pay- 
ment in  the  event  of  dissolution  and  a  deficiency  of  as- 
sets, (a)  The  amount  of  each  partner's  capital  ought,  there- 
fore, always  to  be  accurately  stated,  in  order  to  avoid 
disputes  on  a  final  adjustment  of  account; l  and  this  is  more 

(a)  See  on  this  subject,  infra,  manner  of  paying  it  in,  may  be 
book  iii,  ch.  8,  §  1,  on  partnership  proved  by  other  evidence  than  the 
accounts.  articles  of  copartnership.     Boyers 

!The  amount  of  capital  furnished    v.  Elliott,  7  Humph.  204. 
by  each  partner  in  a  firm,  and  the        The  capital  of  a  firm  may  consist 

733 


!20 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   III. 


important  where  the  capitals  of  the  partners  are  unequal, 
for  if  there  is  no  evidence  as  to  the  amounts  contributed 


of  the  mere  use  of  the  property 
owned  by  one  member  of  the  firm. 
"Whiting  v.  Leakin,  G6  Md.  25.1. 

In  estimating  the  profits  of  the 
business  in  partnership,  amounts 
expended  in  permanent  improve- 
ments to  the  real  estate  of  the  firm 
should  be  regarded  as  capital  and 
not  as  expenditures.  Braun's  Ap- 
peal, 105  Pa.  St.  414. 

A  testator  by  will  directed 
trustees  to  hold  the  residue  of  his 
property  invested,  as  they  may  re- 
ceive the  same,  or  at  their  discre- 
tion to  sell  or  exchange.  Testator 
was  a  member  of  a  firm  whose 
articles  provided  that  if  any  mem- 
ber should  die  the  testator  should 
be  entitled  to  his  share  of  the  prof- 
its up  to  the  time  of  the  second 
semi-annual  account  after  his 
death.  The  articles  also  declared 
that  as  the  business  required  no 
capital,  none  was  contributed,  but 
provided  for  loans  to  the  firm  by 
the  partners,  when  needed,  at  a 
specified  rate  of  interest.  At  the 
time  of  his  death  he  had  lent  the 
firm  a  large  sum  of  money.  Held, 
that  the  profits  received  by  the 
trustees  over  and  above  interest  on 
the  loans  should  be  treated  as  cap- 
ital and  not  as  income.  Mudge  v. 
Parker,  139  Mass.  153. 

Avails  of  discounted  notes,  under 
the  particular  circumstances  of  the 
case,  held  to  be  capital.  Mohawk 
Nat.  Bank  v.  Van  Slyck,  29  Hun, 
188. 

Partnership  agreements  con- 
strued as  respects  the  amount  of 
property  put  by  one  partner  into 
the  firm.  Sexton  v.  Lamb,  27  Kan. 
420. 


In  the  construction  of  a  will,  ac- 
cumulated earnings  of  a  firm,  of 
which  the  testator  was  a  partner, 
which  remained  invested  in  its 
business,  held,  equally  with  the 
sums  originally  put  in,  to  consti- 
tute its  capital.  Thomas  v.  Lines, 
83  N.  C.  191. 

"Outstanding  accounts"  con- 
tributed as  part  of  the  capital  of 
the  firm  construed.  White  v.  Wa- 
gann,  65  Wis.  86. 

The  term  "  present  capital,"  used 
in  a  will,  construed.  Dean  v.  Dean, 
54  Wis.  23. 

In  the  case  of  a  partnership 
agreement,  by  which  A.  sells  to  B. 
for  a  certain  sum  a  one-half  inter- 
est in  a  business  previously  con- 
ducted by  A.  alone,  the  sum  paid 
is  not  B.'s  contribution  to  the  cap- 
ital, but  belongs  to  A.  individually. 
Ball  v.  Farley,  1  S.  &  R.  253. 

The  mention  in  a  bill  for  winding 
up  a  partnership  of  a  sum  of 
money  as  capital  invested  by  one 
of  the  partners,  held,  not  to  mean 
anything  more  than  that  it  was 
money  advanced  by  him  for  the 
use  of  the  firm,  and  that  such  char- 
acterization would  not  preclude 
him  from  the  right  to  interest  on 
such  sum.  McMillan  v.  James,  105 
111.  194. 

Where,  in  a  suit  for  a  dissolution 
of  a  partnership,  it  appeared  that 
there  was  a  mistake  as  to  the 
amount  of  capital  put  in  by  the 
complainants,  and  it  appeared  that 
more  was  put  in  than  was  origi- 
nally stated,  but  how  much  more 
was  uncertain,  held,  that  the  bur- 
den of  proof  was  upon  them,  and 
that  they  should  be  restricted  to 


734 


en.  in. j 


CAPITAL    OF    PARTNERSHIPS. 


:320 


by  them,  the  shares  of  the  whole  assets  will  be  treated  as 
equal,  (b) 


the  smallest  amount  proved,  espe- 
cially as  one  of  the  complainants 
was  the  book-keeper,  and  should 
have  kept  the  books  so  as  to  show 
the  true  state  of  the  affairs.  Moon 
v.  Story,  8  Dana,  22G. 

A  partnership  consisting  of  four 
partners  was  dissolved,  two  assign- 
ing their  shares  to  one  of  the  others 
and  the  remaining  two  formed  a 
new  partnership.  In  their  arti- 
cles they  agreed  that,  of  the  prop- 
erty on  band,  a  sufficient  amount 
should  be  set  apart  and  appropri- 
ated to  paying  the  debts  of  the  old 
firm ;  and  another  amount  for  im- 
provements made  on  real  estate, 
and  that  the  remainder  should  be 
deemed  the  capital  stock  of  the 
firm.  Held,  that  the  amount  set 
apart  for  improvements  made  on 
real  estate  did  not  make  a  part  of 
the  capital  stock.  Mathers  v.  Pat- 
terson, 33  Pa.  St.  485. 

Where  a  former  clerk  is  taken 
into  copartnership  by  a  firm  which 
was  indebted  to  him,  and  the 
amount  of  such  indebtedness  is 
placed  to  his  credit  upon  the  new 
books,  to  which,  on  dissolution  of 
the  firm,  is  added  his  share  of  the 
net  profits,  such  indebtedness  will 
not  be  regarded  as  capital  put  in 
by  the  new  member,  but  rather  as 
a  loan  to  the  firm  to  be  repaid  him, 
with  his  share  of  the  profits.  Top- 
ping V.  Paddock,  92  111.  92. 

An  incoming  partner  paid  the 
two  original  members  of  the  firm 
money  as  indicated  in  the  receipt : 
"  Received  of  E.  $2,000  for  and  in 
consideration  of  one-half  interest 


in  one  safe,  two  desks,  two  pair  of 
scales,  one  stove  and  pipe:  also  the 
undivided  half  of  our  trade  and 
good-will,  and  the  benefit  accruing 
therefrom;  also  one-half  of  the 
contract  of  potatoes  for  future  de- 
livery, and  the  benefits  of  the  same 
as  per  contract  of  copartnership 
made  this  date  between  H.,  E.  and 
M. : "  Held,  that  the  money  so 
paid  belonged  to  the  original  part- 
ners, especially  if  it  was  credited 
on  the  books  in  equal  amounts  to 
their  stock  account.  Evans  v.  Han- 
son, 42  111.  234. 

Two  persons  agreed  to  form  a 
planting  partnership  with  a  third, 
and,  for  that  purpose,  to  sell  him 
for  his  portion  of  the  capital  one- 
third  of  a  plantation,  the  price  to 
be  paid  out  of  his  share  of  the  prof- 
its.    Held,  that  the  joint  owner- 
ship was  not  to  be  treated  as  if 
acquired  from   different  vendors, 
but  as  subsidiary  to  a  partnership 
to  whose  terms  it  was  subject ;  and 
that  as  by  those  terms  the  vendee 
could  not  take  his  capital  out  of 
the  partnership  until  payment  of 
the  price,  neither  he,  his  creditors, 
nor  his  representatives,  could  take 
his  third  interest  until  the   other 
partners    were    fully  reimbursed. 
Thompson  v.  Mylne,  6  La.  Ann.  80. 
Where,    by    the    terms    of    the 
agreement,  the  defendant  furnished 
the  capital  stock,  and  the  plaintiff 
contributed  his  skill  and  service, 
and  the  profits  of  the  copartnership 
were  to  be    equally  divided,  the 
plaintiff  is  not  to  be  entitled  to  any 
part  of  the  capital  stock  on  a  set- 


Co)  See  as  to  the  equality  of  shares,  infra,  book  iii,  ch.  5,  §  2. 

735 


*'321  EIGHTS    AND   OBLIGATIONS.  [BOOK   III. 

[*321]  ''Increase  and  diminution  of  capital. —  When 
the  agreed  amount  of  capital  of  a  partnership  has 
been  exhausted  and  the  business  cannot  be  carried  on  to 
a  profit,  the  partnership  may  be  dissolved,  as  will  be 
pointed  out  hereafter,  (c)  A  partner  cannot  be  compelled 
to  furnish  more  capital  than  he  has  agreed  to  bring  in 
and  risk;  although  he  cannot,  by  limiting  the  amount  of 
his  capital,  limit  his  liability  for  debts  incurred  by  the 
firm,  (d)  On  the  other  hand,  a  partner  who  has  agreed  to 
furnish  a  certain  amount  of  capital  is  bound  not  only  to 
bring  it  into  the  firm,  but  also  to  leave  it  in  the  business 
until  the  firm  is  dissolved. 

It  follows  from  these  considerations  that  the  agreed  cap- 
ital of  a  partnership  cannot  be  either  added  to  or  withdrawn 
except  with  the  consent  of  all  the  members  of  the  partner- 
ship;^) and  this  rule  is  perfectly  consistent  with  the  ob- 
vious fact  that  the  assets  and  liabilities  of  a  partnership  are 
necessarily  liable  to  fluctuation,  and  that  the  value  of  each 
partner's  share  of  such  assets  constantly  fluctuates  also. 

Borrowing  money  and  increasing  capital. —  The  differ- 
ence between  borrowing  mone}r  on  the  credit  of  a  firm  and 
increasing  its  capital  has  been  already  adverted  to;  {/)  and 
it  has  been  seen  that,  although  each  member  of  an  ordinary 

tlement  of  the  affairs  of  the  part-  consideration  to  support  it.  The 
nership.  He  had  no  interest  in  rights  and  benefits  resulting  to 
any  part  of  the  capital,  excepting  partners  constitute  the  considera- 
so  far  as  in  the  progress  of  the  tion  he  receives  for  the  capital  he 
business  the  same  may  have  been  may  advance ;  he  receives  the  con- 
converted  into  profits.  Conroy  v.  sideration  for  his  capital  by  being 
Campbell,  45  N.  Y.  Super.  Ct.  326;  admitted  a  partner.  Stafford  v. 
Shea  v.  Donahue,  15  Lea,  160.  See,  Fargo,  35  111.  481. 
also,  Manley  v.  Taylor,  50  N.  Y.  (c)  Infra,  book  iv,  ch.  1,  §  2. 
Super.  Ct.  26.  (d)  Ante,  p.  200. 

A  note  given  by  a  partner  to  his  (e)  See  Heslin  v.  Hay,  15  L.  R.  Ir. 

copartner,  as  collateral  security  for  431,  where  an  attempt  was  made  to 

the  capital  advanced  by  the  latter,  violate  this  rule ;  and  see  the  obser- 

being  intended  simply  as  a  receipt  vations  of  Lord  Bram  well  in  Bouch 

for  the  money,  and  to  secure  the  v.  Sproule,  12  App.  Ca.  405. 

return  of  the  capital  in  the  event  (/)  Ante,  pp.  132,  133. 
that  no  loss  occurred,  is  without 

736 


CH.  III.]  CAPITAL   OF   PARTNERSHIPS.  *32i 

trading  partnership  can  pledge  its  credit  for  money  bor- 
rowed in  order  to  carry  on  its  business,  he  cannot  render  it 
liable  to  repay  money  borrowed  by  him  to  enable  him  to 
furnish  the  amount  of  capital  which  he  has  agreed  to  bring 

in-  iff) 

(g)  Ante,  pp.  132,  133. 

Vol.  I  — 47  737 


[*322]  ^CHAPTER  IV. 

OF  JOINT  AND  SEPARATE  PROPERTY. 

Partnership  property.  —  The  expressions  partnership 
property,  partnership  stock,  partnership  assets,  joint  stock, 
and  joint  estate,  are  used  indiscriminately  to  denote  every- 
thing to  which  the  firm,  or,  in  other  words,  all  the  partners 
composing  it,  can  be  considered  to  be  entitled  as  such,  (a) 
The  qualification  as  such  is  important;  for  persons  may  be 
entitled  jointly  or  in  common  to  property,  and  the  same  per- 
sons may  be  partners,  and  yet  that  property  may  not  be 
partnership  property;  e.  g.,  if  several  persons  are  partners  in 
trade,  and  land  is  devised  or  a  legacy  is  bequeathed  to  them 
jointly  or  in  common,  it  will  not  necessarily  become  part- 
nership property  and  form  part  of  the  common  stock  in 
which  they  are  interested  as  partners,  (b) l  Whether  it  does 
so  or  does  not  depends  upon  circumstances,  which  will  be 
examined  hereafter. 

Importance  of  distinguishing  partnership  property 
from  the  separate  property  of  the  partners. —  It  is  often 
a  difficult  matter  to  determine  what  is  to  be  regarded  as 
partnership  property,  and  what  is  to  be  regarded  as  the 
separate  property  of  each  partner.  The  question,  however, 
is  of  importance  not  only  to  the  partners  themselves,  but 
also  to  their  creditors;  for,  as  will  be  seen  hereafter,  if  a 

(a)  The  expression  joint  estate  Eq.  197 ;  S.  C.  on  appeal  under  the 
sometimes  has  a  wider  significa-  name  of  Re  Littles,  10  id.  375. 
tion,  including  all  property  which,  l  The  fact  that  a  negotiable  note 
on  the  bankruptcy  of  the  firm,  is  is  payable  to  two  or  more  persons 
distributable  amongst  its  creditors,  jointly  is  no  evidence  that  it  is 
See  post,  book  iv,  ch.  4,  sec.  3,  Re-  owned  in  partnership;  nor  is  the 
puted  Ownership.  fact  that  such  note  is  in  the  actual 

(b)  Morris  v.  Barrett,  3  Y.  &  J.  possession  of  one  of  the  parties 
884;  and  see  the  judgment  in  Ex  such  evidence.  Haydon  v.  Nico- 
parte  The  Fife  Banking  Co.  6  Ir.  letti,  18  Nev.  290. 


CH.  IV,  SEC.  I.]      JOINT   AND    SEPARATE    PROPERTY.  "323 

firm  becomes  bankrupt  the  property  of  the  firm  and  the 
separate  property  of  each  partner  have  to  be  distinguished 
from  each  other,  it  being  a  rule  to  apply  the  property  of  the 
firm  in  the  first  place  in  payment  of  the  creditors  of  the 
firm,  and  to  apply  the  separate  properties  of  the  partners  in 
the  first  place  to  the  payment  of  their  respective  separate 
creditors. 

*It  is  proposed,  therefore,  to  examine  the  rules  by  [*323] 
which  to  determine  what  is  the  property  of  the  firm 
and  what  the  separate  property  of  its  members. 

Question  determined  by  agreement. —  It  is  for  the  part- 
ners to  determine  by  agreement  amongst  themselves  what 
shall  be  the  property  of  them  all,  and  what  shall  be  the  sep- 
arate property  of  some  one  or  more  of  them.     Moreover,  it 
is  competent  for  them  by  agreement  amongst  themselves  to 
convert  what  is  the  joint  property  of  all  into  the  separate 
property  of  some  one  or  more  of  them,  and  vice  versa.    The 
determination,  therefore,  of  the  question,  What  is,  and  what 
is  not  the  property  of  the  firm?  involves  an  inquiry  into  the 
three  following  subjects,  viz.: 
Joint  estate. 
Separate  estate. 
Conversion  of  one  into  the  other. 

Each  of  these  will  be  examined  in  order. 

Section  I. —  Of  Joint  Estate. 

1.  Property  of  the  firm. —  Whatever  at  the  commence- 
ment of  a  partnership  is  thrown  into  the  common  stock, 
and  whatever  has  from  time  to  time  during  the  contin- 
uance of  the  partnership  been  added  thereto  or  obtained 
by  means  thereof,  whether  directly  by  purchase  or  circui- 
toush^  by  employment  in  trade,  belongs  to  the  firm,  unless 
the  contrary  can  be  shown,  (c)1 

(c)  See    Crawshay  v.    Collins,    2     V.  Burnand,  4  Russ.  247,  and  2  Bli. 
Russ.  339,  as  to  the  patents;  Nerot    N.  S.  415 ;  Bone  v.  Pollard,  24  Beav. 

1  See  post,  Partnership  Realty.  property  is  a  mixed  question  of  law 

Whether  property  is  partnership    and  fact.     Bacon  v,  Lloyd,  1  Tex. 

739 


'323 


KIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Property  paid  for  by  the  firm.—  The  mere  fact  that  the 
property  in  question  was  purchased  by  one  partner  in  his 

283.  See,  also,  as  to  co-owners  of  of  partnership  money  on  the  sepa- 
mines  not  being  copartners,  Clegg  rate  property  of  one  partner,  see 
v.  Clegg,  3  Giff .  322.     As  to  outlays    infra,  §  2. 


App.  (Civ.)  116;    Smith  v.  Harris, 
76  Ind.  104. 

Property  purchased  with  firm 
moneys  for  firm  purposes  is  part- 
nership property.  Way  v.  Steb- 
bins,  47  Mich.  296 ;  Seiler  v.  Bren- 
ner, 3  S.  West.  Rep.  (Ky.)  796.  See, 
also,  Way  v.  Stebbins,  47  Mich. 
296. 

The  circumstance  that  the  pay- 
ment was  made  out  of  partnership 
funds,  especially  if  the  property  be 
necessary  in  the  ordinary  opera- 
tions of  the  partnership  and  be  so 
employed,  will  afford  a  very  strong 
presumption  that  it  was  intended 
to  be  held  as  partnership  property, 
and,  in  the  absence  of  proof  to  the 
contrary,  will  be  decisive.  Rice  v. 
Pennypacker,  5  Del.  279. 

Where  a  tenant  is  a  firm  the 
tenant's  right  of  renewal  of  the 
lease  is  a  partnership  asset.  John- 
son v.  Loughery,  6  Cent.  R.  278; 
S.  C.  8  Atl.  R.  36. 

The  mere  fact  that  two  persons 
use  certain  machinery  in  a  business 
in  which  they  are  partners  does  not 
prove  that  it  is  partnership  prop- 
erty. If  no  account  is  taken  of  it 
in  settling  the  firm  business  the 
more  natural  inference  is  that  it  is 
owned  in  common.  Browning  v. 
Cover,  42  Leg.  Intel.  396. 

F.  and  W.  formed  a  partnership 
into  which  F.  put  certain  machin- 
ery, covered  by  an  unrecorded 
mortgage  previously  given  by  F. 
W.  sold  his  interest  in  the  partner- 
ship to  three  others,  who  continued 


the  business  with  F.  Held,  that, 
upon  the  formation  of  the  partner- 
ship, F.  ceased  to  have  any  indi- 
vidual interest  in  any  portion  of 
the  mortgaged  machinery,  and 
that,  as  the  mortgage  was  unre- 
corded, the  mortgagee's  only  rem- 
edy was  against  whatever  portion 
of  the  partnership  assets  might  re- 
main as  F.'s  share  after  all  claims 
against  the  firm  were  settled. 
Ringo  v.  Wing,  5  So.  West.  Rep. 
(Ark.)  787. 

A  partner  in  a  firm  engaged  in 
purchasing  live-stock  on  commis- 
sion died  after  certain  commissions 
were  partly  earned.  The  surviving 
partner  completed  the  transactions 
and  received  the  money.  Held, 
that  such  commissions  should  be 
treated  as  partnership  assets,  but 
that  the  surviving  partner  was  en- 
titled to  have  an  allowance  for  his 
time  and  expenses  in  completing 
the  transactions.  Newell  v.  Hum- 
phrey, 37  Vt.  265. 

A  judgment  in  a  suit  by  two  for 
a  trespass  alleged  to  be  on  firm 
property  is  firm  assets.  Collins  v. 
Butler,  14  Cal.  223. 

On  the  termination  of  a  partner- 
ship formed  to  plant  and  sell  oys- 
ters, planted  oysters  remaining  in 
the  beds  after  payment  of  all  part- 
nership debts  are  the  common 
property  of  both  partners,  of 
which,  as  in  case  of  any  personal 
property  held  in  common,  one  ten- 
ant in  common  cannot  dispose  of 
the  share  of  the  other  without  his 


740 


CH.  IV,  SEC.  I.]       JOINT    AND    SEPARATE    PROPERTY. 


524 


own  name  is  immaterial,  if  it  was  paid  for  out  of  the  partner- 
ship moneys,  for  in  such  a  case  he  will  be  deemed  to  hold  the 
property  in  trust  for  the  firm,  unless  he  can  show  that 
he  holds  it  for  himself  alone,  (d)1     Upon  this  *prin-  [*324] 


authority.  Ruckman  v.  Decker, 
23  N.  J.  Eq.  283. 

If  such  tenant  in  common  turn 
over  such  property  to  a  firm  of 
which  he  becomes  a  member  such 
firm  is  accountable  to  the  other 
tenant  in  common  of  the  property 
for  the  value  of  his  share  of  the 
property  so  turned  over  and  used 
by  the  new  firm.  Ruckman  v. 
Decker,  supra. 

Where  C.  and  B.  formed  a  part- 
nership for  the  purpose  of  making, 
selling  and  letting  chronometers, 
C.  contributing  all  the  capital  and 
B.  giving  labor  only  and  receiving 
a  salary  and  a  share  of  the  profits, 
and  C.  agreed  to  put  into  the  stock 
of  such  partnership  certain  chro- 
nometers which  were  his  property, 
upon  a  stipulation  "  that  they 
should  be  taken  at  a  fair  valuation 
as  a  stock  in  trade,  so  that  upon  a 
sale  of  them  at  the  usual  market 
price  the  profit  usual  in  that 
branch  of  business  might  be  made 
upon  them;"  but  this  agreement 
never  was  reduced  to  writing  as 
was  intended,  nor  was  a  valuation 
ever  fixed  upon ;  and  after  dissolu- 
tion of  the  firm  both  partners  re- 
mained in  the  store  they  had  occu- 
pied as  partners,  and  C.  let  the 
chronometers  in  his  own  name  and 
kept  his  own  accounts  of  them,  and 
there  was  some  evidence  that  it 
was  understood  between  the  par- 
ties that  C.  was  to  take  stock  and 
pay  the  debts,  held,  that  after  such 
dissolution  the  chronometers. were 
the  property  of  C,   and   that  his 


lessee  of  one  of  them  could  recover 
it  from  B.,  who  had  taken  it  away 
from  him.  Upon  such  an  agree- 
ment the  chronometers  did  not  be- 
come the  property  of  the  firm,  but 
continued  always  the  property  of 
C,  the  firm  having  permission 
to  use  them.  Penny  v.  Black,  9 
Bosw.  310. 

One  of  two  partners  cannot  com- 
mit a  trespass,  larceny,  embezzle- 
ment or  burglary  as  to  the  property 
or  house  of  the  firm.  Jones  v.  The 
State.  76  Ala.  8 :  Alfele  v.  Wright, 
17  Ohio,  238;  State  v.  Butman,  61 
N.  H.  511. 

(d)  See  per  Lord  Eldon  in  Smith 
V.  Smith,  5  Ves.  193;  Robley  v. 
Brooke,  7  Bli.  90;  Morris  v.  Bar- 
rett, 3  Y.  &  J.  384.  See,  also,  Hel- 
more  v.  Smith,  35  Ch.  D.  436. 

1  Where  a  firm  exclusively  en- 
gaged in  the  collection  of  rents  de- 
posit the  same  as  collected  in  a 
bank  in  the  name  of  one  of  the 
partners,  from  which  account  the 
rents  are  paid  to  the  parties  enti- 
tled, by  the  check  of  such  partner, 
the  fund  so  constituted  is  partner- 
ship property  as  to  a  judgment 
creditor  of  the  firm  for  rents  col- 
lected by  them,  seeking  to  reach 
such  fund  by  a  creditor's  bill 
against  the  surviving  partner. 
Le  Roy  v.  Mathewson,  47  N.  Y. 
Super.  Ct.  389. 

If  a  person  buys  goods  for  a 
firm  of  which  he  is  a  member  the 
goods  bought  become  the  property 
of  the  firm,  though  he  does  not  at 
the  time  disclose  the  name  of  his 


741 


*324 


KIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


ciple  it  is  held  that  land  purchased  in  the  name  of  one 
partner,  but  paid  for  by  the  firm,  is  the  property  of  the 
firm,  although  there  may  be  no  declaration  or  memoran- 
dum in  writing  disclosing  the  trust,  and  signed  by  the  part- 
ner to  whom  the  land  has  been  conveyed,  (e) l  So,  if  shares 
in  a  company  are  bought  with  partnership  money,  they  will 
be  partnership  property,  although  they  may  be  standing  in 
the  books  of  the  company  in  the  name  of  one  partner  only, 
and  although  it  may  be  contrary  to  the  company's  deed 
of  settlement  for  more  than  one  person  to  hold  shares  in 
it-  if) 


partner.  Scott  v.  McKinney,  98 
Mass.  344. 

Where  two  members  of  a  firm 
engaged  in  buildiug  a  mill  bought, 
with  their  own  means,  lumber  for 
that  purpose  and  delivered  it  on 
the  ground  where  the  mill  was 
building,  and  the  other  partner, 
who  had  personal  charge  of  the 
work,  took  possession  of  the  lum- 
ber and  applied  it  to  the  partner- 
ship uses  as  it  was  needed,  with 
the  knowledge  of  the  two  former, 
and  without  objection,  these  facts 
are  enough  to  prove  a  conversion 
of  all  the  lumber  so  bought  and  de- 
livered into  partnership  property. 
Person  v.  Wilson,  25  Minn.  189. 

A  judgment  upon  a  warrant  of 
attorney  given  to  one  member  of  a 
partnership  to  secure  a  debt  due 
the  partnership  will  be  held  by 
him,  as  trustee,  for  the  benefit  of 
the  firm ;  and  payment  of  the 
judgment  will  satisfy  the  partner- 
ship debt.  Chapin  v.  Clemitson,  1 
Barb.  811. 

Where  one  permits  another  to 
buy  stock  on  their  joint  account, 
in  anticipation  of  forming  a  part- 
nership, and  immediately  after- 
wards repudiates  the  agreement  to 


become  a  partner,  he  is  not  entitled 
to  any  of  the  property  bought,  nor 
are  his  individual  creditors.  Rice 
v.  Shuman,  43  Pa.  St.  37. 

A  special  contract  between  part- 
ners respecting  the  ownership,  sale 
and  application  of  the  proceeds  of 
certain  railroad  bonds  construed. 
Simonton  v.  Sibley,  122  U.  S.  220. 

As  to  when  real  estate  is  partner- 
ship property,  see  post. 

(e)  Forster  v.  Hale,  5  Ves.  308, 
and  3  id.  G96. 

1  Where  it  appeared  that  real  es- 
tate had  been  used  by  a  partnership 
for  a  long  series  of  years  in  the 
manufacture  of  iron,  and  that  upon 
the  death  of  any  partner  his  heirs 
at  law,  to  whom  the  land  descended, 
came  into  the  partnership  in  his 
place,  and  there  was  no  proof  of 
any  articles  of  partnership,  held, 
that  the  whole  partnership  estate, 
whether  consisting  of  real  or  per- 
sonal property,  was  to  be  regarded 
in  equity  as  a  consolidated  fund,  to 
be  appropriated  primarily  and  ex- 
clusively to  the  satisfaction  of 
partnership  debts.  Good  burn  v. 
Stevens,  5  Gill,  1. 

(/ )  Ex  parte  Connell,  3  Deac.  201 ; 
Ex  parte  Hinds,  3  De  G.  &  S.  613. 


742 


OH.  IV,  SEC.  I.]      JOINT    AND    SEPARATE    PROPERTY.  *325 

Ships. —  As  regards  ships  there  was  often  a  difficulty  aris- 
ing from  the  ship  registration  acts.  For  as  it  was  clearly 
settled  that  a  ship  belonged,  both  at  law  and  in  equity,  to 
the  person  or  persons  who  were  registered  as  her  owners, 
and  to  no  one  else,  it  followed  that  if  a  ship  had  been  bought 
with  partnership  money,  had  been  used  as  partnership  prop- 
erty, and  had  always  been  treated  as  such  by  all  the  part- 
ners, yet,  if  she  was  registered  in  the  name  of  one  partner 
only,  there  was  no  method  by  which  that  one  could  be  pre- 
vented from  effectually  asserting  an  exclusive  right  to  the 
ship,  and  depriving  his  copartners  of  all  their  interest  in 
her.  iff)  The  provisions  of  the  present  merchant  shipping 
acts  differ,  however,  in  several  material  respects  from  the 
enactments  previously  in  force,  and  now,  in  the  case  above 
supposed,  the  registered  partner  would  be  deemed  a  trustee 
for  the  firm,  (h) 

•Cases  where  property  paid  for  by  the  firm  does  [*325] 
not  belong  to  it. —  Strong  as  is  the  presumption  that 
what  is  bought  with  partnership  money  is  partnership  prop- 
erty, the  presumption  may  be  rebutted;  e.  g.,  by  showing 
that  the  money  was  lent  by  the  firm  to  one  partner,  and  so 
was  not  in  fact  partnership  money  when  invested,  (z)  More- 

(g)  See  Slater  v.  "Willis,  1  Beav.  firm,  see  Ex  parte  Howden,  2  M. 

354;  Battersby  v.  Smyth,  3  Madd.  D.  &  D.  574. 

110;  Camden  v.  Anderson,  5  T.  R.        (h)  17  and  18  Vict.  ch.  104,  g§  37 

709;  Curtis  v.  Perry,   6  Ves.  739;  and  43,  and  26  and  26  Vict.  ch.  63. 

Ex  parte  Yallop,  15  Ves.  60;  Ex  §3.     Upon  the  construction  of  the 

parte  Houghton,  17  Ves.  251 ;  and  former  act,  see  Hughes  v.  Suther- 

astothe  old  law  relating  to  equi-  land,  7  Q.   B.   D.   160;   Liverpool 

table  interests  in  ships,  see  an  article  Borough  Bank  v.  Turner,   1  J.   & 

by  the  author  in  the  Law  Magazine  H.  159,  and  2  De  G.  F.  &  J.  502. 

for  May,  1862,  vol.  xiv,  p.  70,  N.  A  ship  may  be  registered  in  the 

S.     If  a  ship  was  registered  in  the  name  of  a  company,  though  some 

name  of  two  partners  the  shares  of  its  members  are  foreigners.   See 

in    which    they    were    interested  17  and  18  Vict.  ch.  104,  §  18,  and 

might  have  been  shown.     See  Ex  R.  v.  Arnaud.  9  Q.  B.  806. 
parte  Jones,  4  M.  &  S.  450.     As  to        (t)  As  in  Smith  v.  Smith,  5  Ves. 

the  right  of  one  partner  to  sell  or  193.     See,  also,  "Walton  v.  Butler, 

mortgage  a  ship  belonging  to  the  29   Beav.  428;  Ex  parte  Emly,  1 

Rose,  64. 
743 


*326  EIGHTS    AND   OBLIGATIONS.  [liOOK    III. 

over,  it  is  to  be  observed  that  property  which  has  been  used 
and  treated  as  partnership  property  cannot  be  presumed  to 
belong  to  one  partner  only,  simply  because  he  paid  for  it; 
for  the  presumption  in  such  a  case  is,  rather,  that  the  prop- 
erty in  question  was  his  contribution  to  the  common 
stock,  (j)  This  subject  will  be  adverted  to  more  at  length 
in  the  next  section. 

Secret  benefits  obtained  by  one  partner. —  It  has  been  al- 
ready seen  that  one  partner  will  not  be  allowed  to  retain,  for 
his  own  exclusive  benefit,  any  property  which  he  may  have 
acquired  in  breach  of  that  good  faith  which  ought  to  regu- 
late the  conduct  of  partners  inter  se.  Whatever  property 
has  been  so  acquired  will  be  treated  as  obtained  for  the 
benefit  of  all  the  partners,  and  as  being  part  of  the  assets 
of  the  firm;  and  this  rule  applies  to  property  obtained  by 
a  continuing  or  surviving  partner  in  breach  of  the  good 
faith  which  he  is  bound  to  exercise  towards  a  retired 
partner  and  the  representatives  of  a  deceased  partner,  so 
long  as  their  interest  in  the  partnership  assets  contin- 
ues, (k) 

Money  paid  to  one  partner  for  his  exclusive  benefit. — 
At  the  same  time,  if  an  advantage  which  has  been  obtained 
by  a  partner  is  wholly  unconnected  with  partnership  af- 
fairs, or,  being  connected  with  them,  has  been  conferred 
upon  him  with  a  view  to  his  own  personal  benefit,  he  can- 
not be  called  upon  to  account  for  it  to  the  partnership.  For 
example,  where  a  ship,  belonging  to  a  Frenchman  and  two 
Americans,  as  partners,  was  captured  by  a  British  cruiser, 
and  compensation  was  made  to  the  Americans,  but  to  them 
only,  the  Frenchman  being  expressly  excluded,  it  was  held 
that  the  sum  awarded  to  the  Americans  belonged  to  them 
alone,  and  that  the  Frenchman  had  no  interest  in 
[*326]  it.  (I)     So,  if  one  partner  is  *the  lessee  of  property 

(j)  See  Ex  parte  Hare,  1  Deac.     551.     See,  also,  Burnand  v.   Rodo 

25,  per  Sir  J.  Cross.  canachi,  7  App.  Ca.  333 ;  Thompson 

(fc)  See  ante,  p.  305  et  seq.  v.  Ryan,  2Swanst.  565,  n;  Moffatt  v. 

(Z)  Campbell  v.  Mullett,  2  Swanst.     Farquharson,  2  Bro.  C.  C.  338.     See 

744 


CH.  IV,  SEC.  I.]      JOINT   AND    SEPARATE    PROPERTY. 


*326 


to  which  the  firm  is  only  entitled  so  long  as  the  part- 
nership continues,  and,  on  the  dissolution  of  the  partner- 
ship, the  lease  is  sold  or  renewed,  the  price  of  the  sold 
lease,  or  the  renewed  lease,  as  the  case  may  be,  will  belong, 
not  to  the  firm,  but  to  that  partner  in  whom  the  lease  is,  by 
hypothesis,  exclusively  vested.  (?n) 

Property  acquired  after  dissolution.—  As  regards  prop- 
erty acquired  after  a  dissolution,  but  before  the  affairs  of 
a  dissolved  partnership  have  been  wound  up,  such  property 
is  not  necessarily  to  be  considered  as  partnership  property, 
even  though  the  partner  acquiring  it  has  continued  to  carry 
on  the  business  of  the  dissolved  firm  without  the  consent 
of  his  late  partners.  This  was  decided  in  Nerot  v.  Bur- 
nand.  (n)  In  that  case,  in  effect,  an  hotel-keeper  bequeathed 
his  business  to  his  son  and  daughter.  After  the  death  of 
the  testator  the  daughter  continued  to  carry  on  the  busi- 
ness. She  afterwards  transferred  it  to  a  new  house  in  Clif- 
ford street,  and  this  house  was  conveyed  to  her  in  fee.  She 
continued  to  carry  on  the  business  there  for  some  time,  and 
ultimately  she  married.  During  the  greater  part  of  the 
time  which  had  elapsed  since  the  death  of  the  testator  his 
son  had  been  abroad,  and,  on  his  return,  he  insisted  that  he 
ought  to  be  considered  as  a  partner  with  his  sister,  and 
that,  as  such,  he  was  entitled  to  have  the  new  house  taken 
by  her,  and  all  the  stock  in  trade  and  effects  purchased  by 
her  in  order  to  carry  on  the  business,  treated  as  partnership 
property.  The  vice-chancellor  decided  that  the  testator's 
son  and  daughter  had  become  partners,  but  that  the  part- 
nership between  them  had  been  dissolved  on  her  marriage. 
He  also  held  that  the  new  house  and  all  the  goods,  furni- 
ture, plate,  linen,  china,  wines,  stock  in  trade,  implements 
and  other  effects,  being  in  and  about  the  premises,  formed 

the  note  on  this  case  in  Belt's  edi-        (n)  4  Russ.  247,  and  2  Bli.  N.  S. 
tion  of  Brown's  reports.  215.     See,  too,   Payne  v.  Hornby  ^ 

(w)  See  Burdon  v.  Barkus,  3  Giff.     25  Beav.  280. 
412 ;  aff .  on  appeal,  4  De  G.  F.  & 
J.  42. 

745 


*327  EIGHTS   AND   OBLIGATIONS.  [BOOK    III. 

a  part  of  the  partnership  property.  Upon  appeal  this  de- 
cision was  affirmed  so  far  as  it  related  to  the  existence  and 
subsequent  dissolution  of  partnership,  but  was  varied  so  far 

as  it  related  to  what  ought  to  be  considered  as 
[*327]  partnership   property.      *Upon  this  head    the  lord 

chancellor's  judgment  wTas  as  follows: 

'•It  appears  to  me  satisfactorily  made  out  from  all  the  circumstances 
that  the  house  in  Clifford  street  was  bought  with  the  partnership  prop- 
erty ;  bought,  in  the  first  instance,  partly  with  the  partnership  property, 
partly  with  money  borrowed  by  Miss  Nerot  and  afterwards  repaid  out 
of  the  partnership  effects,  and  partly  upon  the  credit  of  the  house  that 
belonged  to  the  partnership,  and  I  think  that  part  of  the  vice-chancel- 
lor's decree  by  which  he  directs  the  house  to  be  sold  must  be  affirmed. 

"There  is  a  part  of  the  decree,  however,  in  which  I  cannot  concur. 
The  dissolution  of  the  partnership  took  place  in  September,  1819.  The 
vice-chancellor  has  directed  all  the  property  to  be  sold  which  was  in  the 
house  in  Clifford  street  at  the  time  when  the  decree  was  pronounced, 
several  years  after  the  dissolution  of  the  partnership,  as  if  all  the  prop- 
erty which  at  the  time  of  the  decree  existed  in  the  house  was,  without 
inquiry,  to  be  considered  as  partnership  property.  Lord  Eldon  doubted 
greatly  whether  that  part  of  the  decree  could  be  sustained;  and  in  my 
opinion  it  must  be  varied  by  directing  the  master  to  take  an  account  of 
the  particulars  of  the  partnership  property  which  were  in  the  house  in 
Clifford  street  at  the  time  of  the  dissolution,  and  of  the  value  of  the 
property  at  that  time ;  and  to  inquire  whether  any  part  of  that  property 
still  remains  in  the  house."  (o) 

Good-will. —  The  good-will  of  a  partnership,  in  so  far  as  it 
has  a  pecuniary  value,  is  partnership  property,  unless  the 
contrary  can  be  shown.  This  subject,  however,  will  be 
more  conveniently  discussed  hereafter  when  treating  of 
partnership  articles,  (p) 1 

(o)  See,  also,  Ex  parte  Morley,  8  paper,  when  published    by    more 

Ch.  1026,  where  a  surviving  partner  than  one,  is  partnership  property  : 

continued  the  business,  sold  the  old  and  when  one  of  the  partners  die 

stock  in  trade,  and  it  was  held  that  it  does  not  survive  to  the  surviving 

the  new  stock  in  trade  formed  part  partner,  but  belongs  to,  or  is  ad- 

of  his  separate  estate.  ministered  as  part  of,  the  joint  es- 

(p)  See  infra,  book  iii,  ch.  9,  §  2.  tate.     Holden  v.  M'Makin,  1  Pars. 

1  The  subscription  list  of  a  news-  Sel.  Cas.  270. 

746 


CH.  IV,  SEC.  II.]   JOINT  AND  SEPARATE  PROPERTY. 


*323 


Section  II. —  Separate  Estate. 

2.  Property  of  the  individual  partners. —  The  preced- 
ing inquiry  into  what  constitutes  the  property  of  the  firm 
has  rendered  it  unnecessary  to  inquire  at  length  into  what 
constitutes  the  separate  property  of  its  members.  A  few 
additional  observations,  pointing  out  the  danger  of  reiving 
too  much  on  circumstances  which  are  often  regarded  as 
decisive,  may,  however,  be  usefully  added. 

*That  which  produces  partnership  profits  may  [*328] 
belong  to  one  partner  only. —  It  by  no  means  fol- 
lows that  persons  who  are  partners  by  virtue  of  their  par- 
ticipation in  profits  are  entitled  as  such  to  that  which 
produces  those  profits.  For  example,  coach-proprietors 
who  horse  a  coach  and  divide  the  profits  may  each  make 
use  of  horses  which  belong  to  himself  alone  and  not  to  the 
firm  of  proprietors,  (q) 1     So,  where  a  merchant  employs  a 


(q)  As  in  Frornont  v.  Coupland,  2 
Bing.  170;  Barton  v.  Hanson,  2 
Taunt.  49 ;  and  see  Wilson  v.  White- 
head, 10  M.  &  W.  503,  as  to  an 
author's  interest  in  paper  supplied 
for  his  work  to  the  publisher. 

1  Where  two  persons  were  en- 
gaged in  the  livery  business,  each 
individually  owning  a  portion  of 
the  property  used  therein,  the  only 
community  of  interest  being  in 
the  profits,  the  property  was  not 
partnership  property  in  such  sense 
as  to  prevent  the  owners  from 
claiming  it  as  exempt  from  execu- 
tion.    Root  v.  Gay,  64  la.  399. 

Where  S.  furnished  the  capital 
and  owned  all  the  stock  of  the 
firm,  and  R.  contributed  his  labor 
and  experience  and  had  "a  work- 
ing interest "  only,  receiving  a 
share  of  the  net  profits  for  his  serv- 
ices, the  property  did  not  become 
partnership  property  and  was  lia- 


ble to  be  sold  to  satisfy  the  individ- 
ual debts  of  S.  Stumph  v.  Bauer, 
76  Ind.  157. 

Personal  property  purchased  by 
one  partner  with  his  own  funds,  to 
be  used  for  partnership  purposes,  in 
the  absence  of  any  understanding 
to  the  contrary  remains  the  prop- 
erty of  the  purchaser.  If  such 
property  be  destroyed  in  the  use  of 
the  partnership  and  replaced,  the 
property  replaced  belongs  to  the 
partner  who  owned  the  original 
property.  Kelly  v.  Clancey,  16 
Mo.  App.  550. 

If  partners,  by  arrangement 
among  themselves,  own  each  a 
separate  part  of  the  stock  in  trade 
on  which  the  partnership  business 
is  transacted,  the  stock  will  never- 
theless be  regarded  as  partnership 
property  for  the  payment  of  part- 
nership debts,  at  least  as  to  cred- 
itors who  have  no  notice  that  the 
17 


J2S 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


broker  to  buy  goods  for  him  and  to  sell  them  again  on  his 
account,  although  it  may  be  agreed  that  the  profits  are  to 

Elliot 


stock  is  owned  in  that  way 
v.  Stevens,  38  N.  H.  311. 

Articles  of  partnershqj  for  manu- 
facture of  carriages  provided  that 
the  entire  stock  should  be  fur- 
nished by  one  partner;  that  the 
other  was  to  have  no  interest  or 
ownership  in  the  capital  stock,  but 
6hould  give  his  personal  attention 
exclusively  to  the  business;  and 
that  the  net  pi'ofits  and  losses 
should  be  equally  divided.  Held, 
that  stock  and  tools  of  the  factory 
manufactured  by  it  in  the  course 
of  its  business  was  not  the  sole 
property  of  the  partner  furnishing 
the  capital,  but  was  joint  property. 
Snyder  v.  Lunsford,  9  W.  Va.  223. 

Plaintiffs  and  defendant  were 
engaged  in  carrying  on  business  as 
partners,  the  articles  of  copartner- 
ship providing  that  the  capital  con- 
tributed by  the  plaintiffs  should 
belong  to  them  respectively  and 
exclusively.  The  plaintiffs  pur- 
chased a  lathe  and  other  machin- 
ery, which  were  put  in  the  shop  in 
the  custody  of  the  defendant,  who 
was  to  carry  on  the  business,  and 
one-half  the  cost  of  which  machin- 
ery was,  by  one  of  the  plaintiffs, 
credited  to  each  of  them  upon  the 
books  of  the  firm.  Held,  that,  by 
the  credit  of  the  cost  of  the  ma- 
chinery to  the  plaintiffs,  the  ma- 
chinery became  the  property  of 
the  firm,  and  that  the  same  having 
been  removed  by  the  defendant, 
the  plaintiffs  could  not  maintain 
trover  therefor.  Robinson  v.  Gil- 
fillian,  15  Hun,  267. 

An  entry  in  the  partnership 
books  by  one  of  the  partners  in  the 
business  of   a  saw-mill,  charging 


himself  with  a  boat  which  he  had 
built  at  the  mill,  may  be  intro- 
duced by  him  as  evidence  inter  alia 
to  prove  the  boat  to  be  his  individ- 
ual property.  Reno  v.  Crane,  2 
Blackf.  217. 

A.,  B.  and  C.  agreed  to  engage 
in  the  shipment  and  sale  of  such 
cattle  as  either  might  from  time  to 
time  purchase  on  his  own  account 
and  offer  to  the  others  at  cost  for 
the  purpose  of  shipment  and  sale 
on  joint  account,  but  it  was  pro- 
vided that  when  the  party  pur- 
chasing delivered  a  lot  of  cattle  to 
the  place  of  shipment  the  others 
had  the  option  to  take  an  interest 
or  decline,  but  if  they  accepted, 
the  lot  so  offered  became  partner- 
ship property  and  was  sold  on  joint 
account;  but  if  they  did  not,  it  re- 
mained the  property  of  the  buyer 
and  was  shipped  and  sold  on  his 
own  account.     H.,  to  whom  this 
arrangement  was  unknown,  sold 
cattle  to  A.  on  his  individual  credit, 
to  be  paid  for  on  his  receiving  re- 
turns of  sales,  but  he  failed  to  pay 
as  agreed.  Held,  that  the  cattle  did 
not  become   partnership   property 
till  delivered  at  the  place  of  ship- 
ment and  accepted  to  be  shipped 
and  sold  on  joint  account;  that  at 
the  time  the  cattle  were  sold  and 
delivered  to  A,  B.  and  C.  did  not 
acquire  an  interest  therein  inde- 
pendent of  their  consent,  and  were 
not  liable  by  operation  of  law  for 
the  debt  thus  contracted.    The  fact 
that  they  or  either  of  them  subse- 
quently elected  to  take  an  interest 
in  the  cattle  under  said  agreement 
did  not  create  a  liability  against 
them   as    partners  on   such    pui- 


748 


CH.  IV,  SEC.  II.]       JOINT   AND   SEPAEATE    PROPERTY. 


*328 


be  divided,  the  goods  themselves,  and  the  money  arising 
from  their  sale,  are  the  property  of  the  merchant  and  not 
the  joint  property  of  himself  and  the  broker;  (r)  and  it  not 
un frequently  happens  that  dormant  partners  have  no  inter- 
est in  anything  except  the  profits  accruing  to  the  firm  to 
which  they  belong,  (s) 

Property  used  for  partnership  purposes  not  necessarily 
partnership  property. —  Again,  it  by  no  means  follows  that 
property  used  by  all  the  partners  for  partnership  purposes 
is  partnership  property.  For  example,  the  house  and  land 
in  and  upon  which  the  partnership  business  is  carried  on 
often  belongs  to  one  of  the  partners  only,  either  subject  to 
a  lease  to  the  firm,  or  without  any  lease  at  all.  (t)  So  it 
sometimes  happens,  though  less  frequently,  that  office  fur- 
niture, (u)  and  even  utensils  in  trade,  {x)  are  the  separate 
property  of  one  of  the  partners,  subject  to  the  right  of  the 
others  to  use  them  as  long  as  the  partnership  continues. 


chase.  Valentine  v.  Hickle,  39  Ohio 
St.  19. 

Money  paid  by  a  person  for  a 
half  interest  in  an  existing  business, 
under  an  agreement  for  a  partner- 
ship between  him  and  the  proprie- 
tor, does  not  belong  to  the  firm  but 
to  the  former  proprietor.  Ball  v. 
Farley,  81  Ala.  288. 

Individual  assets  of  one  partner 
hypothecated  by  him  for  a  firm 
debt  do  not  thereby  become  firm 
assets.  Fay  v.  Finley,  14  Phila. 
206 ;  S.  C.  38  Leg.  Intel.  222. 

A  mortgage  given  by  one  part- 
ner to  secure  any  balance  that  may 
be  due  to  the  other  is  not  a  firm 
asset  but  should  be  distributed  to 
the  individual  creditors  of  the 
mortgagee.  Niagara  Bank  v.  Lord, 
33  Hun  (N.  Y.),  557. 

(r)  Smith  v.  Watson,  2  B.  &  C. 
401 ;  Meyer  v.  Sharp,  5  Taunt.  74 ; 
Burnell  v.  Hunt,  5  Jur.  650,  Q.  B. 


(s)  See  Ex  parte  namper,  17  Ves. 
404,  405;  Ex  parte  Chuck,  Mont. 
373. 

{t)  See  Burdon  v.  Barkus,  3  Giff . 
412,  aff.  on  appeal,  4  De  G.  F.  &  J. 
42,  as  to  a  lease  of  a  coal  mine ;  Ex 
parte  Murton,  1  M.  D.  &  D.  252 ; 
Balmain  v.  Shore,  9  Ves.  500 ;  Row- 
ley v.  Adams,  7  Beav.  548 ;  Doe  v. 
Miles,  1  Stark.  181,  and  4  Camp. 
373.  If  there  is  no  lease  and  the 
firm  is  dissolved,  the  owner  can 
eject  his  late  partners  without  no- 
tice to  quit.  Doe  v.  Bluck,  8  C.  & 
P.  464;  Benham  v.  Gray,  5  C.  B. 
138  (an  action  of  trespass).  As  to 
an  injunction  in  such  cases,  see 
Elliot  v.  Brown,  3  Swanst.  489,  n.; 
Hawkins  v.  Hawkins,  4  Jur.  N.  S. 
1044,  V.-C.  Stuart. 

(u)  Ex  parte  Owen,  4  De  G.  &  Sm. 
351.  See  Ex  parte  Hare,  1  Deac.  16 ; 
Ex  parte  Murton,  1  M.  D.  &  D.  252. 

(a?)  Ex  parte  Smith,  3  Madd.  63. 


749 


*329  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

If,  however,  a  partner  brings  such  property  into  the  com- 
mon stock  as  part  of  his  capital  it  becomes  partner- 
[*329]  *ship  property,  and  any  increase  in  its  value  will 
belong  to  the  firm,  (y) 

Property  bought  with  the  money  of  the  firm. —  It  does 
not  even  necessarily  follow  that  property  bought  with  the 
money  of  the  firm  is  the  property  of  the  firm.  For  it  some- 
times happens  that  property,  although  paid  for  by  the  firm, 
has  been,  in  fact,  bought  for  one  partner  exclusively,  and 
that  he  has  become  debtor  to  the  firm  for  the  purchase 
money.  (?) 

Agreement  of  the  partners  the  true  test. —  It  is  obvi- 
ous, therefore,  that  the  only  true  method  of  determining  as 
between  the  partners  themselves  what  belongs  to  the  firm, 
and  what  not,  is  to  ascertain  what  agreement  has  been 
come  to  upon  the  subject.  If  there  is  no  express  agree- 
ment attention  must  be  paid  to  the  source  whence  the  prop- 
erty was  obtained,  the  purpose  for  which  it  was  acquired, 
and  the  mode  in  which  it  has  been  dealt  with.  The  follow- 
ing cases,  in  which  there  was  very  little  evidence  to  show 
what  agreement  had  been  made,  may  be  usefully  referred 
to  on  this  subject. 

Stock  in  trade  and  furniture. —  In  Ex  parte  Owen,  (a) 
one  Bowers,  who  was  a  grocer,  provision  dealer  and  wine 
merchant,  and  who  possessed  stock  in  trade  and  household 
furniture  at  his  place  of  business,  took  two  partners,  with- 
out any  agreement  except  that  they  were  to  participate  in 
the  profits  of  the  concern.  They  brought  in  no  capital 
and  paid  no  premium,  and  no  deed  or  agreement  was  exe- 
cuted. Bowers  bought  with  his  own  money,  but  in  the 
name  of  the  firm,  new  stock  required  for  the   business. 

(y)  Robinson  v.  Ashton,  20  Eq.  25.        (a)  4  De  G.  &  Sin.  351.    See,  also, 

(z)  See  Smith  v.   Smith,  5  Ves.  Pilling  v.  Pilling,  3  De  G.  J.  &  S. 

193;  Walton  v.   Butler,    29  Beav.  162.     As  to  a  lease  of  salt-works 

428;   Ex  parte  Emly,  1  Rose,   64.  belonging  originally  to  one  partner. 

Compare  the  case  of  The  Bank  of  but  which  became  the  property  of 

England,    3  De   G.  F.    &  J.    645,  the  firm,  Parker  v.  Hills,  5  Jur. 

noticed  infra,  p.  330.  N.  S.  809,  and  on  appeal,  7  id.  833. 

750 


CH.  IV,  SEC.  II.]   JOINT  AND  SEPARATE  PROPERTY.         *330 

Upon  the  bankruptcy  of  the  firm  the  question  arose  to 
whom  the  stock  in  trade  and  furniture  belonged.  The 
court,  coming  to  the  best  conclusion  it  could  from  such 
materials  as  were  before  it,  held  that  there  was  an  agree- 
ment between  the  three,  expressed  or  implied,  that  all  the 
stock  in  trade  should  become  the  property  of  the 
three,  subject  to  an  account,  in  *which  the  partner-  [*330J 
ship  would  be  debited  in  favor  of  Bowers  for  the 
value  of  the  articles  which  belonged  to  him  or  for  which 
he  paid.  But  the  court  thought  there  was  not  the  same 
ground  for  such  an  inference  as  to  the  household  furniture, 
and  that,  therefore,  was  held  to  have  continued  and  to  re- 
main the  separate  estate  of  Bowers. 

Outlays  on  property. —  Sometimes  a  firm  lays  out  money 
on  property  which  belongs  exclusively  to  one  partner;  or 
some  of  the  partners  lay  out  their  own  moneys  on  the  prop- 
erty of  the  firm;  and  in  such  cases  the  question  arises 
whether  the  money  laid  out  can  be  considered  as  a  charge 
on  the  property  on  which  it  has  been  expended,  or  whether 
the  owners  of  the  property  obtain  the  benefit  of  the  outlay. 
The  agreement  of  the  partners,  if  it  can  be  ascertained,  de- 
termines their  rights  in  such  cases.  But  where,  as  often 
happens,  it  is  extremely  difficult,  if  not  impossible,  to  ascer- 
tain what  was  agreed,  the  only  guide  is  that  afforded  by 
the  burden  of  proof.  It  is  for  those  claiming  an  allowance 
in  respect  of  the  outlay  to  establish  their  claim.  On  the 
other  hand  an  intention  to  make  a  present  of  a  permanent 
improvement  is  not  to  be  presumed. 

Houses  built  on  partnership  property. —  In  Be  Streat- 
Jleld,  Lavrrence  &  Company,  (b)  two  partners  bought  an 
estate  with  partnership  money.  The  land  was  conveyed  to 
them  in  undivided  moieties  to  uses  to  bar  dower,  and  each 

(6)  Bank  of  England  Case,  3  De  G.  erected  on  the  separate  property  of 
F.  &  J.  645.  In  Pawsey  v.  Arm-  one  of  the  partners.  See,  also.  Bur- 
strong,  18  Ch.  D.  698,  an  inquiry  donr.  Barkus,  3  Giff.  412,  and4De 
was  directed  as  to  buildings  paid  G.  F.  &  J.  42,  where  a  pit  was  sunk 
for  out  of  partnership  moneys,  but    by  the  firm  in  a  partner's  property. 

751 


*<331  RIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

partner  built  a  house  on  the  land  with  money  of  the  firm, 
but  charged  to  him  in  his  private  account.  An  account 
was  opened  in  the  partnership  books,  and  in  this  account 
the  purchased  estate  was  debited  with  all  moneys  of  the 
partnership  expended  in  the  purchase.  At  the  time  of  the 
purchase  the  land  was  in  lease,  but  the  tenant  surrendered 
to  the  partners  those  portions  which  they  wanted,  they  re- 
ducing his  rent.  The  rents,  viz.,  both  that  paid  by  the 
tenant  for  what  he  held,  and  that  paid  to  him  for  what  he 
gave  up,  were  treated  in  the  books  of  the  firm  as  paid  to 
and  by  it.  There  was  evidence  to  show  that  the  partners 
intended  to  come  to  some  arrangement  respecting 
[*331]  the  division  of  the  estate,  but  *they  became  bank- 
rupt before  doing  so.  It  was  held  that  both  the 
land  and  the  houses  on  it  were  the  joint  property  of  the 
firm,  and  not  the  separate  properties  of  the  partners. 

Appointments. —  In  Collins  v.  Jackson,  (c)  two  persons 
were  in  partnership  as  solicitors,  and  one  of  them  held  sev- 
eral appointments;  he  was  clerk  to  poor  law  guardians, 
superintendent  registrar  of  births,  marriages  and  deaths, 
treasurer  of  a  turnpike  trust,  steward  of  a  manor,  treasurer 
of  a  charity  and  receiver  of  tithes.  The  question  arose 
whether  the  profits  of  these  offices  belonged  to  the  partner- 
ship or  not.  There  was  no  written  agreement  specifically 
applying  to  these  offices,  but  there  was  a  memorandum  re- 
lating to  some  others  reserved  by  the  father  of  one  of  the 
partners  when  he  retired  from  business,  and  the  master  of 
the  rolls  held  that  all  the  offices  in  question  were  to  be 
treated  as  held  on  behalf  of  both  partners,  and  not  for 
the  exclusive  benefit  of  the  partner  who  actually  filled  the 
offices,  (d) l 

(c)  31  Beav.  645.  an  agreement  with  a  neighboring 

(d)  See,  also,  Smith  v.  Mules,  9  postmaster,  by  which  the  office  was 
Ha.  556 ;  and  Ambler  v.  Bolton,  14  to  be  kept  at  the  store  of  the  firm, 
Eq.  427,  as  to  the  mode  of  deal-  and  the  contracting  partner  was 
ing  with  such  offices  on  a  dissolu-  appointed  deputy ;  but  the  business 
tion.  was  transacted  by  the  clerks  of  the 

1  One  of  two  partners  entered  into    store  indiscriminately,  no  separate 

752 


CH.  IV,  SEC.  II.]      JOINT   AND    SEPARATE    PROPERTY.  *332 

Cases  where  co-owners  share  profits. —  The  cases,  how- 
ever, which  present  most  difficulty  are  those  in  which  the 
co-owners  are  partners  in  the  profits  derived  from  their 
common  property,  (e)  Suppose,  for  example,  that  two  or 
more  joint  tenants,  or  tenants  in  common,  of  a  farm  or  a 
mine  work  their  common  property  together  as  partners, 
contributing  to  the  expenses  and  sharing  all  profits  and 
losses  equally,  there  will  certainly  be  a  partnership;  and 
yet,  unless  there  is  something  more  in  the  case,  it  seems 
that  the  land  will  not  be  partnership  property,  but  will  be- 
long to  the  partners  as  co-owners,  just  as  if  they  were  not 
partners  at  all;  (f)  and  the  result  may  even  be  the  same  if 
they  purchase  out  of  their  profits  other  lands  for  the  pur- 
pose of  more  conveniently  developing  their  business,  (g) 

Land  acquired  by  devise  farmed  in  common. —  In  Mor- 
ris v.  Barrett,  (h)  lands  were  devised  to  two  persons 
*as  joint  tenants.  They  farmed  those  lands  together  [*332] 
for  twenty  years,  and  kept  their  money  in  one  com- 
mon stock  to  which  each  had  access,  but  they  never  came 
to  any  account  with  each  other.  Out  of  their  common  stock 
they  bought  other  lands,  which  were  conveyed  to  one  of 
them  only,  but  were  farmed  by  both,  like  the  first  lands. 
It  was  held  that  the  devised  farms  were  not  partnership 
property,  but  that  the  purchased  farms  were.1 

books  were  kept,  the  money  went  (/)  See  Crawshay  v.  Maule,  1 
into  the  partnership  funds,  and  all  Swanst.  523,  and  Roberts  v.  Eber- 
payments  on  account  of  the  post-  hardt,  Kay,  159.  See,  also,  Will- 
office  were  made  out  of  the  funds  iams  v.  Williams,  2  Ch.  294,  where 
of  the  firm.  Held,  that  the  profits  the  partnership  had  expired,  but  an 
of  the  postoffice  belonged  to  the  agreement  to  divide  the  property 
firm,  especially  as  the  partners  had  was  held  to  have  been  come  to. 
made  two  settlements  between  (g)  Steward  v.  Blakeway,  4  Ch. 
themselves,  without  any  separate  603,  and  6  Eq.  479,  a  case  of  a  farm 
claim  to  those  profits  having  been  and  quarry.  But  compare  Morris 
set  up  by  the  partner  who  con-  v.  Barrett,  Phillips  v.  Phillips,  and 
tracted  fur  the  business.  Caldwell  Waterer  v.  Waterer,  cited  below. 
v.  Leiber,  7  Paige,  483.  {h)  3  Y.  &  J.  384.  Compare  Wat- 
te) As  to  the  distinction  between  erer  v.  Waterer,  infra,  p.  333. 
co-ownership  and  partnership,  see  l  Whether  real  estate  shall  be  con- 
ante,  p.  51  et  seq.  sidered  as  partnership  property,  as 
Vol.  1  —  48                        753 


*332 


EIGHTS    AND    OBLIGATIONS. 


LBOOK    III. 


Joint  tenants  by  devise  partners  in  profits.—  In  Brown 
v.  Oakshot,  (i)  a  brewer  devised  his  real  estates  to  trustees 


between  the  partners,  depends 
largely  upon  their  intention.  See 
Ludlow  v.  Cooper,  4  Ohio  St.  1; 
Smith  v.  Jackson,  2  Edw.  28; 
Wheatly  v.  Calhoun,  12  Leigh,  2G4; 
Tarbell  v.  Bradley,  7  Abb.  N.  C. 
273;  Shafer's  Appeal,  106  Pa.  St. 
49;  S.  C.  15  Weekly  Not.  Cas.  407; 
39  Leg.  Intel.  304 ;  42  id.  267 ;  Rice 
v.  Pennypacker,  5  Del.  279;  Rank 
v.  Grote,  50  N.  Y.  Super.  Ct.  275; 
Providence  v.  Bullock,  14  R.  I. 
353;  Holmes  v.  Self,  79  Ky.  297. 

Such  intention  may  be  shown  by 
parol  and  by  the  acts  and  declara- 
tions of  the  parties.  Shafer's  Ap- 
peal, 106  Pa.  St.  49 :  S.  C.  15  Weekly 
Not.  Cas.  407;  39  Leg.  Intel.  304, 
and  42  id.  267. 

Payment  from  the  partnership 
funds  is  only  prima  facie  evidence 
of  the  intention.  Providence  v. 
Bullock,  14  R.  I.  353. 

Where  one  of  two  partners  pur- 
chased real  estate  and  paid  for  the 
same  with  a  note  of  the  firm,  with 
the  expenses  of  the  purchase,  dis- 
count on  the  note  and  renewals 
thereof,  and  the  taxes  on  the  lot 
were  charged  to  his  individual  ac- 
count by  the  direction  of  the  other 
partner,  held,  that  the  property 
was  purchased  on  individual  ac- 
count, and  the  profits  arising  from 
its  sale  went  to  him  and  not  to  the 
firm.  Hay's  Appeal,  91  Pa.  St. 
265. 

Where  real  estate  is  conveyed  to 
a  firm,  or  to  the  copartners  in  their 
individual  names  for  the  use  and 
benefit  of  the  firm,  or  in  payment 
of  debts  due  to  the  firm,  in  the  ab- 


sence of  any  agreement  or  under- 
standing to  the  contrary  the 
grantees  become  at  law  tenants  in 
common  of  the  land ;  and  upon  the 
death  of  either  the  legal  title  to  his 
undivided  share  descends  to  his 
heirs  at  law.  Buchan  v.  Sumner, 
2  Barb.  Ch.  165 ;  Caldwell  v.  Palmer, 
56  Ala.  405;  Wood  v.  Montgomery, 
60  Ala.  500 ;  Anderson  v.  Tompkins, 

1  Brock.  456;  Willey  v.  Carter,  4 
La.  Ann.  56;  Arnold  v.  Stevenson, 

2  Nev.  234;  Donaldson  v.  Bank  of 
Cape  Fear,  1  Dev.  Eq.  103 ;  Ensign 
v.  Briggs,  6  Gray,  329;  Galbraith 
v.  Gedge,  16  B.  Mon.  631 ;  Divine  v. 
Mitchum,  4  id.  488;  Coles  v.  Coles, 
15  John.  159;  Block  v.  Seipt,  12 
Phila.  360;  Slaughter  v.  Doe,  67 
Ala.  494;  McMillan  v.  Hadley,  78 
Ind.  590 ;  Berry  v.  Folkes,  60  Miss. 
576;  Espy  v.  Comer,  76  Ala.  501; 
Sutlive  v.  Jones,  61  Ga.  676;  Santa 
Clara  Mining  Ass'n  v.  Quicksilver 
Mining  Co.  17  Fed.  Rep.  657  (hold- 
ing that  mining  partners  are  ten- 
ants in  common);  Percifull  V. 
Piatt,  36  Ark.  456;  Abernathy  v. 
Moses,  73  Ala.  381.  See,  also,  Cot- 
tle v.  Harrold,  72  Ga.  830;  Thomp- 
son v.  Bowman,  6  Wall.  316;  Blake 
v.  Nutler,  19  Me.  16. 

Where  real  estate  is  conveyed  to 
persons  who  are  partners,  the  face 
of  the  conveyance  determines  as  to 
judgment  creditors  the  nature  of 
the  title.  When,  therefore,  real 
estate  is  conveyed  to  partners  as 
tenants  in  common,  judgments 
against  individual  partners  become 
a  lien  on  their  interest  in  the  land. 
Parol  testimony  that  the  property 


(i)  24  Beav.  254. 


754 


CH.  IV,  SEC.  II.]   JOINT  AND  SEPARATE  PKOPERTV. 


-332 


for  a  terra  of  five  hundred  years,  upon  trust,  to  pay  certain 
annuities,  and  to  divide  the  surplus  rents  between  his  sons, 


was  bought  for  the  firm  with  firm 
assets  and  actually  used  by  the 
firm  will  not  alter  this  result. 
Holt's  Appeal,  98  Pa.  St.  257;  S.  C. 
37  Leg.  Intel.  430. 

So,  where  land  is  purchased  by 
partners  with  partnership  funds, 
but  not  for  the  use  and  convenience 
of  the  partnership  business,  or  in 
the  legitimate  line  of  their  partner- 
ship business,  they  become  invested 
with  the  title  as  tenants  in  common, 
and  their  respective  interests  there- 
in are  several.  Price  v.  Hicks,  14 
Fla.  565;  Russell  v.  Miller,  26 
Mich.  1. 

But  where  land  is  purchased  with 
partnership  funds  and  conveyed  to 
the  partners  by  name,  although  in 
law  they  are  considered  as  tenants 
in  common,  and  no  notice  is  taken 
of  the  equitable  relations  arising 
out  of  the  partnership,  yet  in  the 
absence  of  an  express  agreement, 
or  of  circumstances  showing  an  in- 
tent that  such  estate  shall  be  held 
for  their  separate  use,  in  equity  the 
partnership  property  will  be  de- 
voted to  partnership  purposes,  and 
a  trust  is  created  for  the  security 
of  the  partnership  debts.  If  the 
partnership  becomes  insolvent  the 
property  is  primarily  liable  to  the 
payment  of  the  partnership  debts, 
to  the  postponement  of  the  cred- 
itors of  the  several  partners.  Rcss 
v.  Henderson,  77  N.  C.  170;  Robert- 
son v.  Baker,  11  Fla.  192.  See,  also, 
infra,  in  this  note. 

But  where  a  deed  of  lands  was 
made  to  A.,  B.  andC,  "doing  busi- 
ness as  A.,  B.  &  Co.,  their  heirs  and 
assigns,"  it  was  held  that  the 
grantees  took  the  legal  estate  in 


joint  tenancy,  and  a  judgment  con- 
fessed by  all  of  them  in  their  in- 
dividual names  with  the  same 
words,  "doing  business,"  etc., 
added  thereto,  is  a  lien  upon  the 
land,  and  will  bind  it  in  the  hands 
of  subsequent  purchasers  from  the 
firm.  Lauffer  v.  Cavett,  87  Pa.  St. 
479. 

The  appearance  of  real  estate  on 
partnership  books  to  the  extent 
necessary  to  carry  on  the  business 
of  the  firm  is  not  inconsistent  with 
the  partners'  title  to  the  real  estate 
as  tenants  in  common.  Grobb's 
Appeal,  66  Pa.  St.  117. 

Although  the  proposition  that 
when  a  partnership  ceases  the  part- 
ners become  tenants  in  common  of 
the  partnership  property  then  un- 
disposed of  is  generally  true,  yet 
it  is  not  universally  true.  So  long 
as  partnership  debts  remain  unpaid 
partnership  property  continues 
such  for  the  purpose  of  being  ap- 
plied to  the  payment  of  such  debts. 
Rice  v.  McMartin,  39  Conn.  573. 

Partners  may  by  contract  stipu- 
late that  the  ownership  of  property 
may  remain  in  one,  while  the  firm 
shall  have  only  the  use  of  the 
same,  as  between  themselves,  or 
any  other  regulation  in  regard 
to  ownership  of  the  property  used, 
not  prohibited  by  law.  Taft  v. 
Schwamb,  80  III.  289. 

While  there  may  be  partnerships 
in  the  business  of  milling,  mining 
or  farming,  unless  the  intent  of  the 
joint  owners  to  throw  their  real 
estate  into  the  fund  as  partnership 
stock  is  distinctly  manifested,  or 
unless  the  real  property  is  bought 
out  of  the  social  funds  for  partner- 


755 


*332 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


and  he  devised  the  same  estates  subject  to  this  term  to  his 
sons  as  joint  tenants.     The  sons  carried  on  their  father's 


ship  purposes,  it  must  still  retain 
its  character  of  realty.  Wheatly 
v.  Calhoun,  12  Leigh,  264. 

Where  land  purchased  with  part- 
nership funds  is  conveyed  to  the 
partners  by  a  deal  which  would  or- 
dinarily make  them  tenants  in  com- 
mon thereof,  it  will  be  deemed  in 
equity  converted  into  personal  prop- 
erty, and  may  be  administered 
upon  as  such,  in  winding  up  the 
affairs  of  the  concern,  unless  from 
the  books  or  other  sources  it  ap- 
pears that  business  profits  were 
thus  invested  to  pay  a  dividend  to 
the  partners.  The  intention  of  the 
partners  in  making  the  purchase,  as 
shown  by  the  evidence  in  the  case, 
should  govern  the  construction  of 
the  conveyance.  Collumb  v.  Read, 
24  N.  Y.  505. 

A  mere  agreement  to  use  real 
property  for  partnership  purposes, 
or  as  partnership  property,  is  not 
sufficient  to  convert  it  into  partner- 
ship stock    in  the  absence  of  any 
evidence  of  such  intention.     The 
mere  fact  that  the  property  held 
by  the  firm  as  tenants  in  common 
is  used  in  and  for  the  partnership 
business,  or  a  mere  agreement  to 
use  it  for  partnership  purposes,  is 
not  of  itself  sufficient  to  convert  it 
into  partnership  stock.  There  must 
be  some  evidence  of  further  agree- 
ment to  make  it  partnership  prop- 
erty.    Alexander    v.    Kimbro,    49 
Miss.  529;  Thenot  v.  Michel,  28  La. 
Ann.  107 ;  Shafer's  Appeal,  106  Pa. 
St.  49 ;  S.  C.   15  Weekly  Not,  Cas. 
407;  39  Leg.  Intel.  303;  42  id.  467. 
See,  however,  Osborn  v.  McBride, 
16  Bank.   Reg.  23,  as  to  the  pre- 
sumption upon  the  question. 


Thus,  the  mere  fact  that  partners 
carry  on  partnership  business  on  a 
lot  of  land  belonging  to  the  mem- 
bers of  the  partnership  does  not 
necessarily  impress  it  with  the 
character  of  partnership  property, 
unless  they  have,  by  agreement  or 
otherwise,  purposely  impressed 
upon  it  that  character.  Ware  v. 
Owens,  42  Ala.  212 ;  Pecot  v.  Anne- 
lin,  21  La.  Ann.  667. 

A  contrary  presumption  prevails 
when  the  title  is  not  in  the  firm, 
and,  to  rebut  that  presumption,  it 
must  appear  either  that  the  prop- 
erty was  paid  for  with  the  firm's 
money,  or  was  by  agreement  act- 
ually brought  into  the  common 
stock.  Shafer's  Appeal,  106  Pa.  St. 
49 ;  S.  C.  15  Weekly  Not.  Cas.  407 ; 
39  Leg.  Intel.  304,  and  42  id.  267. 

Even  where  real  estate  is  brought 
into  the  common  stock  by  agree- 
ment it  is  within  the  power  of  the 
partners  to  withdraw  it  and  to  re- 
convert it  into  the  separate  prop- 
erty of  the  individual  partners; 
such  a  reconversion  would  be  bind- 
ing as  between  the  partners,  and, 
in  the  absence  of  fraud,  upon  their 
joint  and  respective  creditors.  Sha- 
fer's Appeal,  106  Pa.  St.  49 ;  S.  C. 
15  Weekly  Not.  Cas.  407 ;  39  Leg. 
Intel.  304,  and  42  id.  267. 

An  oral  agreement  of  two  per- 
sons to  sell  lands  of  each  and  em- 
ploy the  proceeds  as  capital  for 
going  into  business  as  partners  is 
valid;  and  a  ferry  and  franchise 
purchased  by  one  with  the  pro- 
ceeds is  partnership  property, 
Knott  v.  Knott,  6  Oreg.  142. 

Real  estate  acquired  with  part- 
nership funds  for  partnership  pur- 
756 


CH.  IV,  SEC.  II.]      JOINT    AND    SEPARATE    PROPERTY. 


*332 


business  in  partnership  together,  and  used  the  real  estates 
devised  to  them  for  the  purposes  of  the  business;  but  it 


poses  must  be  considered  as  part- 
nership property  and  liable  to  all 
the  incidents  attending  that  de- 
scription of  property.  Sigourney 
v.  Munn,  7  Conn.  11;  Matlock  v. 
Matlock,  5  Ind.  403 ;  Abbott's  Ap- 
peal, 50  Penn.  St.  234;  Hoxie  v. 
Carr,  1  Sumn.  173 ;  Pugh  v.  Carrie, 
5  Ala.  446 ;  Lancaster  Bank  v.  My- 
lie,  13  Penn.  St.  544;  Brooke  v. 
Washington,  8  Gratt.  248;  Spal- 
ding v.  Wilson,  80  Ky.  589 ;  Berry 
v.  Folkes,  GO  Miss.  576;  Priest  v. 
Chouteau,  12  Mo.  App.  252;  Caus- 
ler  v.  Wharton,  62  Ala.  358;  Mes- 
ser  v.  Messer,  59  N.  H.  375;  Allen 
v.  Withrow,  110  U.  S.  119;  Roberts 
v.  Eldred,  15  Pac.  Rep.  (Cal.)  16. 
See,  also,  Sutlive  v.  Jones,  61  Ga. 
676.  See,  however,  Smith  v.  Jack- 
son, 2  Edw.  28. 

The  fact  that  a  conveyance  of 
land  is  made  to  partners  and  that  it 
may  be  used,  after  being  thus  con- 
veyed, for  partnership  purposes 
does  not  necessarily  impress  upon 
it  the  character  of  partnership 
property.  Griffie  v.  Maxey,  58  Tex. 
210. 

Actual,  open  and  notorious  oc- 
cupation of  land  by  a  firm  for  part- 
nership purposes  is  notice  to  all  the 
world  of  the  equitable  rights  of  the 
firm ;  and  the  fact  that  a  convey- 
ance is  not  actually  made  to  the 
firm  by  the  partner  holding  the  title 
till  after  the  firm  ceased  to  occupy 
the  lot  will  not  make  the  grantee, 
as  against  the  partners  other  than 
the  one  holding  the  title,  a  pur- 
chaser in  good  faith.  Bergeron  v. 
Richardott,  55  Wis.  129. 

The  possession  and  use  of  land 
by  a  firm  is  not  notice  to  purchas- 


ers that  the  land  is  partnership  as- 
sets, where  the  requisite  title  shows 
that  the  partners  were  tenants  in 
common,  holding  undivided  one- 
half  interests  therein.  Hammond 
v.  Paxton,  58  Mich.  394. 

As  to  the  requisites  of  a  convey- 
ance of  land  to  members  of  a  firm, 
to  charge  individual  creditors  and 
others  with  notice  that  the  land  is 
held  as  partnership  property,  see 
Kepler  v.  Erie  Savings  Bank,  101 
Pa.  St.-  602;  S.  C.  13  Weekly  Not. 
Cas.  21. 

Where  the  value  of  a  lot  of  land 
used  for  partnership  purposes  was 
charged  to  the  partnership  on  the 
books  of  the  firm,  and  credited  to 
M.,  the  partner  holding  the  legal 
title,  it  will  be  treated  in  equity  as 
partnership  property.  And  where, 
on  the  dissolution  of  that  firm  and 
the  formation  of  a  new  one  as  its 
successor,  the  lot  was  credited  to 
the  old  firm  on  the  books  of  the 
new  with  the  knowledge  of  M.,  it 
must  be  treated  in  equity  as  the 
property  of  the  new  firm  as  against 
M.  and  his  grantee  with  notice. 
Bergeron  v.  Richardott,  55  Wis. 
129. 

A  partnership  "for  the  purchase 
of  lands  "  does  not,  however,  neces- 
sarily contemplate  sales  of  land  so 
as  to  make  the  land  stock  in  trade, 
but  it  passes  to  the  heir  as  real  es- 
tate, and  not  to  the  administrator. 
Dilworth  v.  May  field,  36  Miss.  40. 

Two  persons  took  a  lease  of  a 
coal  mine  as  tenants  in  common. 
Afterwards  they  associated  them- 
selves in  the  business  of  coal-min- 
ing, shipping  and  selling  as  part- 
ners, the  business  to  be  carried  on 


757 


*332 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


was  nevertheless  held  that  the  reversion  in  fee  continued 
to  be  vested  in  them  jointly,  and  not  in  common,  as  would 
have  been  the  case  had  it  become  partnership  property. 


from  the  proceeds  of  the  demised 
premises  for  the  whole  period  of 
the  lease.  Held,  that  the  leasehold 
became  partnership  property.  Pat- 
terson v.  Silliman,  28  Pa.  St.  304. 
See,  also,  Morton  v.  Ostrom,  33 
Barb.  256. 

Where  partners  purchased  a 
leasehold  estate  with  partnership 
property,  gave  a  deed  of  trust  upon 
it,  and  the  trustee,  after  the  death 
of  one  of  the  partners,  sold  the  es- 
tate under  the  power  in  the  deed, 
a  surplus  remaining,  held,  that  the 
surplus  was  to  be  considered  as 
partnership  property,  upon  which 
the  surviving  partner  was  entitled 
to  administer.  Carlisle  v.  Mulhern, 
19  Mo.  56. 

Real  property,  an  undivided  half 
interest  in  which  was  bought  and 
paid  for  by  each  of  two  partners, 
who,  with  partnership  funds,  com- 
pleted, repaired,  improved  and  pro- 
tected it,  and  who  used  it  for  part- 
nership purposes,  becomes  thereby 
partnership  property.  Roberts  v. 
McCarty,  9  Ind.  16. 

Two  persons,  who  were  partners 
in  the  business  of  fishing  and  sell- 
ing fish,  bargained  for  a  block  of 
land,  gave  their  note  to  the  defend- 
ant for  the  price,  and  took  the  de- 
fendant's bond  for  a  deed  in  pay- 
ment of  a  note,  and  paid  one  year's 
interest  before  the  note  fell  due. 
One  of  the  partners  having  died, 
the  other,  claiming  to  act  as  surviv- 
ing partner,  assigned  the  bond  and 
the  land  to  the  plaintiff  two  years 
after  the  note  fell  due,  no  adminis- 
tration being  had,  and  it  being  a 
disputed  question  whether  the  land 


was  purchased  for  partnership  pur- 
poses. In  a  suit  by  the  assignee 
for  specific  performance,  held,  that 
the  question  of  fact,  whether  the 
land  was  purchased  for  partnership 
purposes,  could  not  be  ultimately 
settled  so  as  to  bind  the  heirs  of 
the  deceased  partner  in  a  suit 
where  neither  the  heirs  nor  the 
representatives  of  the  deceased 
partner  were  made  parties;  and 
that  the  defendant  should  not  be 
required  to  convey  to  the  assignee 
of  the  survivor  unless  he  has  rea- 
sonable grounds  of  certainty  on 
that  question.  Knott  v.  Stevens, 
3  Oreg.  269. 

Real  estate  purchased  for,  and 
appropriated  to,  or  intended  to  be 
used  for,  partnership  purposes,  and 
paid  for  out  of  partnership  funds, 
is  partnership  property,  although 
the  legal  title  is  taken  in  the  indi- 
vidual names  of  the  partners,  or  in 
the  name  of  one  of  the  partners,  or 
in  the  name  of  a  third  person, 
equity  will  hold  the  party  holding 
the  legal  title,  or  his  heirs,  in  case 
of  his  death,  as  trustee  for  the  firm. 
Fairchild  v.  Fairchild,  64  N.  Y. 
471;  S.  C.  5  Hun,  407;  Faulds  v. 
Yates,  57  111.  416;  Little  v.  Sned- 
cor,  52  Ala.  167 ;  Hewitt  v.  Rankin, 
41  Iowa,  35 ;  Smith  v.  Tarleton,  2 
Barb.  Ch.  336;  Drewry  v.  Mont- 
gomery, 28  Ark.  256;  Johnson  v. 
Clark,  18  Kan.  157;  Hogle  v.  Lowe, 
12  Nev.  286;  Boyers  v.  Elliott,  7 
Humph.  204;  McGuire  v.  Ramsey, 
9  Ark.  518;  Indiana,  etc.  Co.  v. 
Bates,  14  Ind.  8 ;  Fowler  v.  Bailie}', 
14  Wis.  125;  Owens  v.  Collins,  23 
Ala.  837;  Lacy  v.  Hall,  37  Penn. 


758 


CH.  IV,  SEC.  II.]       JOINT    AND    SEPARATE    PROPERTY.  *332 

Public  houses  devised  to  partners  in  a  brewery.—  In 

Phillips  v.  Phillips,  (k)  public  houses  were  devised  to  two 


St.  360;  Erwin's  Appeal,  39  id.  535; 
Jarvis  v.  Brookes,  27  N.  H.  37;  Cil- 
ley  v.  Huse,  40  id.  358 ;  Fall  River 
Whaling  Co.  v.  Borden,  10  Cush. 
458;  Dupuy    v.    Leavenworth,    17 
Cal.   262;  Price  v.  Hicks,  14  Fla. 
565 ;  Uhler  v.  Semple,  20  N.  J,  Eq. 
288;  Abbott's  Appeal,  50  Penn.  St. 
234;  Lime  Rock   Bank  v.   Phette- 
place,  8  R.  I.  56;  Lancaster  Bank 
v.  Myerley,  13  Penn.  St.  544;  His- 
cock  v.  Phelps,  49  N.  Y.  97;  King 
v.   Weeks,   70  N.   C.    372;  Owens 
v.  Collins,  23  Ala.  837;  Dewey  v. 
Dewey,  35  Vt.  555 ;  Chamberlain  v. 
Chamberlain,  44  N.  Y.  Super.  Ct. 
116;  Matlack  v.  James,    13   N.  J. 
Eq.  126;  Smith  v.  Tarleton.  2  Barb. 
Ch.  336;  Delmonico  v.  Guillaume, 
2  Sandf.  Ch.  366;  Cos  v.  McBur- 
ney,  2  Saudf.  561 ;  Buchan  v.  Sum- 
ner, 2  Barb.   Ch.  165 ;  Whitney  v. 
Cotton,    53   Miss.    689;  Buffuin  v. 
Buffuin,    49    Me.    108.     See,   also, 
Rammelsburg  v.  Mitchell,  29  Ohio 
St.   22;    Holmes  v.   Moon,   infra; 
Deming  v.  Colt.  3  Sandf.  284;  Bird 
v.  Morrison,    12  Wis.  138;  Deven- 
ney  v.  Mahoney,  23  N.  J.  Eq.  247 ; 
McGuire  v.  Ramsey,  9  Ark.  518; 
Paige  v.  Paige,    71  la.  318;  Cottle 
v.  Harrold,  72  Ga.  830;  Brown  v. 
Beecher,   12  Atl.    Rep.    68;    Spal- 
ding v.  Wilson,  80  Ky.  589 :  Bark- 
ley  v.  Tapp,  87  Ind.  25;  Rank  v. 
Grote,   50    N.   Y.   Super.  Ct.  275; 
Railsback  v.  Lovejoy,  116  111.  442; 


Martin  v.  Morris,  62  Wis.  418  (a  sur- 
viving partner) ;  McCulley  v.  McCul- 
ley,  73  Va.  159;  Hardy  v.  Norfolk 
Mfg.  Co.  80  Va.  404;  Norwalk  Nat. 
Bk.  v.    Sawyer,  38  Ohio  St.  339; 
Wiegand  v.  Copeland,  7  Savvy.  442 : 
S.  C.  14  Fed.  Rep.  118  (in  this  case 
the  realty  was  put  in  as  capital  but 
the  tide  held  by  one  partner  as 
security);    Tarbell    v.    Bradley,   7 
Abb.    N.  C.   273;   Smith  v.  Jones, 
18    Neb.    481;    Shanks    v.   Klein, 
104  U.  S.  18;   S.  C.   11  Fed.  Rep. 
767;  Rice  v.  Pennypacker,  5  Del. 
279 ;  Page  v.  Thomas,  43  Ohio  St. 
38;  Hatchett  v.   Blanton,  72  Ala. 
423;  Ballantine  v.   Frelinghuysen, 
38  N.  J.  Eq.  266;  Bennett  v.  Ben- 
nett,  102  Iud.    86;  Van  Staden  v. 
Kline,  64  la.  180;  Davis  v.  Davis, 
60  Miss.   615;  Diggs  v.  Brown,  78 
Va.  292;  Sprague  Mfg.  Co.  v.  Hoyt, 
29  Fed.  Rep.  421 ;  Williams  v.  Shel- 
don, 28  N.  W.  Rep.  115;  Pepper  v. 
Thomas,  4  So.  W.  Rep.  297.     See, 
also,  Blocks.  Seipt,  12  Phila.  360; 
King  v.  Remington,  29  N.  W.  Rep. 
352. 

A  partner  holding  land  in  trust 
for  the  partnership,  upon  its  disso- 
lution holds  in  trust  for  its  individ- 
ual members.  Tenney  v.  Simpson, 
37  Kan.  579. 

Where  the  title  to  land  occupied 
for  partnership  purposes  was  held 
by  two  out  of  three  partners,  and 
the  articles  set  forth  that  upon  ful- 


(fc)  As  stated  in  Bisset  on  Part-  conclusion  that  the  devised  prop- 

nership,  p.  50.     The  report  in  1  M.  erty  was  not  in  fact  partnership 

&  K.  649,  is  silent  as  to  the  prop-  property,  the  question  of  conver- 

erty  devised.     Mr.  Bisset  considers  sion  would  not   arise.      Compare 

the"  decision  as  an  authority  on  the  Waterer  v.  Waterer,  15  Eq.  402, 

point  of  conversion.     But  if,  as  he  infra. 
represents,  the  court  came  to  the 

759 


*332 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


persons  who  carried  on  a  brewery  in  partnership,  and  it 
was  held  that  such  houses  did  not  become  partnership  prop- 


fillment  of  certain  terras  by  the 
third  partner,  including  the  pay- 
ment by  him  of  one-thhd  of  the 
price  of  the  land,  they  would  con- 
vey him  an  equal  undivided  one- 
third,  it  was  held  that  the  partner- 
ship articles  did  not  make  the  lands 

'  partnership  property,  and  hence 
they  did  not  come  in  account,  but 
remained  the  property  of  the  part- 
ners holding  the  title,  one  of  whom 
could  mortgage  his  interest  there- 
for, and  in  a  suit  for  an  accounting 
such  land  would  not  be  treated  as 
partnership  property  as  against 
the  mortgagee.  Gordon  v.  Gor- 
don, 49  Mich.  501. 

A  bill  for  relief  against  an  heir 
holding  in  trust  a  partnership  in- 
terest in  lands  should  show  the 
partnership  character  of  the  inter- 
est. Jenness  v.  Smith,  58  Mich. 
281. 

A  trust  in  land  cannot  be  predi- 
cated upon  proof  of  an  agreement 
to  create  a  partnership  for  the  pur- 
pose of  purchasing,  handling  or 
improving  the  same,  the  partner- 
ship relation  not  having  existed 
prior  to  acquisition  of  title,  and  no 
partnership  funds  having  been  in- 
vested in  the  property.  Kayser  v. 
Maugham,  8  Colo.  232. 

Where    a    member    of    a    firm 
bought  land  at  a  sheriff's  sale,  tak- 
ing conveyance  to  himself,  paying 
ten  per  cent,  in  cash,  giving  his 
{own  obligation  for  the  residue,  and 

'  the  ten  per  cent,  was  drawn  from 
the  partnership  funds,  as  also  sub- 
sequent payments,  and  such  part- 
ner was  charged  on  the  partnership 
books  with  the  payments  so  made, 
and  for  expenses  paid  by  the  firm 


on  account  of  the  real  estate,  and 
credited  with  sundry  sums  received 
by  the  firm  from  the  real  estate, 
held,  that  under  such  circum- 
stances there  was  no  trust  of  the 
real  estate  in  favor  of  the  firm. 
Harvey  v.  Pennypacker,  4  Del.  Ch. 
445. 

The  execution  of  an  agreement 
by  the  partner  holding  firm  real 
estate,  by  the  request  of  his  copart- 
ner for  his  benefit,  to  convey  the 
property  to  a  third  person  within 
a  given  time,  upon  certain  condi- 
tions, which,  not  being  performed, 
the  agreement,  by  its  terms,  be- 
comes null  and  void,  is  not  a  bar 
to  a  bill  in  equity  by  the  other 
partners  to  have  the  property  de- 
creed to  be  held  by  his  associate  in 
trust  for  the  firm.  Sherburne  v. 
Morse,  132  Mass.  469. 

A  conveyance  of  land  to  a  part- 
ner in  payment  of  a  firm  debt,  the 
word  "trustee"  being  written  in 
the  deed  after  the  partner's  name, 
the  understanding  being  that  the 
deed  was  made  to  him  as  a  matter 
of  convenience,  instead  of  to  the 
firm,  authorizes  the  partner  to 
bind  his  fellow-pai'tners  by  sale 
of  the  land  through  an  attorney 
in  fact,  appointed  by  him  for  that 
purpose;  the  word  "trustee"  nei- 
ther enlarges  nor  restricts  his  pow- 
ers, the  property  being  regarded 
as  personal  assets  of  the  firm,  as  to 
which  one  partner  may  bind  the 
rest  by  a  contract  in  the  scope  of 
the  partnership.  Paton  v.  Baker, 
62  la.  704. 

When  a  partner  devotes  his  in- 
dividual property,  or  the  usufruct 
thereof,  to  the  uses  of  the  partner- 


760 


CH.  IV,  SEC.  II.]       JOINT   AND    SEPARATE    PROPERTY. 


:"332 


erty,  though  used  for  the  purposes  of  the  partnership.     In 
the  same   case   some   mortgage   debts   secured  on  public 


ship,  the  title  remaining  in  him, 
and  there  is  no  express  contract  of 
lease,  the  use  ceases  on  the  termi- 
nation of  the  partnership,  and  does 
not  pass  to  an  assignee  of  the  firm 
assets.  Rapier  v.  Gulf  City  Paper 
Co.  64  Ala.  330. 

The  partner  holding  the  title  is 
a  trustee  for  the  firm  and  its  cred- 
itors, and  when  the  trust  is  dis- 
charged by  the  payment  of  the 
debts  and  the  settlement  of  the 
claims  between  the  partners,  char- 
acter of  realty  again  revives.  Rank 
v.  Grote,  50  N.  Y.  Super.  kCt.  275, 
and  cases  above  cited  in  this  note. 

C.  bargained  for  a  grist-mill  and 
appurtenances,  paid  $1,000  down, 
and  took  a  bond  for  a  deed  ;  made 
a  verbal  contract  to  sell  it  to  D. 
and  received  $1,300  of  him  in  part 
payment;  D.  took  the  possession, 
laid  out  a  considerable  sum  in  re- 
pairs and  improvements,  and  car- 
ried on  the  business  a  short  time, 
when  he  and  C.  made  a  verbal  con- 
tract of  copartnership  in  the  grist- 
mill business,  and  carried  it  on  to- 
gether at  this  grist-mill  for  two 
years,  neither  of  the  parties  claim- 
ing rent ;  the  grist-mill  was  taxed 
to  the  company,  and  one  year's 
taxes  were  paid  out  of  the  com- 
pany's funds,  and  payments  were 
made  on  C.'s  notes  named  in  the 
bond  for  a  deed  which  he  held,  by 
giving  credit  to  the  parties  to  whom 
payments  were  made  on  the  com- 
pany's books.  A  dam  tax  of  $75 
was  paid  in  the  same  manner.  At 
the  end  of  the  two  years  C.  gave 
D.  notice  that  he  was  going  to  dis- 
solve the  copartnership ;  D.  pro- 
posed that  it  should"  be  mutual, 


and  that  they  should  bid  for  choice 
of  the  mill  property.  C.  does  not 
deny  that  he  told  D.  that  he  would 
shortly  say  what  he  would  give  or 
take,  but  he  did  not  do  this;  yet  a 
few  days  afterwards  he  took  a  deed 
of  the  mill  property  to  himself,  dis- 
charged the  bond,  excluded  his  co- 
partner, mortgaged  the  mill  prop- 
erty to  secure  some  partnership 
debts,  and  some  of  his  own,  and 
the  balance  of  the  purchase  money 
remaining  due,  and  brought  this 
bill  in  equity  to  close  the  partner- 
ship affairs. 

The  bill  and  answer  both  admit 
the  existence  of  the  partnership. 
It  is  satisfactorily  proved  that  the 
verbal  contract  for  the  sale  of  the 
mill  from  C.  to  D.  was  abandoned 
by  mutual  consent  when  they  went 
into  partnership,  and  that  the  un- 
derstanding between  them  was 
that  the  purchase  of  the  mill  prop- 
erty should  be  completed  on  part- 
nership account,  the  sums  pre- 
viously paid  and  expended  by  the 
partners  severally  toward  the  pur- 
chase or  in  the  improvement  of  the 
mill  property  to  be  regarded  as  so 
much  contributed  by  them  respect- 
ively to  the  partnership  funds. 
Held,  that  there  is  nothing  in  the 
statute  of  frauds  to  prevent  part- 
nership equities  from  attaching  to 
the  grist-mill  property,  and  that  it 
should  stand  charged,  as  between 
these  parties,  for  the  payment  of 
partnership  debts,  and  any  balance 
that  may  be  found  due  to  either  of 
the  partners  upon  the  final  adjust- 
ment of  the  partnership  accounts ; 
the  legal  title  not  to  be  disturbed 
except  as    may  be    necessary  for 


761 


*332 


EIGHTS    AND    OBLIGATIONS. 


[liOOK  III. 


houses  were  bequeathed  to  the  two  partners,  and  the}T  after- 
wards purchased  the  equities  of  redemption,  and  paid  for 


these  purposes.  Collins  v.  Decker, 
70  Me.  23. 

Where  real  and  personal  property 
is  held  in  trust  by  one  partner  for 
the  benefit  of  the  firm,  and  upon 
an  agreement  that  he  will  not  dis- 
pose of  it  without  the  consent  of 
the  others,  he  cannot  be  compelled 
to  convey  to  one  of  the  other  part- 
ners his  share  in  the  property  until 
such  partner  shall  have  first  paid 
to  him  his  share  of  indebtedness 
for  advances  made.  Cheeseman 
v.  Sturges,  6  Bosw.  520. 

Where  partners  own  each  in 
severalty  the  real  estate  where  the 
business  is  carried  on,  and  buildings 
have  been  erected  and  improve- 
ments made  thereon  by  the  firm, 
the  lands,  on  a  dissolution,  will  be 
treated  as  partnership  assets. 
Smith  v.  Dan  vers,  5  Sandf.  6(39. 

Where  B.,  owning  a  saw-mill 
property,  formed  a  partnership 
with  F.  in  the  lumber  business, 
agreeing  by  parol  that  the  mill  es- 
tate should  constitute  part  of  the 
partnership  fund,  and  F.  paid  a  part 
of  the  consideration  in  cash,  the  rest 
to  be  paid  out  of  the  profits  of  the 
business,  held,  that  the  title  of 
B.  did  not  pass  to  the  firm,  al- 
though F.  went  into  possession 
with  B.,  and  improvements  were 
made  upon  the  property  out  of  the 
firm  funds.  McCormick's  Appeal, 
57  Pa.  St.  54. 

M.  and  C.  entered  into  partner- 
ship, M.  contributing  real  estate  at 
an  estimated  value,  which  was  car- 
ried into  the  firm  stock  account  to 
his  credit,  he  reserving  his  right  on 
dissolution  not  to  be  bound  by  the 
estimated  value  and  to  withdraw 


the  property.  During  the  partner- 
ship the  buildings  were  burned  and 
rebuilt  by  the  firm  funds.  Held, 
that  the  real  estate  was,  in  equity, 
partnership  property  with  the  legal 
title  in  M. ;  that  his  reservation 
was  a  provision  to  correct  the  valu- 
ation ;  that  M.  withdrawing  it  on 
dissolution  would  take  it  at  its 
then  value;  and  that  the  property 
with  its  accretions  belonged  to  the 
firm,  to  be  accounted  for  as  firm 
assets.  Clark's  Appeal,  72  Pa.  St. 
142. 

Where  one  of  a  firm  of  four 
brothers  purchased,  in  his  own 
name,  a  lot.  and  leased  it  to  the 
firm,  and  the  firm  erected  its  oil 
refinery  thereon,  held,  that  his 
three  brothers  could  not,  in  an 
equity  proceeding,  afterwards 
claim  that  the  lot  should  be  treated 
as  firm  property,  although  he  had 
acted  in  bad  faith  in  procuring  the 
conveyance  to  himself  rather  than 
to  the  firm, —  his  act  having  been 
long  acquiesced  in  by  the  three 
others  without  an  investigation  of 
the  false  and  flimsy  reason  he  had 
assigned  therefor.  Slemmer's  Ap- 
peal, 58  Pa.  St.  1G8. 

There  is,  however,  no  presump- 
tion that  a  leasehold  standing  in 
the  name  of  one  of  several  copart- 
ners, and  used  by  the  firm  for  their 
business,  constitutes  partnership 
assets.  The  presumption  is  other- 
wise; its  mere  use  for  partnership 
purposes  does  not  operate  to  divest 
or  affect  the  legal  title.  Chamber- 
lain v.  Chamberlain,  44  N.  Y.  Supr. 
Ct.  (12  Jones  &  Sp.)  116. 

Where,  however,  all  the  mem- 
bers of  a  partnership  join  in  a  deed 


762 


CH.  IV.  SEC.  II.]       JOINT    AND    SEPARATE    PROPERTY. 


#009 


them  out  of  the  funds  of  the  partnership,  but  it  was  held 
that  the  property  thus  acquired  did  not  form  part  of  the 


of  land,  the  presumption  is,  in  the 
absence  of  proof,  that  the  consid- 
eration money  goes  to  the  use  of 
the  firm.  Lincoln  v.  White,  30 
Me.  291. 

A  partnership,  as  such,  cannot 
hold  the  legal  title  to  real  estate. 
But  where  a  deed  was  made  to 
Jarrett,  Moon  &  Co.,  it  not  appeai-- 
ing  whether  the  firm  was  composed 
of  Jarrett  &  Moon  and  others,  or 
Jarrett  Moon  (one  person)  and 
others,  held,  that  in  the  former 
case  the  legal  title  vested  in  Jarrett 
and  Moon,  and  in  the  latter  in  Jar- 
rett Moon,  in  trust  for  the  part- 
nership; the  uncertainty  arising 
from  the  omission  of  the  Christian 
names  of  grantees  might  be  re- 
moved by  parol  proof.  Holmes  v. 
Moon,  7  Heisk.  506.  See,  also, 
Tidd  v.  Rives,  2  N.  W.  Rep.  (N.  S.) 
497. 

A  conveyance  of  real  estaet  to 
"J.  L.  S.  &  Co."  vests  the  legal 
title  in  J.  L.  S.  individually, 
clothed,  however,  with  a  trust  for 
the  benefit  of  the  partnership. 
Moreau  v.  Saffarans,  3  Sneed,  595; 
Gilie  v.  Hunt,  35  Minn.  357;  Perci- 
full  v.  Piatt,  36  Ark.  456.  See, 
also,  Tidd  v.  Rines,  26  Minn.  201. 

If  the  conveyance  is  made  to  a 
partnership  name  which  expresses 
the  name  of  no  party,  it  vests  in  no 
one.  So  held  in  an  action  of  eject- 
ment. Percifull  v.  Piatt,  36  Ark. 
456. 

In  the  case  of  The  Chicago  Lum- 
ber Company  v.  Ashworth,  26  Kan. 
212,  it  was  held  that  where  a  mort- 
gage was  executed  to  a  firm  under 
the  name  of  "The  Chicago  Lum- 
ber Company,'*  the  absence  of  the 


names  of  the  individual  members 
from  the  mortgage  did  net  inval- 
idate it;  and  that  same  might  be 
foreclosed  upon  proper  allegations 
in  the  petition  as  to  the  constitu- 
tion of  partnership  and  the  owner- 
ship of  the  note  and  mortgage. 
See,  also,  Printup  v.  Turner,  65 
Ga.  71. 

In  Kelley  v.  Bourne,  16  Pac. 
Rep.  (Or eg.)  40,  it  was  held  that 
while  a  deed  to  a  partnership,  un- 
der the  name  of  "The  Grant's  Pass 
Real  Estate  Association/'  might  be 
insufficient  to  convey  the  legal  title 
to  the  partnership,  it  was  valid  as  a 
contract  to  convey,  and  vested  such 
an  equitable  title  in  the  partner- 
ship as  would  defeat  a  subse- 
quently acquired  title.  See,  also, 
Baker  v.  Thompson,  36  Minn. 
314. 

In  Brunson  v.  Morgan,  76  Ala. 
593,  it  was  held  that  when  real  es- 
tate is  conveyed  to  a  partnership 
by  name  a  legal  title  does  not  vest 
in  the  firm,  but  in  the  several  part- 
ners as  tenants  in  common.  See, 
also,  Davis  v.  Davis,  60  Miss.  615; 
Slaughter  v.  Doe,.  67  Ala.  494 ;  Al- 
len v.  Whetstone,  35  La.  Ann.  846 ; 
McMurray  v.  Fletcher,  28  Kan. 
337;  Printup  v.  Turner,  65  Ga.  71. 

Tax  deed  issued  to  partners  in 
the  firm  name  is  not  void  for  want 
of  grantee.  Sherry  v.  Gilmore,  58 
Wis.  324. 

Where  one  partner  invested  a 
portion  of  the  partnership  funds  in 
lands  for  his  own  use,  it  was  held 
that  this  created  a  resulting  trust, 
and  that  the  other  partners  might 
follow  it  and  claim  their  portion 
of  the  specific  property.     King  v. 


763 


*332 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


partnership  property,  the  equities  of  redemption  following 
the  mortgage  debts.     But  in  this  very  case  it  was  held  that 


Hamilton,    16  111.   190.     See,  also, 
Edgar  v.  Donnally,  2  Munf.  387. 

If  one  partner  purchase  land  to 
his  own  use  with  money  taken  out 
of  the  joint  fund,  the  lands  have 
been  held  not  to  be  joint  stock. 
Goodwin  v.  Richardson,  11  Mass. 
469 ;  Pitts  v.  Waugh,  4  id.  424. 

In  Louisiana  real  estate  owned 
by  commercial  partners  does  not 
enter  into  their  commercial  assets. 
As  regards  that  species  of  property 
they  are  joint  owners.  Guilbeau 
v.  Melancon,  28  La.  Ann.  627. 

Under  the  laws  of  Louisiana  pro- 
hibiting a  commercial  partnership 
from  owning  immovable  property, 
if  immovable  property  is  purchased 
with  partnership  funds  by  one  of 
the  partners  in  his  own  name,  and 
without  the  consent  of  his  copart- 
ners, the  property  itself  belongs  to 
the  partner  purchasing,  but  its 
value  at  the  time  of  the  purchase 
belongs  to  the  partnership.  No  de- 
cree of  a  court  could  be  rendered  to 
vest  the  title  of  property  so  pur- 
chased in  the  partnership,  for  the 
partnership  is  incapable  of  acquir- 
ing title.  McKee  v.  Griffin,  23  La. 
Ann.  417. 

"Where  the  title  to  land  belong- 
ing to  a  partnership  is  vested  in  one 
of  the  partners,  the  fact  that  it  is 
partnership  property  may  be  estab- 
lished or  rebutted  by  parol.     Zook 
v.  Clemens,  41  Iowa,  95;  Sherwood 
v.  St.  Paul,  etc.  R.  R.  Co.  21  Minn. 
127;  Bird  v.  Morrison,  12  Wis.  138 
Fairchild  v.  Fairchild,  64  N.  Y.  471 
In  re  Farmer,  18  Bank.  Reg.  207 
Black's    Appeal.    89    Pa.    St.    201 
Block  v.  Seipt,  17  Weekly  Notes  of 
Cases,  565 ;  Thompson  v.  Egbert,  3 


Thomp.  &  C.  474;  S.  C.  1  Hun,  484. 
See,  also,  Little  v.  Snedcor,  52  Ala. 
167 ;  Hewitt  v.  Rankin,  41  Iowa,  35 ; 
Drewrey  v.  Montgomery,  28  Ark. 
256;  Fall  River  Whaling  Co.  v. 
Borden,  10  Cush.  458;  Hauff  v. 
Howard,  3  Jones'  Eq.  440;  Paige  v. 
Paige,  71  la.  318.  See,  also,  Collins 
v.  Decker,  70  Me.  23. 

As  to  strangers,  however,  it  is 
held  in  Pennsylvania  that  p'artners' 
agreements  to  make  real  estate 
common  stock  must  be  in  writing, 
and  ought  to  be  on  record.  It  is 
not  competent  to  show  by  parol 
that  real  estate  conveyed  to  two  as 
tenants  in  common  is  partnership 
property.  Lefevre's  Appeal,  69  Pa. 
St.  122.  See,  also,  Ebbert's  Appeal, 
70  Pa.  St.  79;  Jones'  Appeal,  id. 
169 ;  and  Hale  v.  Henric,  2  Watts, 
143;  Ridgway's  Appeal,  15  Penn. 
St.  177;  Otis  v.  Sill,  8  Barb.  102. 

Where  there  is  a  conveyance  to 
one  partner  by  a  deed  absolute  on 
its  face,  and  it  is  attempted  to  be 
shown  by  parol  that  it  was  in  fact 
a  conveyance  to  him  for  the  use  of 
himself  and  his  copartner  as  ten- 
ants in  common,  it  is  competent  to 
rebut  this  evidence  by  showing  by 
parol  evidence  that  it  was  owned 
by  them  as  partnership  property. 
Black's  Appeal,  89  Pa.  St.  201. 

Improvements  upon  land  owned 
by  one  partner,  or  by  several  part- 
ners as  tenants  in  common,  made 
with  partnership  funds,  are  part- 
nership property.  Lane  v.  Tyler, 
49  Me.  252;  Kendall  v.  Rider,  35 
Barb.  100;  Hiscock  v.  Phelps,  44 
N.  Y.  97.  See,  also,  Deveney  v. 
Mahoney,  23  N.  J.  Eq.  247. 

Permanent  improvements  upon 


764 


<3H.  IV,  SEC.  II.]       JOINT   AND    SEPARATE    PROPERTY. 


*332 


other  public  houses  purchased  by  the  partners  out  of  the 
partnership  funds,  and  used  for  the  purposes  of  its  trade,  did 
form  partnership  property  to  all  intents  and  purposes.  (I) 


real  estate  owned  by  one  partner 
will,  however,  notwithstanding  the 
real  estate  is  used  as  the  place  of 
business  of  the  firm,  be  presumed 
to  be  the  individual  property  of 
such  partner  until  it  is  proved  that 
such  improvements  were  erected 
by  the  firm  and  paid  for  out  of  firm 
assets,  or  contributed  as  firm  cap- 
ital by  such  partner.  Goepper  v. 
Kinsinger,  39  Ohio  St.  429.      . 

Where  real  estate  is  purchased 
by  one  of  two  partners,  and  paid 
for  out  of  his  individual  funds,  and 
improvements  are  made  thereon 
with  the  partnership  funds,  be- 
tween the  time  of  the  giving  of  a 
judgment  by  one  of  the  partners  as 
a  security  for  future  responsibil- 
ities, and  the  incurring  of  such 
responsibilities  by  the  judgment 
creditor,  the  equitable  interest  of 
the  other  copartner  to  be  reim- 
bursed his  share  of  the  partnership 
funds  applied  to  the  making  of 
such  improvements  is  prior  in 
point  of  time  to  the  lien  of  the 
judgment,  upon  the  principle  that 
an  incumbrance  which  intervenes 
between  a  partnership  and  further 
advances  takes  priority  over  the 
latter.  Averillu.  Loucks,  6  Barb.  19. 

Employing  partnership  funds  in 
making  permanent  improvements 
upon  real  property  owned  by  the 
partners,  and  appropriated  to  the 
partnership  business  is  not  neces- 
sarily a  fraud  upon  the  creditors  of 
the  firm  if  no  intent  to  defraud  is 
shown.  Parker  v.  Bowles,  57  N.  H. 
491. 


Where  real  estate  is  owned  in 
undivided  interests  by  the  individ- 
uals who  compose  a  partnership 
which  has  only  the  use  of  it,  trade 
fixtures  set  up  by  the  partners  do 
not  become  realty,  and  when  their 
occupation  ceases  they  may  remove 
them.  They  are  not  covered  by 
mortgages  on  the  premises  if  their 
owners  do  not  plainly  mean  them 
to  be  so.  Robertson  v.  Corsett,  39 
Mich.  777. 

In  equity  partnership  real  estate 
is  treated  as  mere  personalty,  and 
is  governed  by  the  rules  and  gen- 
eral doctrines  applicable  to  that 
species  of  property.  See  Arnold  v. 
Wainwright,  6  Minn.  358 ;  Davis  v. 
Christian,  15  Gratt.  11 ;  Mauck  v. 
Mauck,  54  111.  281 ;  Scruggs  v.  Blair, 
44  Miss.  406;  Nicoll  v.  Ogden,  29 
111.  323 ;  Hill  v.  Beach,  12  N.  J.  Eq. 
31 ;  Ludlow  v.  Cooper,  4  Ohio  St. 
1 ;  Moderwell  v.  Mullison,  21  Penn. 
St.  257 ;  Day  v.  Perkins,  2  Sandf . 
Ch.  359  (a  leasehold);  Andrews  v. 
Brown,  21  Ala.  437 ;  Black  v.  Black, 

15  Geo.  445;  Whitney  v.  Cotton, 
53  Miss.  689;  Galbraith  v.  Gedge, 

16  B.  Mon.  631 ;  Divine  v.  Mitchum, 
4  id.  488;  Coles  v.  Coles,  15  Johns. 
159;  Piatt  v.  Oliver,  3  McLean,  27; 
Davis  v.  Smith,  82  Ala.  198 ;  Mur- 
tagh  v.  Castello,  7  Law  Rep.  (Ir.) 
428;  Re  Ransom,  17  Fed.  Rep.  331 ; 
Leaf's  Appeal,  105  Pa.  St.  505 ;  S.  C. 
14  Weekly  Not.  Cas.  507;  41  Leg. 
Intel.  450;  Causler  v.  Wharton,  62 
Ala.  358 :  Tarbell  v.  Bradley,  7  Abb. 
N.  C.  273 ;  Trowbridge  v.  Cross,  117 
111.  109 ;  Shanks  v.  Klein,  104  U.  S. 


(I)  1  M.  &  K.  649. 


765 


f333 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Devisees  of  a  trade  and  of  land  for  the  purpose  of  car- 
rying  it  on. —  On  the   other  hand,   in  Jackson  v. 
[*333]  Jackson,  (m)  a  testator  had  *devised  to  his  two  sons 


18;  S.  C.  11  Fed.  Rep.  767;  Rank 
v.  Grote,  50  N.  Y.  Super.  Ct.  275 ; 
Rice  v.  Pennypacker,  5  Del.  279; 
Flannagan  v.  Shuck,  82  Ky.  617; 
Grissom  v.  Moore,  106  Ind.  296; 
Godfrey  v.  White,  43  Mich.  171; 
Espy  v.  Comer,  76  Ala.  501;  Re 
Codding,  9  Fed.  Rep.  849 ;  Breen  v. 
Richardson,  6  Colo.  605;  Priest  v. 
Chouteau,  85  Mo.  398;  S.  C.  12  Mo. 
App.  252;  Brewer  v.  Browne,  68 
Ala.  210;  Brunson  v.  Morgan,  76 
Ala.  593;  Diggs  v.  Brown,  78  Va. 
292 ;  Sprague  Mfg.  Co.  v.  Hoyt,  29 
Fed.  Rep.  421 ;  Mallory  v.  Russell, 
32  N.  W.  Rep.  102;  Taylor  v. 
Farmer,  6  West.  Rep.  710 ;  Pepper  v. 
Thomas,  4  So.  W.  Rep.  297 ;  Lenow 
v.  Fones,  4  So.  W.  Rep.  56.  See, 
also,  Morgan  v.  Olney,  53  Ind.  6; 
Rammelsberg  v.  Mitchell,  29  Ohio 
St.  22;  Foster  v.  Barnes,  81  Penn. 
St.  377;  West  v.  Hickory  Mining 
Ass'n,  80  id.  38.  See,  however, 
Ferguson  v.  Hass,  Phill.  Eq.  113. 

But  this  rule  grows  out  of  the 
peculiar  nature  of  the  partnership 
relation,  and  is  adopted  for  the  pur- 
pose of  doing  justice  between  part- 
ners, or  between  them  and  others 
having  dealings  with  them,  and  for 
the  purpose  of  properly  adjusting 
the  relations  between  them,  or  be- 
tween them  and  others  having 
dealings  with  or  relations  to  the 
partnership.  It  is  not  an  arbitrary 
rule,  by  which  a  court  of  equity 
transmutes  real  estate  into  personal 
property  when  it  is  onco  owned  and 
possessed    by  a    partnership,   and 


causes  it  to  take  that  character 
outside  of  and  independent  of  the 
exigencies  of  the  partnership. 
Black  v.  Black,  15  Ga.  445. 

Although  a  court  of  equity  con- 
siders and  treats  real  property, 
purchased  with  the  partnership 
funds,  and  held  for  the  purposes  of 
the  firm,  as  constituting  part  of  the 
stock  of  the  partnership,  it  leaves 
the  legal  title  undisturbed,  except 
so  far  as  may  be  necessary  to  pro- 
tect the  equitable  rights  of  the  re- 
spective partners.  Lang  v.  Waring, 
25  Ala.  625. 

The  real  estate  of  a  partnership 
is  held  as  personalty  for  the  pur- 
poses of  the  partnership,  but  where 
not  needed  for  such  purposes  it 
descends  as  other  real  estate  to  the 
heir.  Williamson  v.  Fontain,  7  J. 
Baxt.  (Tenn.)  212.  See,  also,  Mc- 
Grath  v.  Sinclair,  55  Miss.  89; 
Yeatman  v.  Woods,  6  Yerg.  20; 
Gaines  v.  Catron,  1  Humph.  514; 
Piper  v.  Smith,  1  Head,  93;  Sum- 
mey  v.  Patton,  1  Wins.  (N.  C.)  Eq. 
(No.  II)  52.  See,  however,  McAl- 
lister v.  Montgomery,  3  Hayw. 
(Tenn.)  94. 

The  widow  of  a  deceased  partner 
cannot,  therefore,  treat  the  part- 
nership real  estate  as  personal 
property,  but  it  goes  to  the  heir. 
Williamson  v.  Fontain,  supra. 

Where,  after  the  dissolution  of  a 
firm  by  the  death  of  a  partner,  the 
firm  and  the  individual  partners 
are  all  insolvent,  the  widow  of  the 
deceased  partner  cannot  recover  a 


(m)  9  Ves.  591,  and  7  id.  535. 
24  Beav.  254,  noticed  supra. 


Compare  this  with  Brown  v.  Oakshot, 


766 


OH.  IV,  SEC.  II.]       JOINT    AND    SEPARATE ,  PROPERTY. 


"333 


jointly,  his  trading  business  and  lands  used  by  him  for 
the  purpose  of  carrying  it  on.     The  sons  took  the  busi- 


distributive  share  of  the  firm 
realty,  and  the  administrator  of 
the  deceased  partner  cannot,  while 
the  firm  creditors  are  unsatisfied, 
appropriate  a  share  of  the  property 
to  satisfy  the  creditors  of  the  de- 
ceased, although  they  may  have 
become  creditors  on  the  faith  that 
decedent  had  an  individual  interest 
in  such  realty.  Paige  v.  Paige,  71 
la.  318. 

Where  the  legal  title  to  lands 
purchased  and  held  for  partnership 
uses  is  in  the  partners  individually, 
they  are  nevertheless  subject  to  an 
implied  trust  that  they  shall  be  ap- 
plied to  the  payment  of  the  part- 
nership debts ;  and  the  widow  of  a 
deceased  partner  is  not  entitled  to 
dower  therein  until  the  trust  is 
fully  executed.  Bopp  v.  Fox,  63 
111.  540;  Price  v.  Hicks,  14  Fla.  565; 
Uhler  v.  Semple,  20  N.  J.  Eq.  288; 
Campbell  v.  Campbell,  30  id.  415; 
Howard  v.  Priest,  5  Mete.  582; 
Simpson  v.  Leech,  86  111.  286; 
Stroud  v.  Stroud,  Phill.  L.  525; 
Robertshaw  v.  Hanway,  52  Mass. 
713;  Be  Ransom,  17  Fed.  Rep.  331; 
Trowbridge  v.  Cross,  117  111.  109; 
Mallory  v.  Russell,  71  Iowa,  63; 
Paige  v.  Paige,  32  N.  W.  Rep.  360 ; 
Martin  v.  Smith,  25  W.  Va.  580; 
Dumble  v.  Mcintosh,  8  Ont.  225; 
Lenow  v.  Fones,  48  Ark.  557.  See, 
also,  Hudson  v.  Neil,  41  Ind.  505; 
Pepper  v.  Thomas,  4  S.  W.  Rep. 
297;  Strong  v.  Lord,  infra  in  this 
note;  Cook  v.  Watson,  30  N.  J.  Eq. 
345. 

The  right  to  a  homestead  exemp- 
tion stands  on  no  higher  ground 
than  dower.  Robertshaw  v.  Han- 
way,  supra;    Terry  v.  Berry,    13 


Nev.  514;  Commercial  &  S.  Bank 
v.  Corbett,  5  Sawy.  543;  Trow- 
bridge v.  Cro.s,  117  111.  109;  Lind- 
ley  v.  Davis,  6  Mont.  453;  Holmes 
v.  Winchester,  138  Mass.  542; 
Hoyt  v.  Hoyt,  69  la.  174:  Van  Sta- 
den  v.  Kline,  64  la.  180 ;  Drake  v. 
Moore,  66  la.  58. 

See,  however,  contra,  Swearin- 
gen  v.  Bassett,  65  Tex.  267;  Hun- 
nicutt  v.  Summey,  63  Ga.  586. 

After  the  settlement  of  the  af- 
fairs of  the  firm,  partnership 
realty  undisposed  of  will  resume 
its  original  character,  and  the 
widow  be  entitled  to  her  dower  or 
share  in  it  as  realty.  Lenow  v. 
Fones,  48  Ark.  57.  See,  also.  Rank 
v.  Grote,  50  N.  Y.  Super.  Ct.  275, 
and  the  cases  above  cited. 

Where  real  estate  has  been  de- 
voted by  a  husband  to  the  use  of 
the  firm  of  which  he  is  a  member 
his  wife's  inchoate  interest  therein, 
in  the  absence  of  her  joining  in  a 
conveyance,  is  not  affected ;  but, 
as  to  the  improvements  placed 
thereon  for  partnership  purposes, 
she  is  merely  entitled  to  take  as 
any  other  heir.  Crissom  v.  Moore, 
106  Ind.  296. 

A  widow  is  entitled  to  dower  in 
partnership  land  conveyed  by  the 
partners  to  a  third  person.  Bow- 
man v.  Bailey,  20  S.  C.  550. 

A  Nation  en  paiement,  made  by 
a  partner  to  his  wife,  of  the  prop- 
erty of  the  firm,  in  satisfaction  of 
her  claim  against  the  firm  for  her 
paraphernal  funds,  held  by  it,  is 
valid.  Murrell  v.  Murrell,  33  La. 
Ann.  1233. 

Partnership  real  estate  can  only 
be  conveyed  as  real  estate  by  those 


767 


'333 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


ness  and  carried  it  on  in  partnership,  and  it  was  held  that 
the  lands  formed  part  of  the  partnership  property,  and  did 


holding  the  legal  title.  Davis  v. 
Christian,  15  Grat.  11. 

Neither  partner  can  alone  con- 
vey more  than  his  undivided  inter- 
est therein.  Anderson  v.  Tompkins, 

1  Brock.  456 ;  Willey  v.  Carter,  4 
La.  Ann.  50 ;  Arnold  v.  Stevenson, 

2  Nev.  234 ;  Donaldson  v.  Bank  of 
Cape  Fear,  1  Dev.  Eq.  103.  See, 
also,  Weld  v.  Peters,  1  La.  Ann. 
432. 

A  mortgage  executed  by  an  in- 
dividual member  of  a  firm  upon 
land,  the  legal  title  of  which  is 
vested  in  him,  but  which  is,  in  fact, 
owned  and  used  by  the  firm  as 
partnership  property,  is  "  real  es- 
tate security  "  within  the  clause  in 
a  will  directing  such  security  to 
be  taken  for  money  loaned.  Miller 
v.  Procter,  20  Ohio  St.  442. 

However,  land  purchased  by  sev- 
eral for  the  purpose  of  sale  for 
profits  only,  and  not  for  permanent 
use,  will  be  regarded  in  equity  as 
personal  property  among  the  part- 
ners in  the  speculation,  and  one  of 
them,  it  is  held,  may  release  his 
interest  in  the  same  orally.  Morrill 
v.  Colehour,  82  111.  618. 

And  where  land  is  partnership 
stock  it  never  becomes  personalty, 
even  during  the  continuance  of 
the  firm,  so  as  to  give  one  partner 
power  to  dispose  of  the  firm  inter- 
est in  it.  Foster's  Appeal,  74  Pa. 
St.  391. 

There  is  nothing,  however,  in 
the  statute  of  frauds,  to  prevent 
one  partner  from  giving  to  another 
partner,  by  verbal  contract,  a  lien 
upon  his  interest  in  the  real  estate 
af  th<  Srm,  to  secure  moneys  ad- 
vanced for  the  payment  of  his  pro- 


portion of  the  firm  debts.  Taylor 
v.  Farmer,  6  West.  R.  710. 

Real  property  purchased  with 
partnership  funds  for  partnership 
purposes,  and  which  remains  after 
paying  the  debts  of  the  firm  and 
adjusting  the  equitable  claims  of 
the  different  members  of  the  firm, 
as  between  themselves  is  consid- 
ered and  treated  as  real  estate. 
Buckley  v.  Buckley,  11  Barb.  43; 
Scruggs  v.  Blair,  44  Miss.  456.  See, 
however,  Thayer  v.  Lane,  Walk. 
Ch.  200. 

And,  in  the  settlement  of  the  es- 
tate of  a  deceased  copartner,  any 
real  estate  of  the  partnership  re- 
maining after  the  fulfillment  of  all 
partnership  obligations  is  to  be 
treated  as  realty.  Wilcox  v.  Wil- 
cox, 13  Allen,  252. 

Real  estate  owned  and  used  by  a 
partnership  may  be  deemed  per- 
sonalty, not  only  for  ^purposes  of 
the  partnership,  but  for  distribu- 
tion also,  when  the  intention  of 
the  partners  that  it  should  be  so 
treated  appears.  In  the  absence 
of  their  agreement,  express  or  im- 
plied, to  this  effect,  it  should  only 
be  so  regarded  for  the  purposes  of 
the  partnership,  and,  after  these 
are  answered  the  surplus  should 
be  held  to  be  real  estate  for .  all 
other  purposes.  Lowe  v.  Lowe.  13 
Bush,  688;  McAvoy's  Estate,  12 
Phila.  83;  Lenow  v.  Fones,  4  S. 
W.  Rep.  56 ;  Brewer  v.  Browne,  68 
Ala.  210 ;  Re  Codding,  9  Fed.  Rep. 
849;  Espy  v.  Comer,  76  Ala.  501; 
Leaf's  Appeal,  105  Pa.  St.  505;  S. 
C.  14  Weekly  Not.  Cas.  507;  41 
Leg.  Intel.  450;  Logan  v.  Green- 
low,  25  Fed.  Rep.  299;  Martin  v. 
68 


CH.  IV,  SEC.  II.]       JOINT   AND    SEPARATE    PROPERTY. 


-333 


not  belong  to  the  sons  as  mere  joint  tenants.     In  this  case, 
not  only  was  there  some  evidence  to  show  that  the  sons  con- 


Morris,  63  Wis.  418;  Way  v.  Steb- 
bins,  47  Mich.  296.  See,  also,  Col- 
lins v.  Decker,  70  Me.  23; 
Scruggs  v.  Blair,  44  Miss.  406. 
Compare  Bank  of  Louisville  v. 
Hale,  8  Bush,  672;  Cornwall  v. 
Cornwall,  6  id.  369. 

When  land,  held  as  personalty 
stock,  and  therefore  deemed  per- 
sonalty, is  sold  by  the  firm,  the 
land  becomes  land  again  in  the 
hands  of  the  purchaser,  and  the 
proceeds  personalty,  but  only  to 
the  extent  of  accomplishing  the 
purposes  of  the  conversion,  namely, 
the  equity  of  the  partners  to  have 
the  joint  debts  and  their  own  ad- 
vances paid  before  any  part  goes  to 
the  other  partners  or  their  separate 
creditors.  The  time  of  reconver- 
sion is  the  moment  the  partnership 
is  wound  up,  either  by  decree, 
judgment  or  agreement,  and  it  is 
determined  to  be  no  longer  partner- 
ship stock  nor  required  for  its  pur- 
poses. Foster's  Appeal,  74  Pa.  St. 
391.  See  the  cases  next  above  cited. 

In  a  court  of  equity  real  estate 
belonging  to  a  firm,  purchased 
with  the  partnership  funds  and 
treated  as  partnership  property,  is 
considered  as  personal  property  to 
this  extent  at  least :  that  it  is  liable 
to  pay  the  debts  of  the  firm ;  and 
the  surviving  partner,  although 
the  legal  title  does  not  devolve 
upon  him,  has  a  claim  on  it  for 
that  purpose  which  is  superior  to 
the  title  of  the  widow  and  heirs  at 
law  of  the  deceased  partner.  An- 
drews v.  Brown,  21  Ala.  437;  Aber- 
nathy  v.  Moses,  73  Ala.  381. 

The  equitable  interest  of  a  part- 
nership under  a  contract  to  convey 


land  to  the  firm  may  be  subjected 
to  the  partnership  debts  by  proper 
proceeding  against  the  surviving 
partner.  McCaskell  v.  Lancashire, 
83  N.  C.  393. 

A  surviving  partner  is  entitled 
to  use  the  real  estate  of  the  part- 
nership as  firm  assets  so  far  as  it  is 
needed  to  settle  the  affairs  of  the 
firm,  and  decedent's  heirs  hold 
the  legal  estate  only  as  trustees  for 
the  equitable  purposes  of  the  firm. 
Merritt  v.  Dickey,  38  Mich.  41 ;  Du- 
puy  v.  Leavenworth,  17  Cal.  262. 
See,  also,  Matthews  v.  Hunter,  67 
Mo.  293. 

A  surviving  partner  cannot  con- 
vey by  deed  the  title  of  a  deceased 
partner  to  his  interest  in  lands  be- 
longing to  the  partnership.  McNiel 
v.  First  Congregational  Society,  66 
Cal.  105. 

While  the  deed  of  a  surviving 
partner  conveying  partnership  real 
estate  for  the  purpose  of  paying 
debts  does  not  pass  the  legal  title 
as  against  the  heirs  of  the  deceased, 
it  conveys  an  equity  through 
which  the  purchaser  may  compel 
the  conveyance  of  the  legal  title 
by  them.  Davis  v.  Smith,  82  Ala. 
198;  Shanks  v.  Klein,  104  U.  S.  18. 
See,  also,  Breen  v.  Richardson,  6 
Colo.  605. 

Where,  however,  the  articles  of 
copartnership  expressly  declare 
that  the  real  estate  of  the  firm 
shall  be  considered  as  part  of  the 
joint  stock  and  funds  of  the  firm, 
and  as  possessing  all  the  incidents 
and  liabilities  of  partnership  funds 
and  personal  property,  and  fully 
impressed  by  the  parties  with  such 
incidents  and  liabilities,  and  these 


Vol.  1  —  49 


769 


*333 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


sidered  the  land  as  part  of  their  property  as  partners,  but 
there  was  also  this  peculiarity,  that  a  trading  business  was 

articles  are  duly  probated  as  part    be  sold,  and  the  debt  paid  out  of 


of  the  will  of  a  deceased  partner, 
the  deed  of  the  surviving  partner, 
though  not  executed  for  the  pur- 
Wise  of  paying  the  debts  of  the 
firm,  conveys  a  perfect  legal  title 
as  against  the  heirs  of  the  deceased. 
Davis  v.  Smith,  82  Ala.  198;  S.  C. 
2  So.  Rep.  897. 

The  doctrine  of  survivorship  in 
respect  to  estates  in  partnership  in 
real  property  is  limited,  as  it 
seems,  to  the  extent  to  which 
equity  stamps  the  character  of  per- 
sonalty upon  such  estates ;  and  that 
is  so  far,  and  no  farther,  as 
they  are  required  to  pay  partner- 
ship debts;  so  that  whatever  re- 
mains after  the  debts  of  the  com- 
pany shall  have  been  discharged  is 
held  in  common  and  subject  to 
dower  or  curtesy,  and  descends  to 
the  heirs  or  devisees.  Strong  v. 
Lord,  107  111.  25. 

A  firm  creditor,  where  all  the 
members  of  the  firm  are  dead,  may, 
to  satisfy  his  debt,  on  proper  proof 
by  a  surrogate's  order,  procure  a 
sale  of  the  real  estate  of  the  one 
who  survived  the  other,  although 
the  latter  is  shown  to  have  left 
abundant  assets  to  meet  all  de- 
mands against  the  estate.  Bridge 
v.  Swain,  3  Redf.  487. 

The  heirs  of  deceased  partners 
are  not  necessarily  parties  to  an 
•action  to  subject  the  real  property 
'of  the  firm  to  the  claims  of  its 
creditors.  McCaskell  v.  Lanca- 
shire, 83  N.  C.  393. 

Partnership  real  estate  which 
cannot  be  divided  or  is  required  to 
pay  partnership  debts  may,  upon  a 
decree  of  dissolution,  be  ordered  to 


the  proceeds,  surplus  to  be  divided 
between  the  partners.  Wiegand 
v.  Copeland,  7  Sawyer,  442;  S.  C. 
14  Fed.  Rep.  113. 

As  to  what  circumstances  will 
justify  the  exercise  of  the  power 
of  a  court  of  equity  to  authorize  a 
surviving  partner  to  sell  at  private 
sale  realty  owned  by  an  insolvent 
firm,  see  Mauck  v.  Mauck,  54  111. 
281. 

Where  real  estate  is  purchased 
with  partnership  funds,  the  title 
taken  in  the  partnership  name,  and 
the  property  held  for  partnership 
purposes,  and,  on  the  death  of  one 
of  the  partners,  the  firm  being  in- 
solvent, the  surviving  partner  con- 
veys the  lands,  with  all  the  other 
partnership  property,  to  an  as- 
signee, in  compromise  and  settle- 
ment of  the  claims  of  creditors, 
who  assent  to  it,  the  assignee  may 
maintain  a  bill  in  equity  against 
the  heirs  of  the  deceased  partner 
to  compel  a  divestiture  of  the  legal 
title  and  have  the  lands  applied  to 
the  payment  of  the  partnership 
debts.  Murphy  v.  Abrams,  50  Ala. 
293. 

An  administrator  cannot  be  held 
liable  for  not  receiving  and  ac- 
counting for  funds  arising  from  the 
sale  of  his  intestate's  partnership 
interest  in  real  estate,  when  the 
whole  property  was  needed  to  sat- 
isfy the  debts  of  the  firm,  and  the 
sale  was  made  to  the  surviving 
partner  in  order  to  transfer  to  him 
the  legal  title,  to  be  used  in  settling 
the  business.  Merritt  v.  Dickey, 
38  Mich.  41. 

If  rents  and  profits  accrue  from 


770 


CH.  IV,  SEC.  II.]   JOINT  AND  SEPARATE  PROPERTY. 


•333 


left  to  them,  and  that  the  land  was  accessory  to  that  trade; 
so  that  it  was  very  difficult,  as  observed  by  the  lord  chan- 

The  rule  is  the  same  though  the 
title  stands  in  an  individual  part- 
ner or  in  several  partners  as  ten- 
ants in  common.  Lime  Rock  Bank 
v.  Phetteplace,  8  R.  I.  56;  Watlock 
v.  James,  13  N.  J.  Eq.  126 ;  Jarvis 
v.  Brooks,  27  N.  H.  37 ;  Cilley  v. 
Huse,  40  id.  358 ;  Gordon  v.  Ken- 
nedy, 36  Iowa,  167;  Fall  River 
Whaling  Co.  v.  Borden,  10  Cush. 
458 ;  Paige  v.  Paige,  32  N.  W.  Rep. 
360 ;  Page  v.  Thomas,  43  Ohio  St. 
38;  Bowen  v.  Billings,  13  Neb.  439; 
Collins  v.  Decker,  70  Me.  23. 

The  rule  is  the  same  in  the  case 
of  improvements  upon  such  realty. 
Hiscock  v.  Phelps,  49  N.  Y.  97. 
See,  also,  Deveney  v.  Mahoney,  23 
N.  J.  Eq.  247. 

In  the  absence  of  proof  of  joint 
ownership  of  land  occupied  for 
firm  purposes,  or  representations  or 
conduct  of  the  individual  partner 
holding  the  legal  title  such  as  will 
mislead  creditors,  and,  as  to  them, 
estop  him  from  denying  the  owner- 
ship of  the  firm,  the  right  of  the 
creditors  to  subject  such  property 
to  the  payment  of  firm  debts  in 
preference  to  the  individual  debts 
of  such  partner  must  depend  upon 
the  right  of  partners  as  between 
themselves.  Goepper  v.  Kinsinger, 
39  Ohio  St.  429. 

A  partnership  at  its  dissolution 
was  much  in  debt  and  the  estate  of 
a  deceased  partner  was  insolvent. 
Held,  that  the  fact  that  a  piece  of 
land  which  was  owned  in  common 
by  the  partners  was  presumptively 
a  part  of  the  firm  assets  was  suffi- 
cient ground  to  grant  an  injunction 
in  favor  of  the  surviving  partner,, 
forbidding  the  administrator  of  the 


the  real  partnership  assets  while  in 
the  hands  of  a  surviving  member 
of  a  firm,  such  rents  and  profits 
are  personal  property,  and  any  sur- 
plus would  go  to  the  personal  rep- 
resentative of  the  deceased  part- 
nt,r.  The  heir  would  only  be  enti- 
tled to  the  realty  or  its  surplus,  if 
sold,  as  it  stood  at  the  death  of  his 
ancestor.  Griffey  v.  Northcutt,  5 
Heisk.  746. 

Where  land  is  held  by  a  firm  by 
deed  expressing  that  it  is  partner- 
ship stock  an  incumbrance  against 
a  member  of  the  firm  is  not  a  lien 
upon  any  interest  in  it  so  as  to  pre- 
vent the  firm  conveying  it  to  a  pur- 
chaser clear  of  the  incumbrance. 
Meily  v.  Wood,  71  Pa.  St.  488. 

In  such  case  the  land  is  personal 
property,  to  be  applied,  according 
to  the  equities  between  the  part- 
ners, in  payment  of  partnership 
debts  in  the  first  instance,  so  that 
an  execution  by  a  separate  creditor 
would  sell,  not  an  interest  in 
realty,  but  the  balance  due  his 
debtor,  with  right  by  bill  in  equity 
to  compel  a  settlement.  Meily  v. 
Wood,  supra. 

Partnership  real  estate  must  be 
first  applied  to  the  satisfaction  of 
the  partnership  debts.  Matlock  v. 
Matlock,  5  Ind.  403;  Winslow  v. 
Chiffelle,  1  Harp.  Ch.  25 ;  Hunter 
v.  Martin,  2  Rich.  541 ;  Overholt's 
Appeal,  12  Penn.  St.  222 ;  Marvin 
v.  Trumbull,  Wright,  386;  Bryant 
v.  Hunter,  6  Bush,  75;  Cornwall  v. 
Cornwall,  id.  369;  National  Bank 
of  Metropolis  v.  Sprague,  20  N.  J. 
Eq.  13;  Uhler  v.  Semple,  id.  288; 
Diggs  v.  Brown,  78  Va.  292 ;  Bowen 
v.  Billings,  13  Neb.  439. 


771 


•333 


BIGHTS    AND    OBLIGATIONS. 


[book   III. 


cellor,  to  sever  the  profits  from  the  land  and  to  hold  the 
devisees  to  be  partners  as  to  the  former,  but  not  as  to  the 
latter. 


deceased  partner  from  proceeding 
to  sell  such  land  to  pay  the  separate 
debts  of  his  intestate  under  a  li- 
cense from  the  county  court.  Will- 
iams v.  Moore,  Phill.  Eq.  211. 

A.,  B.  and  C.  were  partners  in  the 
lumber  business.  A  deed  granting 
them  a  quarter-section  of  land  re- 
cited that  an  undivided  half  was 
granted  to  A.,  an  undivided  quarter 
to  B.,  and  an  undivided  quarter  to 
C,  adding,  "  this  being  the  propor- 
tional undivided  interest  of  each  of 
the  above  partners  in  the  lumber 
firm  and  land  of  Milo  A.  Skinner  & 
Co."  A.  mortgaged  his  interest  to 
secure  money  loaned  him  person- 
ally. Held,  that  such  recital  in  the 
deed  was  not  notice  to  the  mort- 
gagee that  such  land  was,  in  fact, 
partnership  property  and  primarily 
liable  for  partnership  debts.  Van 
Slyck  v.  Skinner,  1  N.  W.  Rep. 
(N.  S.)  971. 

A.  and  B.  were  tenants  in  common 
of  a  saw-mill,  with  the  land  and 
appurtenances  conveyed  to  them 
by  separate  deeds,  each  owning  an 
undivided  half  and  each  furnishing 
the  purchase  money  for  the  share 
conveyed  to  him.  They  subse- 
quently formed  a  copartnership 
and  entered  into  a  parol  agreement 
to  consider  the  real  estate  partner- 
ship property,  using  it  in  their 
partnership  business.  Held,  that 
it  was  not  liable  in  equity  to  the 
payment  of  the  partnership  debts 
as  against  the  separate  creditors  of 
the  copartners,  who  had  given 
credit  and  taken  security  thereon 
from  them  upon  the  strength  of 
their  owning  the  property  as  ten- 


ants in  common.  Parker  v.  Bowles, 
57  N.  H.  491. 

Upon  the  sale  of  real  estate  of 
one  of  two  partners,  and  the  ap- 
propriation of  the  proceeds  to  the 
payment  of  a  judgment  against 
both,  a  subsequent  judgment  cred- 
itor of  that  partner  whose  separate 
estate  was  sold  is  not  entitled  to  be 
substituted  as  plaintiff  in  the  judg- 
ment to  which  the  money  was  ap- 
propriated, so  as  to  enable  him  to 
proceed  against  the  other  partner, 
unless  it  shall  be  made  to  appear 
that  he  whose  separate  property 
was  sold  was-,  at  the  time,  a  cred- 
itor partner  of  the  firm.  Sterling 
v.  Brightbill,  5  Watts,  229. 

The  legal  title  of  partnership 
real  estate  vests  in  the  several 
partners  as  tenants  in  common, 
and  all  must  join  in  a  conveyance 
in  order  to  pass  the  title.  Espy  v. 
Comer,  76  Ala.  501.  See  cases 
cited  at  the  beginning  of  this 
note. 

One  partner  in  a  water-right,  ac- 
quired by  appropriation,  cannot 
convey  away  the  interest  of  his 
partner  therein.  Henderson  v. 
Nicholas,  67  Cal.  152. 

Where  one  partner  of  a  firm  and 
his  wife  deeded  to  the  other  part- 
ner of  the  firm  the  undivided  one- 
half  of  the  land  used  in  the  busi- 
ness, and  upon  the  death  of  the 
grantor  his  wife  fraudulently  de- 
stroyed the  deed  before  it  was  re- 
corded, the  grantee  has  the  right 
to  have  restored  to  him  the  evi- 
dence of  his  interest  in  the  prop- 
erty occupied  by  the  defendant. 
Wallace  v.  Wallace,  6  West.  R.  113. 


772 


CH.  TV,  SEC.  II.]   JOINT  AXD  SEPARATE  PROPERTY.    T         ""333 


Devisees  of  mines. —  Upon  this  last  ground  it  was  held* 
in  Crawshay  v.  Jfaule,  (??.)  that  mines  devised  to  several  per- 


See,  also,  Mette  v.  Feldman,  45 
Mich.  25. 

No  partner  or  proportion  of  part- 
ners can  sell  or  transfer  the  real 
estate  of  the  firm  outright  for 
money,  or  by  way  of  mortgage,  as 
to  assignees  in  trust  for  debts,  with- 
out the  consent  and  authority  of 
the  other  partners.  A  conveyance 
made  by  one  partner,  purporting  to 
convey  lands  belonging  to  the  firm, 
passes  only  the  grantor's  undivided 
interest.  Goddard  v.  Renner,  57 
Ind.  532.  See,  also,  Jackson  v. 
Stanford,  19  Ga.  14;  Layton  v. 
Hastings,  2  Harr.  147;  Jones  v. 
Neale,  2  Patt.  &  H.  339 ;  Elicott  v. 
Dycke,  78  Ala.  150. 

It  has  been  held,  however,  that 
if  one  partner  make  an  assignment 
of  the  real  estate  belonging  to  the 
firm  the  legal  title  will  be  held  by 
the  firm  in  trust  for  the  assignee. 
Baldwin  v.  Richardson,  33  Tex.  16. 

A  surviving  partner  cannot  alone 
convey  real  estate  belonging  to  the 
firm.  Galbraith  v.  Gedge,  16  B. 
Mon.  631. 

Where  a  note  for  a  firm  debt  was 
made  by  a  surviving  partner  who 
executed,  to  secure  it,  a  mortgage 
on  real  estate  which  was  the  indi- 
vidual property  of  his  deceased 
partners,  it  was  held,  on  a  bill  to 
foreclose  the  mortgage,  that  the 
bill  should  be  dismissed  without 
prejudice,  there  being  a  complete 
remedy  at  law  to  enforce  the  pay- 
ment of  the  note.  Dowell  v.  Mitch- 
ell, 105  U.  S.  430. 

Where  a  surviving  partner  exe- 
cutes a  mortgage  of  the  partnership 


assets  to  secure  a  firm  liability,  a 
complaint  to  foreclose  the  mort- 
gage is  sufficient  as  against  an  as- 
signee appointed  subsequent  to  the 
execution  of  the  mortgage  without 
showing  any  compliance  with  the 
statute  by  such  surviving  partner. 
Hadley  v.  Milligan,  100  Ind.  49. 

Where  the  surviving  partner  of 
a  firm  which  had  been  engaged  in 
gambling,  and  had  purchased  and 
used  a  house  for  gambling  pur- 
poses, sought  to  impeach  the  title 
by  which  a  grantee  of  his  partner 
held  it,  on  the  ground  that  it  was 
used  for  unlawful  purposes,  he  was 
held  to  be  estopped  by  his  privity 
to  the  grantor.  Watson  v.  Fletcher, 
7  Gratt.  1. 

Mortgage  by  a  firm  as  a  continu- 
ing security  and  indemnity  con- 
strued. National  Bank  of  New- 
burgh  v.  Bigler,  83  N.  Y.  51;  af- 
firming S.  C.  18  Hun  (N.  Y.),  400. 

As  to  the  legal  effect  of  a  mort- 
gage to  a  surviving  partner  who  is 
at  the  same  time  administrator  of 
the  deceased  partner,  describing 
the  grantees  as  A.,  the  surviving 
partner,  and  the  estate  of  B.,  the 
deceased  partner,  see  Look  v.  Ken- 
ney,  128  Mass.  284. 

A  partnership  may  take  security 
by  way  of  mortgage  in  the  firm 
name  to  secure  a  partnership  debt. 
Kellogg  v.  Olson,  34  Minn.  103. 

Two  partners  holding  unequal 
interests,  having  foreclosed  a  mort- 
gage upon  real  estate  taken  to  in- 
demnify the  partnership  against  a 
certain  securityship,  bid  in  the 
property,  and  the  land  was  con- 


(n)  1  Swanst.  495. 


773 


*333 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


sons  for  the  express  purpose  of  being  worked  by  them  in 
partnership,  and  which  were  worked  accordingly,  were  part- 
nership property. 

veyed  to  them  jointly,  without 
designating  their  respective  inter- 
ests. Held,  that  each  took  a  moiety 
of  the  legal  title,  but  that  in  equity 
they  would  hold  according  to  their 
respective  interests ;  and  that  a  con- 
veyance by  the  executor  of  the 
partner  holding  the  greater  interest 
"  of  all  the  right,  title  and  interest 
which  the  testator  had  at  the  time 
of  his  decease,"  would  pass  to  the 
grantee  the  legal  title  to  one  half 
the  land  and  the  equitable  title  to 
the  additional  interest  held  by  the 
testator;  and  that  one  holding 
under  this  grantee,  without  notice 
of  the  non-payment  of  the  pur- 
chase money  of  the  equitable  inter- 
est, would  hold  it  discharged  of  the 
vendor's  lien.  Putnam  v.  Dobbins, 
38  111.  394. 

A  bona  fide  purchaser  of  real 
estate  from  a  member  of  a  copart- 
nership, for  a  valuable  considera- 
tion and  without  notice  of  the 
partnership  character  of  the  prop- 
erty, purchasing  only  to  the  extent 
of  the  grantor's  legal  title,  will  take 
the  title  freed  from  the  equitable 
claims  of  others,  partners  or  credit- 
ors of  the  firm.  Dupuy  v.  Leaven- 
worth, 17  Cal.  262;  Page  v.  Thomas, 
43  Ohio  St.  38;  Norwalk  National 
B'k  v.  Sawyer,  38  id.  339 ;  Seeley  v. 
Michell,  4  S.  W.  Rep.  190 ;  Bowen 
v.  Billings,  13  Neb.  439 ;  McMillan 
v.  Hadley,  78  Ind.  590  (an  execution 
sale);  McNiel  v.  Cong.  Soc'y,  66 
Cal.  105. 

When,  however,  the  legal  title  to 
real  estate  belonging  to  a  partner- 
ship is  vested  in  one  of  its  members 
the  lien  acquired  by  a  judgment 


against  him  individually,  in  favor 
of  a  creditor  of  the  company,  is 
subject  to  the  equities  already  ex- 
isting over  the  property;  and  a 
judgment  against  the  company  it- 
self would  not  operate  as  an  effi- 
cient lien  on  the  land.  Coster  v. 
Bank  of  Georgia,  24  Ala.  37. 

In  Jones  v.  Fletcher,  42  Ark.  422, 
it  was  held  that  a  partner  has  such 
an  interest  in  partnership  lands  as 
is  subject  to  a  lien  of  judgment 
against  him  and  as  may  be  levied 
on  and  sold  under  execution. 

Where  S.,  one  of  two  partners, 
executed  a  release  deed  of  land  to 
himself,  and  M.,  the  other  partner, 
for  a  nominal  consideration,  "re- 
ceived of  S.  and  M.,  merchants  in 
trade  under  the  firm  of  S.  &  Co.," 
"to  be  held  by  them  in  such  pro- 
portions as  is  agreed  on  between 
them,"  it  was  held  that  the  record 
of  this  deed,  the  singularities  of 
which  were  calculated  to  awaken 
attention,  conveyed  constructive 
notice  to  an  incumbrancer  under 
M.  that  the  land  was  partnership 
property.  Sigourney  v.  Munn,  7 
Conn.  324. 

Where  one  partner  holds  the 
legal  title  to  the  undivided  half  of 
certain  real  estate,  the  whole  of 
which  is,  in  equity,  partnership 
property,  the  conveyance  by  him 
of  his  undivided  half  to  a  creditor 
of  the  firm,  in  payment  of  a  part- 
nership debt,  vests  in  the  grantee 
a  good  title  thereto,  notwithstand- 
ing the  firm  is  insolvent  and  the 
other  partner  is  ignorant  of  the 
conveyance.  Van  Bront  v.  Apple- 
gate,  44  N.  Y.  544. 


774 


CH.  IV,  SEC.  II.]      JOINT   AND    SEPARATE    PROPERTY. 


^333 


Devise  of  nursery  grounds. —  In  Waterer  v.  Waterer,  (o)  a 
nurseryman  who  carried  on  business  with  his  sons,  although 
not  in  partnership,  left  his  residuary  estate,  including  the 


So  a  conveyance  by  one  partner 
of  real  estate  owned  by  the  part- 
nership, in  trust  to  secure  a  cred- 
itor of  the  partnership,  passes  a 
good  title,  both  at  law  and  in 
equity,  to  an  undivided  moiety  of 
such  estate;  and  such  creditor  is 
entitled  to  priority  over  all  other 
creditors  of  the  firm.  But  when 
such  property  is  conveyed  by  one 
partner  in  trust  to  secure  his  indi- 
vidual creditors,  the  property  re- 
mains subject  to  the  payment  of 
the  partnership  debts.  Jones  v. 
Neale,  2  Patt.  &  H.  339. 

A  person  who  loans  the  entire 
capital  to  an  individual  partner  for 
the  purpose  of  commencing  busi- 
ness acquires  an  equity  equal  to 
that  of  the  creditors  of  the  partner- 
ship; and  if  the  money  is  used  in 
purchasing  lands,  which  are  after- 
wards mortgaged  to  the  lender  by 
the  individual  partner  to  secure  the 
loan,  the  former  will  acquire  an 
equity  superior  to  that  of  the  cred- 
itors of  the  partnership,  but  subject 
to  the  lien  of  the  other  partner,  if 
he  purchases  with  notice  of  his 
equitable  title  to  an  undivided  half. 
Reeves  v.  Avers,  38  111.  418. 

In  Snyder  v.  Lunsford,  9  W.  Va. 
223,  however,  it  was  held  that  a 
deed  of  lands  owned  and  used  by 
a  partnership,  made  by  one  partner 
only,  who,  however,  was  sole 
owner  of  the  capital  stock,  to  a 
person  from  whom  he  had  bor- 
rowed  the  money  which  he  had 


contributed  as  capital,  was  null 
and  void  as  against  creditors  of  the 
firm. 

A  conveyance  by  one  member  of 
a  solvent  firm  of  his  undivided  in- 
terest in  the  real  estate  of  the  part- 
nership to  a  stranger,  whether 
made  upon  a  sale  or  by  way  of 
payment  of  his  individual  debt,  is 
valid  as  against  the  copartners; 
and  they  cannot  maintain  an  ac- 
tion to  have  it  set  aside  on  the 
ground  that  it  was  made  without 
their  consent  and  impairs  the 
credit  of  the  firm.  Treadwell  v. 
Williams,  9  Bosw.  649. 

If  creditors  do  not  object,  the 
purchaser  takes  a  good  title,  and  it 
does  not  lie  with  the  other  mem- 
bers of  the  firm  to  object;  or,  at 
least,  to  enable  them  to  do  so  they 
must  show  that  the  partnership 
debts  exceed  the  assets,  and  that 
there  is  need  of  the  property  in 
question  to  provide  for  the  defi- 
ciency and  equalize  the  interests  of 
the  partners.  Treadwell  v.  Will- 
iams, supra. 

If  land  devoted  to  the  uses  of  a 
partnership  business  is  owned  by 
the  partners,  each  holding  the  legal 
title  to  an  undivided  share,  a  mort- 
gage by  one  of  his  interest  is 
valid,  and  takes  precedence  over 
the  title  of  a  purchaser  at  a  sale  on 
an  execution  on  behalf  of  partner- 
ship creditors,  unless  the  purchaser 
can  show  that  the  land  had,  in 
fact,  been  made  partnership  prop- 


Co)  Waterer  v.  Waterer,  15  Eq.  402. 
Ch.  D.  813,  a  similar  case. 

775 


See,  also,  Davies  v.  Games,  12 


*333 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


good-will  of  his  business,  to  his  sons  in  common;  they,  after 
his  death,  carried  on  the  business  in  partnership,  and  bought 
more  land  for  the  purposes  of  the  business,  and  paid  for  it 
out  of  his  estate;  then  one  son  died,  and  the  others  bought 
his  share  and  paid  for  it  out  of  money  raised  by  mortgage 


erty,  and  that  the  mortgagee  had 
notice  of  this  before  lending.  John- 
eon  v.  Clark,  18  Kan.  157. 

The  patent  for  certain  land  was 
issued  to  S.  &  R. ,  who  composed  a 
firm.  S.  executed  a  power  of  at- 
torney to  V.  to  sell  and  convey  any 
property  belonging  to  the  firm. 
Within  three  months  thereafter, 
V.,  as  attorney  for  S.  &  R.,  per- 
sonally executed  a  conveyance  of 
the  land  as  partnership  property. 
Forty-five  years  elapsed  without 
complaint  on  the  part  of  S.,  or  any 
one  representing  him.  In  an  action 
of  ejectment  against  a  third  party 
by  one  claiming  under  this  convey- 
ance, it  was  held  that  the  acquies- 
cence of  S.  in  the  treatment  of 
the  land  as  partnership  property 
would  be  presumed.  Wilkerson  v. 
Allen,  67  Mo.  502. 

A  firm  has  no  less  power  than 
any  other  holder  of  property  to 
rent  its  realty.  Williams  v.  Shel- 
don, 28  N.  W.  Rep.  115. 

A  lease  by  one  partner  of  part- 
nership real  estate  in  his  own  name 
inures  to  the  benefit  of  the  firm. 
Moderwell  v.  Mullison,  21  Penn.  St. 
257. 

A  lease  to  certain  parties,  copart- 
ners, under  which  the  lessees  were 
to  build  houses  on  the  leased  prem- 
ises, held,  to  vest  the  lease  in  them 
as  copartners  and  not  as  tenants  in 
common.  Rust  v.  Chisolm,  57  Md. 
376. 

A  lease  of  mining  property  for 
a  term  of  ninety-nine  years  is  part- 


nership assets  as  to  third  parties, 
although  the  recorded  title  is  not 
in  the  partnership  name.  Cham- 
berlain v.  Dow,  16  Weekly  Not. 
Cas.  532. 

A  firm  composed  of  father  and 
son,  using  real  estate  of  the  father 
for  the  firm  business,  under  a  parol 
lease,  may  recover  damages  for 
injury  to  their  leasehold,  business, 
machinery,  etc.,  caused  by  appro- 
priation of  a  part  of  the  real  estate 
by  a  railway  company.  Getz  v. 
Phila.  etc.  R.  R.  Co.  15  Weekly 
Not.  Cas.  357. 

It  is  competent,  however,  for 
partners  to  agree  among  them- 
selves that  certain  real  estate 
owned  by  the  partnership  shall  be 
leased,  and  that  each  shall  be  en- 
titled to  his  proportion  of  the  rent, 
shall  collect,  and  may  discharge  it. 
A  party  renting  with  knowledge  of 
the  agreement  contracts  with  each 
to  pay  him  his  proportion  of  the 
rent,  and  he  may  sue  for  it  in  his 
own  name.  And  one  partner  may 
be  witness  for  another  in  such  suit. 
McDougald  v.  Banks,  13  Ga.  451, 

If  one  partner  occupy  alone  a 
house  belonging  to  the  copartner- 
ship, he  will  be  liable  to  the  firm 
for  rent  on  account  of  it,  although 
there  was  no  special  agreement  to 
that  effect,  and  no  charge  was 
made  against  him  on  the  books 
of  the  firm  during  his  life-time. 
Holden  v.  Peace,  4  Ired.  Eq.  223. 
See,  also,  Stoughton  v.  Lynch,  2 
John.  Ch.  209. 


776 


CH.  IV,  SEC.  III.]       JOINT    AND    SEPARATE    PROPERTY.  "331 

of  the  nursery  ground,  and  out  of  their  father's  estate.  On 
the  death  of  one  of  the  surviving  sons  intestate,  it  was  held 
that  all  the  land  thus  acquired  had  become  partnership  prop- 
erty, and  that  the  share  of  such  son  was  to  be  treated  as 
personal  and  not  as  real  estate. 

Land  acquired  for  the  purposes  of  trade. —  By  a  slight 
extension  of  the  same  principle,  if  several  persons  take  a 
lease  of  a  colliery,  in  order  to  work  the  colliery  as  partners, 
and  they  do  so  work  it,  the  lease  will  be  partnership  prop- 
erty, (p)  So,  if  co-owners  of  land  form  a  partnership,  and 
the  land  is  merely  accessory  to  their  trade,  and  is  treated 
as  part  of  the  common  stock  of  the  firm,  the  land  will  be 
partnership  property,  (q) 

^Result  of  foregoing  cases. —  Upon  the  whole,  [*334] 
therefore,  it  seems  that  land  acquired,  whether  gra- 
tuitously or  not,  for  the  purpose  of  carrying  on  a  partner- 
ship business,  and  used  for  that  purpose,  is  to  be  considered 
as  property  of  the  partnership;  but  that  fund  which  is  not 
so  acquired,  but  which,  belonging  to  several  persons  jointly 
or  in  common,  is  employed  by  them  for  their  common  profit, 
does  not  become  partnership  property  unless  there  is  some 
evidence  to  show  that  it  has  been  treated  by  them  as  ancil- 
lary to  the  partnership  business,  and  as  part  of  the  common 
stock  of  the  firm,  (r) 

Section  III. —  Conversion  of  Joint  Estate  into  Separate 
Estate,  and  Vice  Yersa. 

3.  Agreement  sufficient  to  alter  the  ownership  of  prop- 
erty.—  It  is  competent  for  partners  by  agreement  amongst 
themselves  to  convert  that  which  was  partnership  property 
into  the  separate  property  of  an  individual  partner,  or  vice 

( p)  Faraday  u.  Wight  wick,  Tarul.     Compare  Steward  v.  Blakeway,  4 
250,  and  1  R.  &  M.  45.    See  Bentley    Oh.  603,  and  6  Eq.  479. 
v.  Bates,  4  Y.  &  C.  Ex.  182.  (r)  See  Steward  v.  Blakeway,  4  Ch. 

(q)  Essex  v.  Essex,  20  Beav.  442.     603,  and  6  Eq.  479,  and  cases  ante, 

p.  332. 
777 


*334 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


versa,  (s)1     And  the  nature  of  the  property  may  be  thus  al- 
tered by  anj^  agreement  to  that  effect;  for  neither  a  deed 


(s)  Ex  parte  Ruffin,  6  Ves.  119 ; 
Ex  parte  Williams,  11  id.  3;  Ex 
parte  Fell,  10  id.  348;  Ex  parte 
Rowlandson,  1  Rose,  416. 

1  See  Bullitt  v.  M.  E.  Church,  26 
Penn.  St.  108;  Hickson  v.  McFad- 
din,  1  Swan,  258;  Sage  v.  Chollar, 
21  Barb.  500;  Dirnon  v.  Hazzard, 
32  N.  Y.  65;  Crosby  v.  Nichols,  3 
Bosw.  450;  Evans  v.  Hawley,  35 
Iowa,  83;  City  of  Maquoketa  v.  Wil- 
ley,  35  Iowa,  323;  Whitworth  v. 
Benbow,  50  Ind.  194;  Upson  v. 
Arnold,  19  Ga.  190;  Harkey  v.  Till- 
man, 40  Ark.  551;  Beckwith  v. 
Manton,  12  R.  I.  442;  Swearingen 
v.  Bassett,  65  Tex.  267 ;  McKinney 
v.  Baker,  9  Oreg.  74;  Maybin  v. 
Moorman,  21  S.  C.  346;  Boozer  v. 
Webb,  25  S.  C.  82;  Kendall  v. 
Hackworth,  66  Tex.  499. 

As  to  what  evidence  is  sufficient 
to  establish  the  fact  of  conversion 
into  partnership  property  of  prop- 
erty bought  by  one  of  the  partners, 
see  Person  v.  Wilson,  25  Minn. 
189. 

Such  agreement  may  be  implied 
from  an  acquiescence  by  the  firm 
in  such  use  of  the  firm  property  by 
one  partner  as  would  withdraw 
his  interest  in  it  from  the  common 
burden.  Swearingen  v.  Bassett,  65 
Tex.  267. 

Where  partners  have  agreed  to 
dissolve  their  copartnership,  and 
have  divided  the  partnership  prop- 
erty according  to  their  separate  in- 
terests, the  portion  allotted  to  each 
becomes  his  separate  property,  and 
neither  of  them,  unless  he  can  es- 
tablish that  fraud  was  committed 
in  procuring  the  division,  has,  by 
reason  of  his  liability  for  the  part- 


nership debts,  or  his  payment  of 
them,  any  lien  upon  the  others' 
portions.  He  has  no  remedy,  there- 
fore, in  equity.  Holmes  v.  Hawes, 
8  Ired.  Eq.  21 ;  Whitworth  v.  Ben- 
bow,  supra. 

Two  partners,  on  settlement  with 
a  creditor  of  their  firm,  after  disso- 
lution, gave  their  separate  bonds 
to  the  creditor,  each  for  one-half 
the  debt,  and  agreed  that  the 
amount  which  might  be  recovered 
on  a  certain  chose  in  action,  in  the 
hands  of  the  creditor,  which  be- 
longed to  the  firm,  should  be  ap- 
plied to  the  payment  of  the  bonds. 
Held,  that  the  joint  interest  of  the 
partners  in  the  chose  in  action  was 
severed  by  agreement,  and  that 
one  partner  afterwards  had  a  right 
to  direct  his  half  to  be  applied  to 
the  payment  of  his  bond,  and  that 
the  creditor  had  a  right  so  to  apply 
it.     Rowand  v.  Fraser,  1  Rich.  325. 

Debts  due  to  a  firm  may  be  as- 
signed to  either  of  the  partners, 
and  a  note  given  to  the  assignee 
for  the  amount  due  by  a  debtor  to 
the  firm  extinguishes  the  debt  to 
the  partnership.  Lamkin  v.  Phil- 
lips, 9  Port.  98. 

A  note  in  favor  of  a  partner,  but 
entered  many  months  before  his 
death  on  the  partnership  books  to 
the  credit  of  the  maker,  a  debtor 
and  customer  of  the  firm,  will  be 
treated  as  a  partnership  asset. 
Gillisse  v.  Gibson,  6  La.  Ann.  125. 

Where  a  note  indorsed  in  blank 
by  a  copartnership  remains  after 
dissolution  of  the  same  in  the 
hands  of  a  partner,  who  transfers 
it  iu  payment  of  his  individual 
debt,  in  default  of  showing  to  the 


778 


CU.  IV,  SEC.  III.]       JOINT    AND    SEPARATE    PROPERTY. 


*334: 


nor  even  a  writing  is  absolutely  necessary;  (t)  but  so  long 
as  the  agreement  is  dependent  on  an  unperformed  condi- 
tion, so  long  will  the  ownership  of  the  property  remain  un- 
changed, (u) 

Creditors  not  entitled  to  be  consulted.— Moreover,  as 
the  ordinary  creditors  of  an  individual  have  no  lien  on  his 


cantrary  it  will  be  presumed  to  be 
his  individual  property.  Fletcher 
v.  Anderson,  11  Iowa,  228. 

Where  a  member  of  a  partner- 
ship allows  his  private  property  to 
be  mingled  with  that  of  the  firm, 
and  to  be  sold  with  their  property 
as  part  thereof,  the  purchaser  will 
be  liable  for  the  price  only  to  the 
firm.  White  Mountain  Bank  v. 
West,  46  Me.  15. 

Where  a  copartnership,  to  which 
a  lien  has  accrued  for  work  done 
and  money  expended  upon  ma- 
chinery, is  dissolved,  and  the  in- 
terest in  the  lien  assigned  to  one 
partner,  the  lien  is  not  lost,  but 
may  be  enforced  by  such  partner 
in  the  firm  name.  Busfield  v. 
Wheeler,  14  Allen,  139. 

Where  one  of  the  partners  buys 
a  horse  with  his  private  funds, 
under  an  agreement  to  allow  his 
copartner  to  elect  to  take  him  at 
the  cost  price,  and  for  some  days 
the  horse  is  kept  and  used  with 
the  horses  of  the  partnership,  until 
the  partner,  in  the  exercise  of  his 
election,  sells  him,  such  sale  is  not 
a  partnership  transaction.  Hatch 
v.  Foster,  27  Vt.  515. 

In  June,  1871,  A.,  B.  and  C. 
bought  in  partnership  and  on  spec- 
ulation certain  realty;  A.  and  B. 
to  furnish  the  capital  needed;  C. 
to  manage  the  speculation  and  to 
sell  the  land,  receiving  as  his  com- 
pensation one-third  of  the  net 
profits    and    bearing  one-third   of 


the  loss.  The  title  to  the  land  was 
taken  by  A.  and  B. 

In  June,  1872,  C.  agreed  to  take 
a  portion  of  the  land  as  his  share  of 
the  profits,  and  gave  to  A.  and  B. 
his  receipt  for  such  share,  specify- 
ing the  amount,  and  describing  it 
as  received  by  an  agreement  from 

A.  and  B.  to  convey  such  portion 
to  him  subject  to  the  conditions  of 
the  contract  of  partnership.  A. 
and  B.  gave  to  C.  an  agreement  to 
convey  on  demand  to  C.  or  his 
legal  representatives  the  portion  of 
land  fixed  upon.  Held,  that  by 
this  agreement  the  portion  of  land 
specified  was  taken  out  of  the  part- 
nership account;  and  that  A.  and 

B.  held  the  receipt  of  C.  as  repre- 
senting so  much  money  subject  to 
the  partnership  account  and  the 
equities  of  the  copartners.  Beck- 
with  v.  Manton,  12  R.  I.  442. 

(f)See  Pilling  v.  Pilling,  3  De 
G.  J.  &  Sm.  162 ;  Ex  parte  Will- 
iams, 11  Ves.  3;  Ex  parte  Clark- 
son,  4  D.  &  C.  56,  per  Sir  G.  Rose ; 
Ex  parte  Owen,  4  De  G.  &  Sm. 
351.  None  of  these  cases,  however, 
turned  on  the  effect  of  an  un- 
written agreement  relating  to  land. 
See,  as  to  a  transfer  by  a  partner 
of  his  shares  in  the  partnership 
property  when  it  consists  wholly 
or  in  part  of  land,  post,  ch.  5,  §  5. 

(u)  Ex  parte  Wheeler,  Buck,  25 ; 
Ex  parte  Cooper,  1  M.  D.  &  D.  358; 
Hawkins  v.  Hawkins,  4  Jur.  N.  S. 
1044. 


779 


*335 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


property,  and  cannot  prevent  him  from  disposing  of  it  as 
he  pleases,  so  the  ordinary  creditors  of  a  firm  have  no  lien 
on  the  property  of  the  firm  so  as  to  be  able  to  prevent  it 

from  parting  with  that  property  to  whomsoever  it 
[*335]  "-chooses.1     Accordingly  it  has  frequently  been  held 

that  agreements  come  to  between  partners  convert- 


1  See  Wilcox  v.  Kellogg,  11  Ohio, 
394;  White  v.  Parish,  20  Tex.  688; 
Gwin  v.  Selby,  5  Ohio  St.  96 ;  Sigler 
v.  Knox  Co.  Bank,  8  Ohio  St.  511 ; 
Potts  v.  Black  well,  4  Jones'  Eq.  58; 
Field  v.  Chapman,  15  Abb.  Pr.  434 ; 
Robb  v.  Mudge,  14  Gray,  534;  Allen 
v.  Centre  Valley  Co.  21  Conn.  130; 
Schmidlapp  v.  Currie,  55  Miss.  597 ; 
Pfirrman  v.  Koch,  1  Cincinnati, 
460;  Reeves  v.  Ayers,  38  111.  419; 
Reese  v.  Bradford,  13  Ala.  837; 
Mayer  v.  Clark,  40  id.  259 ;  State  v. 
Thomas,  7  Mo.  App.  205;  Shackle- 
ford  v.  Shackleford,  32  Gratt.  481 ; 
Rankin  v.  Jones,  2  Jones'  Eq.  169; 
Miller  v.  Price,  20  Wis.  117 ;  Weaver 
v.  Ashcroft,  50  Tex.  428 :  Locke  v. 
Lewis,  124  Mass.  1 ;  Case  v.  Beaure- 
gard, 99  U.  S.  119;  S.  C.  1  Woods, 
127;  Barnes  v.  Vetterlein,,  16  Fed. 
Rep.  759;  Martin  v.  Evans,  6  Ont. 
238;  Beckwith  v.  Manton,  12  R.  I. 
442 ;  Trentman  v.  Swartzell,  85  Ind. 
443 ;  Dietrich  v.  Huntington,  29  So. 
W.  Rep.  247;  Tracy  v.  Walker,  1 
Flip.  C.  Ct.  41 ;  Level  v.  Farris,  24 
Mo.  App.  445 ;  Rose  v.  Gunn,  79  Ala. 
411 ;  Woodmansie  v.  Holcomb,  34 
Kan.  35;  Austin  v.  Seligman,  18 
Fed.  Rep.  519;  Saunders  v.  Reilly, 
105  N.  Y.  12;  reversing  S.  C.  34 
Hun,  457;  State  v.  Thomas,  7  Mo. 
App.  205 ;  Allen  v.  Grissom,  90  N.  C. 
90 ;  Couchman  v.  Maupin,  78  Ky.  33 
(overruling,  as  to  this  point,  O'Ban- 
non  v.  Miller,  4  Bush.  25,  and  How- 
ell v.  Com.  Bank  of  Ky.  5  id.  93); 
Farley  v.  Moag,  79  Ala.  148;  Scott 


v.  Kenan,  94  N.  C.  296 ;  Jewett  v. 
Meech,  101  Ind.  289;  Atkins  v. 
Saxton,  77  N.  Y.  195.  See,  also,  Lord 
v.  Devendorf,  54  Wis.  491 ;  Wein- 
rich  v.  Koelling,  21  Mo.  App.  133; 
Hewitt  v.  Northrup,  75  N.  Y.  508; 
Crook  v.  Rindskoff,  105  N.  Y.  476. 
See,  however,  In  re  Sautlioif,  8 
Biss.  35. 

A  partnership  creditor  who  has 
obtained  a  lien  by  attachment  upon 
the  partnership  property  before  the 
same  has  been  appropriated  to  the 
debt  of  a  separate  creditor,  who  has 
before  then  levied  on  all  the  part- 
nership property,  has  a  right  to 
have  the  proceeds  of  the  property 
applied  to  payment  of  the  firm 
debt;  it  is  immaterial  that  the  sep- 
arate creditor  obtain  a  lien  first,  so 
long  as  the  property  has  not  been 
sold  before  the  lien  of  the  firm 
creditor  attached ;  rights  of  the  par- 
ties in  this  case  determined  by  peti- 
tion without  the  necessity  of  resort- 
ing to  an  action  in  equity.  Powers 
v.  Powers,  35  N.  W.  Rep.  (Wis.)  53. 

A  partnership  may  assume  the 
individual  debts  of  one  of  its  mem- 
bers, and  none  but  existing  cred- 
itors can  question  the  transaction. 
Haben  v.  Harsh  aw,  49  Wis.  379. 

A  mortgage  of  firm  goods  to  se- 
cure a  partner's  sureties  on  his  bond 
as  guardian  is  not  available  as 
against  the  creditors  of  an  insolvent 
firm.  Rothell  v.  Grimes,  35  N.  W. 
Rep.  (Neb.)  392. 


780 


CH.  IV,  SEC.  III.]      JOINT   AND    SEPARATE    PROPERTY. 


•"335 


ing  the  property  of  the  firm  into  the  separate  estate  of  one 
or  more  of  its  members,  and  vice  versa,  are,  unless  fraudu- 


As  to  when  the  firm  or  one  part- 
ner may,  as  against  creditoi's,  apply 
the  partnership  property  to  the 
payment  of  the  individual  debts  of 
one  partner,  see,  generally,  Huis- 
kamp  v.  Moline  Wagon  Co.  121 
U.  S.  310;  Woodmansie  v.  Holcomb, 
34  Kan.  35;  Jewett  v.  Meech,  101 
Ind.  289;  Farwell  v.  Metcalf,  63 
N.  H.  276;  Schoverling  v.  Kovar, 
15  Neb.  306;  Mayer  v.  Garber,  53 
la.  689;  David  v.  Birchard,  53  Wis. 
492;  Sherrill,  etc.  Engine  Co.  v. 
Harwood,  30  Hun,  9;  Lowman  v. 
Lowman,  19  Bradw.  481 ;  George  v. 
Wamsley,  64  la.  175. 

A  corporation  formed  by  and 
consisting  of  the  members  of  a 
partnership  for  the  purpose  of  tak- 
ing the  partnership  property  and 
conducting  the  partnership  busi- 
ness takes  such  property  freed 
from  partnership  equities,  all  of 
which  are  extinguished  by  the 
transfer.  Francklyn  v.  Sprague, 
121  U.  S.  215. 

Partnership  property  cannot  be 
divided  between  partners  and  then 
claimed  under  the  exemption  laws 
so  as  to  defeat  the  partnership  cred- 
itors. Gill  v.  Lattimore,  9  Lea 
<Tenn.),  381. 

A  transfer  in  fraud  of  firm  cred- 
itors by  one  partner  cannot  be  held 
good  even  though  the  others  joined 
therein  innocently.  Bank  of  Red 
Bank  v.  Farr,  11  East.  Rep.  (N.  J.)  1. 

Fraudulent  sale  by  partners  to 
one  partner  of  all  the  partnership 
property  is  void  as  against  credit- 
ors. Hagerman  v.  Farr,  7  Cent. 
Rep.  (N.J.)  116. 

A  secret  assignment  of  the  inter- 
est of  one  partner  to  another  who 


carries  on  the  firm  business  with 
the  remaining  partner,  when  made 
to  defraud  creditors,  will  be  held 
void.  Cleveland  v.  Battle,- 68  Tex. 
111. 

Where  one  partner  buys  out  the 
interest  of  his  copartner,  promising 
to  pay  the  outstanding  firm  debts, 
which  he  fails  to  do,  and  subse- 
quently, the  debts  remaining  un- 
paid, and  also  some  individual 
debts,  he  transfers  his  stock  of 
goods,  with  outstanding  credits,  to 
his  former  partner  and  one  of  his 
individual  creditors,  in  considera- 
tion of  his  indebtedness  to  them, 
and  also  of  their  promise  to  pay 
certain  other  debts,  the  adequacy 
of  the  consideration  and  the  good 
faith  of  the  transaction  being  ad- 
mitted, it  will  not  be  declared 
fraudulent  in  law  at  the  instance  of 
the  other  creditors.  McCord  v. 
Tennille,  81  Ala.  168. 

An  absolute  sale  of  its  effects  by 
an  insolvent  firm,  in  consideration 
of  prior  debts  of  the  firm  to  the 
purchasers  and  to  certain  others, 
which  debts  are  assumed  by  the 
purchasers,  is  not  fraudulent  as 
against  unpreferred  creditors.  Dix- 
on v.  Higgins,  2  So.  Rep.  (Ala.)  289. 

Proceeds  of  firm  property  as- 
signed to  a  partner  on  a  division, 
with  the  consent  of  his  copartner, 
cannot  be  lawfully  used  by  him  for 
the  purpose  of  discharging  a  lien 
upon  his  wife's  property  while  the 
firm  indebtedness  exists  to  a  large 
amount  and  the  firm  and  the  in- 
dividual members  are  insolvent. 
Brecher  v.  Fox,  1  McCrary,  48. 
See,  also,  Edwards  v.  Entwisle,  2 
Mackey  (D.  C),  43. 


78 1 


-335 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


lent,  binding  not  only  as  between  the  partners  themselves, 
but  also  on  their  joint  and  on  their  respective  several  cred- 


As  to  what  constitutes  such  a 
transfer  of  the  partnership  effects 
from  the  firm  to  one  partner  as  to 
give  creditors  at  large  of  the  firm  a 
right  to  file  a  bill  in  equity  under 
section  2,  chapter  175,  page  1126  of 
the  code  of  Virginia,  which  author- 
izes suit  to  be  brought  before  judg- 
ment is  obtained  or  execution 
levied  or  returned,  see  Johnson  v. 
Straus,  4  Hughes,  C.  Ct.  621 ;  S.  C. 
26  Fed.  Rep.  57. 

A  mortgage  executed  by  the 
members  of  the  firm  upon  the  real 
or  personal  estate  of  the  firm  to  se- 
cure an  individual  debt  of  [a  part- 
ner, free  from  fraud  or  collusion, 
creates  a  lien  prior  to  partnership 
debts.  Stewart's  Assignment,  62 
la.  614;  Anderson  v.  Norton,  15 
Lea  (Tenn.),  14;  Carver  Gin,  etc. 
Co.  v.  Bannon,  4  S.  W.  Rep.  831 ; 
Fisher  v.  Syfers,  109  Ind.  514. 

A  chattel  mortgage,  given  with- 
out consideration,  to  secure  the 
antecedent  individual  debt  of  a 
partner,  is  fraudulent  as  against 
firm  creditors,  if,  at  the  time  it  was 
given,  the  firm  was  insolvent  or 
would  become  so  by  such  shrinkage 
in  outstanding  accounts  as  might 
reasonably  be  expected.  Heineman 
v.  Hart,  55  Mich.  64. 

A  partner  who  has  purchased 
and  become  sole  owner  of  goods 
which  were  before  partnership 
property  has,  however,  been  held 
entitled  to  exemption  in  the  goods, 
though  at  the  time  the  debt  sued 
for  was  contracted  they  were  part- 
nership property.  State  v.  Thomas, 
7  Mo.  App.  205. 

The  rights  of  joint  creditors  and 
of   those  of    an  individual   mem- 


ber are  very  different  as  respects 
the  partnership  assets.  The  joint 
creditors  have  a  primary  claim  to 
satisfaction  out  of  the  partnership 
effects.  The  claim  does  not  amount 
to  a  lien ;  but,  in  a  controversy  be- 
tween joint  and  separate  creditors 
to  satisfaction  out  of  the  copartner- 
ship property  the  former  will  be 
preferred.  Williams  v.  Gage,  49 
Miss.  777.     See  post. 

Creditors  have,  however,  a  quasi- 
lien  upon  partnership  effects, 
which  may  be  enforced  in  a  court 
of  equity  as  a  derivative  subordi- 
nate right  through  the  lien  and 
equity  of  the  partners.  Guyton 
v.  Flack,  7  Md.  398 ;  Black  v.  Bush, 
7  B.  Mon.  210;  O'Brannon  v. 
Miller,  4  Bush,  25;  Bank  of  Ken- 
tucky v.  Herndon,  1  Bush,  359. 
See,  also,  Tillinghast  v.  Champlin, 
4  R.  I.  173 ;  Shackleford  v.  Shackle- 
ford,  32  Gratt.  481 ;  Couchman  v. 
Maupin,  78  Ky.  33;  Jones  v. 
Fletcher,  42  Ark.  422;  Williamson 
v.  Adams,  16  Bradw.  564;  Rose 
v.  Gunn,  supra;  Buck  Stove  Co. 
v.  Johnson,  7  Lea  (Tenn.),  282; 
Tracy  v.  Walker,  1  Flip.  C.  C.  41 ; 
Evans  v.  Winston,  74  Ala.  349. 
See  post. 

When  from  any  cause  partners 
cannot  assert  their  lien  upon  the 
partnership  effects,  creditors  of 
the  firm  are  equally  unable  to  do 
so.  Couchman  v.  Maupin,  78  Ky. 
33.     See  post. 

If  the  survivor  transfers  the  firm 
assets  to  the  personal  representa- 
tive of  the  deceased  in  settlement 
of  the  partnership  accounts,  his 
lien  is  extinguished,  and  there  is 
none  to  which  a  partnership  cred- 


782 


CH.  IV,  SEC.  III.]      JOINT   AND    SEPARATE    PROPERTY. 


!35 


itors;  and  that,  in  the  event  of  bankruptcy,  the  trustees 
must  give  effect  to  such  agreements,  (x) 

A  conversion  of  joint  into  separate  property,  or  vice  versa, 
most  frequently  takes  place  when  a  firm  and  one  of  its  part- 


itor  can  be  subrogated.     Rose  v. 
Gurm,  79  Ala.  411. 

It  is  only  in  cases  where  there  is 
a  dissolution  by  death  or  bank- 
ruptcy of  one  partner  that  the 
right  of  joint  creditors  can  attach 
as  a  quasi-lien  upon  the  partner- 
ship effects  as  a  derivative,  sub- 
ordinate right  under  and  through 
the  lien  and  equity  of  the  part- 
ners. Level  v.  Farris,  24  Mo.  App. 
445. 

The  rule  that  the  creditors  of  a 
firm  have  no  equitable  lien  upon 
the  copartnership  property,  but  can 
only  work  out  such  a  lien  through 
the  equ'ties  of  the  copartners,  ap- 
plicable whilst  the  copartners  are 
administering  their  own  funds,  has 
no  application  to  the  case  of  a  co- 
partnership dissolved  by  the  death 
of  one  of  the  copartners,  especially 
if  the  surviving  partner  be  in- 
solvent, or  where,  though  living, 
one  or  both  the  copartners  have 
become  insolvent  or  bankrupt,  so 
that  their  property  is  in  the  hands 
of  assignees  for  distribution.  Til- 
linghast  v.  Champlin,  4  R.  I.  173. 
See,  also,  Farley  v.  Moag,  79  Ala. 
148. 

Where  one  partner  buys  out  the 
whole,  agreeing  to  pay  all  the 
debts,  the  firm  creditors  have  a 
lien  on  the  property  superior  to 
any  claims  of  that  partner's  private 
creditors.  Conroy  v.  "Woods,  13 
Cal.  626. 


Where  a  partner  gives  a  mort- 
gage upon  his  separate  property 
to  secure  a  partnership  debt,  he 
thereby  becomes  a  surety  for  the 
firm,  and  is  entitled  to  the  rights 
and  privileges  of  that  character; 
and  his  separate  creditors  succeed 
to  his  rights  and  privileges  as  such 
surety,  and  have  a  right  to  insist 
that  the  partnership  property  be 
first  applied  towards  the  payment 
of  the  debt  secured  by  such  part- 
ner before  resort  is  had  for  that 
purpose  to  the  separate  estate  of 
the  surety;  and  if  the  separate  es- 
tate of  the  surety  is  first  applied 
in  payment  of  such  debt,  his  sepa- 
rate creditors  will  be  entitled  to  be 
subrogated  to  the  rights  of  the 
creditor  as  against  the  partnership 
fund.  Averill  v.  Loucks,  6  Barb. 
470.' 

One  of  three  partners  retired,  sell- 
ing his  interest  to  the  others,  tak- 
ing their  note  in  part  payment, 
and  they  assumed  the  partnership 
debts.  They  continued  the  busi- 
ness awhile  as  partners,  and  then 
failed,  and  made  a  general  assign- 
ment in  trust  for  their  creditors, 
preferring  this  note,  and  providing 
for  the  payment  pro  rata  of  the 
debts  of  both  the  old  and  new 
firms.  Held,  that,  it  being  shown 
that  the  sale  was  in  good  faith,  the 
creditors  of  the  old  firm  had  no 
equity  against  the  partnership 
property  of  the  old   firm  in  the 


(x)  See  Ex  parte  Ruffin,  and  the  Swanst.  575 ;  Ex  parte  Clarkson,  4 
other  cases  cited  in  the  last  two  D.  &  Ch.  56 ;  Ex  parte  Peake,  1 
notes,  and  Campbell  v.   Mullett,  2    Madd.  358. 

783 


*335 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


ners  carry  on  distinct  trades ;  or  when  a  change  occurs  in  a 
firm  by  the  retirement  of  some  or  one  of  its  members,  or 
by  the  introduction  of  a  new  partner. 


hands  of  the  new  firm  or  their  as- 
signee superior  to  that  of  the  cred- 
itors of  the  new  firm.  Smith  v. 
Howard,  20  How.  Pr.  121. 

Where,  upon  the  dissolution  of 
a  partnership,  an  agreement  is 
made  within  the  knowledge  of  its 
creditors  that  the  acting  partner 
shall  take  the  effects  and  pay  all 
the  debts  of  the  firm,  a  creditor 
cannot,  with  a  good  conscience, 
take  a  lien  on  the  joint  effects  for 
new  advances  made  by  him  to  the 
acting  partner  on  the  latter's  in- 
dividual account,  so  as  thus  to 
render  the  retiring  partner  liable, 
the  joint  effects  having  been  ex- 
hausted for  the  old  joint  debts. 
McClean  v.  Miller,  2  Cranch,  C. 
Ct.  620. 

To  authorize  any  person  to  de- 
mand the  aid  of  the  supreme  court 
in  directing  the  application  of  part- 
nership property,  he  must  have  a 
lien  either  legal  or  equitable  upon 
it,  or  must  be  in  a  situation  to  as- 
sert such  a  lien.  Greenwood  v. 
Brodhead,  8  Barb.  593. 

Partnership  creditors,  merely  as 
such,  have  no  lien  on  the  partner- 
ship property  before  obtaining 
judgment  and  execution;  but  can 
only  be  subrogated  to  the  lien  of 
the  partners,  and  are  therefore 
without  remedy  where  such  lien 
has  been  waived  by  them.  Case 
v.  Beauregard,  1  "Woods,  127; 
McGregor  v.  Ellis,  2  Disney  (Ohio), 
286. 
A.  and  B.  dissolved  partnership. 

A.  took  the  stock    of  goods  and 
agreed  to  pay  their  cost  value  to 

B.  B.   took  the  book    accounts, 


notes,  etc.,  and  assumed  to  pay  the 
debts  of  the  firm.  T.  became  the 
surety  for  B.,  whereupon  the  lat- 
ter assigned  him  in  trust  the  in- 
debtedness for  stock  due  from  A. 
and  other  property.  Joint  judg- 
ments were  recovered  against  all 
three  of  the  parties  by  creditors  of 
the  firm.  T.  paid  off  the  judg- 
ments, and  the  property  assigned 
by  B.  failing  to  reimburse  him,  he 
filed  a  bill  against  A.  and  others, 
praying  to  be  subrogated  to  rights 
of  the  creditors  of  the  firm,  and  to 
enforce  his  claim  assigned  by  B. 
Held,  1.  That  the  judgments  hav- 
ing been  rendered  against  T.  as 
well  as  other  parties,  and  the  debts 
paid  by  him  being  firm  debts  which 
he  became  liable  for  as  the  surety 
nominally  of  B.,  who  represented 
the  late  firm,  and  which  A.  was 
also  pre-eminently  liable  to  pay,  he 
ought  to  stand  as  surety  to  the  firm 
and  be  entitled  to  be  subrogated  to 
all  the  rights  of  the  creditors 
thereof.  2.  That  he  was  a  cred- 
itor at  large  of  A.  by  reason  of 
the  assignment,  and  as  such  was 
entitled  to  file  a  bill  to  impeach  a 
fraudulent  conveyance  of  land  in 
which  A.  was  interested.  High- 
land v.  Highland,  5  W.  Va.  63. 

One  who  has  purchased  of  one  of 
a  firm  property  subject  to  partner- 
ship debts,  and  has  agreed  in  writ- 
ing to  assume  and  pay  such  debts 
as  part  of  the  purchase  price, 
thereby  recognizes  the  equitable 
lien  of  the  partnership  creditors, 
and  it  is  not  necessary  that  such 
creditors  should  put  their  claims  in 
judgment  before  filing  a  bill  to 


784 


Oil.  IV,  SEC.  III.]      JOINT   AND    SEPARATE   PROPERTY. 


*335 


Dealings  between  one  partner  and  the  firm. —  "When  a 
firm  and  one  of  its  members  carry  on  distinct  trades,  prop- 
erty passing  in  the  ordinary  way  of  business  from  the  part- 


compel  such  payment.  Olson  v. 
Morrison,  29  Mich.  395. 

Where  one  partner  retires  from 
a  firm,  selling  out  his  interest  in 
the  assets  to  the  remaining  part- 
ners, who  continue  the  business, 
and  stipulate  that  they  will  pay 
the  debts,  having  sufficient  assets 
for  that  purpose,  if  they  fail  to  do 
so  the  firm  creditors  will  have  no 
lien  on  such  property,  as  the  retir- 
ing partner  may  have  withdrawn 
from  the  assets  at  the  time  of  his 
retirement.  Hollis  v.  Staley,  59 
Tenn.  167. 

Notes  given  by  one  member  of  a 
firm,  who  assumes  the  liabilities, 
and  receives  a  transfer  of  the  ef- 
fects of  the  firm,  to  his  copartners, 
on  a  dissolution,  cannot  be  sub- 
jected in  the  hands  of  their  as- 
signee to  the  partnership  debts. 
Belknap  v.  Cram,  11  Ohio,  411. 

A  creditor  of  a  partnership  can- 
not, unless  he  has  recovered  judg- 
ment for  his  debt,  file  a  bill  to 
restrain  the  partners  from  applying 
the  partnership  property  to  their 
separate  debts,  and  for  the  ap- 
pointment of  a  receiver.  Clement 
v.  Foster,  3  Ired.  L.  213. 

When,  upon  some  disagreement 
between  two  partners,  their  differ- 
ences were  submitted  to  arbitra- 
tors, who  awarded  that  all  the 
Koods  and  other  assets  of  the  firm 
should  pass  to  one  of  the  partners, 
who  should  pay  all  the  partnership 
debts,  and  thereupon  such  goods 
and  assets  were  all  attached  by 
private  creditors  of  such  part- 
ner, and  subsequently  by  the  cred- 
itors  of  the  firm,  held,  that  the 

Vol.  1  —  50  785 


creditors  of  the  firm  were  entitled 
to  be  preferred,  even  if  the  award 
had  been  executed  by  a  transfer  in 
accordance  with  it.  Tenney  v. 
Johnson,  43  N.  H.  144. 

Upon  the  dissolution  of  a  part- 
nership the  firm  property  may,  for 
a  valuable  consideration,  be  sold 
and  transferred  to  one  of  the  part- 
ners; and  when  thus  disposed  of 
it  is  not  followed  by  nor  subject  to 
the  claims  of  partnership  creditors 
as  a  fund  out  of  which  they  are  to 
be  first  satisfied.  This  rule  prevails 
even  though  the  partner  so  acquir- 
ing the  property  assumes  to  pay 
the  partnership  debts.  City  of 
Maquoketo  v.  Willey,  35  Iowa,  323. 
See,  also,  Baker's  Appeal,  21  Pa.  St. 
77. 

A.  and  B.  being  the  only  copart- 
ners in  one  company,  and  being 
likewise  partners  with  other  per- 
sons in  two  other  companies,  A. 
made  a  deed-poll  to  B.  of  all  the 
grantor's  interest  in  certain  real 
estate  and  in  the  personal  property 
of  the  three  companies,  the  deed, 
being  nominally  for  a  pecuniary 
consideration,  and  containing  a 
covenant  that  the  grantee  would 
indemnify  the  grantor  against  all 
the  debts  due  from  the  three  com- 
panies. The  deed  was  accepted  by 
the  grantee,  but  was  not  executed 
by  him.  Held,  that  as  the  grantee 
would  be  liable  in  assumpsit  as 
upon  an  implied  promise  to  pay 
the  creditors  and  indemnify  the 
grantor,  this  was  a  valid  consider- 
ation for  the  deed  as  against  part- 
nership creditors  of  A.  and  B. 
Guild  v,  Leonard,  18  Pick.  511. 


*335 


EIGHTS   AND    OBLIGATIONS. 


[BOOK   III. 


ner  to  the  firm  ceases  to  be  his  and  becomes  the  property 
of  the  partnership,  and  vice  versa,  just  as  if  he  were  a 
stranger  to  the  firm.     This  was  settled  in  the  great  case  of 


A  conveyance  by  one  partner  of 
his  interest  in  real  estate  belonging 
to  the  firm  to  his  copartners,  in 
consideration  of  moneys  by  them 
advanced  beyond  their  share  in 
payment  of  the  firm  debts,  is  valid 
against,  and  not  liable  to,  the 
claims  of  individual  creditors  of 
the  partner  executing  the  convey- 
ance.    Evans  v.  Hawley,  35  la.  83. 

A  voluntary  conveyance  by  a 
partner  of  his  individual  real  es- 
tate at  a  time  when  the  partnership 
property  is  sufficient  to  pay  the 
partnership  debts  is  valid.  Hardy 
v.  Mitchell,  67  Ind.  485. 

Where,  upon  dissolution,  one  of 
two  partners  takes  the  property 
and  the  right  to  use  the  firm  name 
in  continuing  the  business,  and 
agrees  to  pay  the  debts,  the  facts 
of  his  continuing  in  the  business 
under  the  same  stylo  and  in  the 
same  manner  as  before,  and  em- 
ploying the  retiring  partner  as  a 
salesman  at  a  rate  agreed  upon, 
will  not,  of  themselves,  warrant 
the  inference  that  the  transfer  from 
the  retiring  partner  was  fraudu- 
lent as  against  his  creditors,  or 
subject  the  property  to  liability  to 
levy  by  his  individual  creditor  who 
became  such  after  the  dissolution. 
Hamill  v.  Willett,  6  Bosw.  533. 

So,  during  the  existence  of  a 
partnership,  which  is  neither  bank- 
rupt nor  contemplating  bank- 
ruptcy, one  of  the  members  of  the 
firm  may,  with  the  consent  of  the 
other  partner  or  partners,  upon  a 
bona  fide  consideration  with  no 
benefit  reserved,  assign  and  trans- 
fer the  assets  of  the  partnership  in 


payment  of  his  individual  debt,  if 
no  lien  has  attached  to  such  assets, 
and  such  transfer  is  good  against 
the  firm  creditors.  Schmidlapp  v. 
Currie,  55  Miss.  597;  Reeves  v. 
Ayers,  38  III.  418. 

A  transfer  by  one  partner  of  an 
interest  in,  or  a  lien  given  by  him 
upon,  the  corpus  of  the  partnership 
property  to  pay  an  individual  debt, 
although  made  with  the  consent  of 
the  other  partners,  is  fraudulent 
and  void  as  to  the  creditors  of  the 
firm,  unless  the  firm  was  at  the 
time  solvent  and  sufficient  property 
remained  to  pay  the  partnership 
debts.  Menagh  v.  "Whitwell,  52 
N.  Y.  146. 

Members  of  an  insolvent  part- 
nership cannot  by  mutual  consent 
divide  the  partnership  funds  be- 
tween themselves  so  as  to  enable 
each  member  to  apply  the  part  al- 
lotted to  him  in  a  preferred  pay- 
ment of  his  separate  debts,  leaving 
the  joint  debts  unsatisfied;  and  a 
transfer  of  such  partnership  prop- 
erty to  an  individual  creditor  in 
payment  of  an  antecedent  debt, 
with  a  knowledge  on  the  part  of 
the  creditor  of  such  design,  will 
not  enable  him  to  hold  it  dis- 
charged from  the  equitable  lien  of 
the  partnership  creditors.  Burtus 
v.  Tisdall,  4  Barb.  571.     See  post. 

The  interest  of  each  partner  in 
the  assets  is  his  share  of  the  sur- 
plus after  the  partnership  debts  are 
settled ;  and  when  a  firm  becomes 
insolvent  the  joint  creditors  have 
a  primary  claim.  So  one  partner 
cannot  be  allowed  to  take  from  the 
firm    property    goods    to  a    large 


786 


CH.  IV,  SEC.  III.]       JOINT    AND    SEPARATE    PROPERTY. 


-335 


Bolton  v.  Puller,  (y)  in  which  there  were  two  banking  firms, 
one  carrying  on  business  at  Liverpool  and  one  in  London. 
All  the  partners  in  the  latter  firm  were  partners  in  the 

amount  for  his  own  use,  and,  as 
against  the  general  creditors  of 
the  firm,  set  off  his  contribution  to 
the  capital  stock  against  a  claim 
for  the  value  of  the  goods  so  taken. 
Strattan  v.  Tabb,  8  Bradw.  225. 

Where  one  partner,  upon  disso- 
lution, there  being  at  the  time 
nothing  due  him,  fraudulently 
drew  from  the  assets  of  the  firm  a 
sum  of  money  with  which  he  dis- 
charged a  mortgage  upon  a  home- 
stead of  himself  and  wife,  held,  in 
an  action  by  his  partner  against 
him  and  his  wife,  that  the  plaint- 
iff was  entitled  to  a  lien  upon  the 
the  land  paramount  to  the  home- 
stead  for  the  amount  paid  in  dis- 
charge of  the  mortgage.  Shinn  v. 
Macpherson,  58  Cal.  596. 

A  distribution  by  partners  among 
themselves  of  part  of  their  stock 
in  trade,  if  made  with  the  assent 
of  creditors,  is  not  fraudulent. 
Wilkinson  v.  Yale,  6  McLean,  16. 
Where  a  retiring  partner  bona 
fide  assigns  all  his  interest  in  the 
stock  and  effects  to  the  remaining 
partner,  whether  the  partnership 
be  general  or  limited,  the  same 
thereby  becomes  separate  property, 
and  will  be  distributable  accord- 
ingly, notwithstanding  the  subse- 
quent insolvency  of  the  remaining 
partner.  Upson  v.  Arnold,  19  Ga. 
190. 

If  partners  submit  the  firm  ac- 
counts for  settlement  to  arbitrators, 
who  decide  that  certain  firm  debts 
shall  be  paid  by  one  partner,  he 
becomes,    from    the  date    of  the 


award,  a  debtor  to  his  copartner 
within  the  meaning  of  the  statute 
against  fraudulent  conveyances. 
Swan  v.  Smith,  57  Miss.  548. 

Any  creditor  of  an  insolvent 
limited  partnership,  although  he 
has  not  proceeded  to  judgment 
and  execution  at  law,  may  bring 
an  action  to  restrain  the  insolvent 
partners  from  disposing  of  the 
property  contrary  to  law,  and  for 
the  appointment  of  a  receiver. 
Whitcomb  v.  Fowle,  7  Abb.  N.  C. 
295 ;  S.  C.  10  Daly,  23. 

As  to  the  effect  of  the  convey- 
ance of  property  by  an  insolvent 
firm  to  another  firm  of  which  a 
special  partner  in  the  first  firm 
was  a  member,  see  Lineweaver  v. 
Slagle,  64  Md.  465. 

The  purchase  by  one  partner  of 
his  copartner's  interest  in  the  firm 
property  is  not  void  for  fraud  be- 
cause the  buyer  had  knowledge  of 
his  partner's  insolvency,  if  he  had 
no  reason  to  suppose  the  latter  in- 
tended to  defraud  his  creditors  by 
the  sale.  Darland  v.  Rosencrans, 
56  la.  122. 

Mercantile  partners,  although 
knowing  they  are  in  some  diffi- 
culty, so  long  as  they  have  a  rea- 
sonable expectation  of  extricating 
themselves,  cannot  be  charged 
with  a  fraudulent  diversion  of 
property  from  firm  creditors  by 
simply  drawing  money  from  pri- 
vate accounts  within  small  and 
reasonable  limits,  whether  for  the 
payment  of  their  individual  ex- 
penses or  of  their  honest  individ- 


(y)  1  Bos.  &  P.  539. 


787 


*335 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    III. 


former.  Some  bills  of  exchange  came  in  the  ordinary 
course  of  business  into  the  hands  of  the  Liverpool  firm,  to 
be  placed  to  the  general  account  of  its  customers.     These 


ual  obligations.     McKinney  v.  Ro- 
senband,  23  Fed.  Rep.  785. 

A  general  creditor  who  has  not 
reduced  his  claim  to  judgment 
cannot  attack  a  chattel  mortgage 
given  by  one  partner  and  ratified 
by  the  other,  upon  firm  goods, 
upon  the  ground  that  it  has  not 
been  filed.  Kennedy  v.  Nat.  Un. 
Bank,  23  Hun  (N.  Y.),  494. 

Under  section  3440  of  the  Civil 
Code,  where  one  of  two  partners 
sells  to  a  third  person  his  interest 
in  a  stock  of  goods  belonging  to 
the  partnership,  there  must  be  an 
immediate  delivery  and  continued 
change  of  possession  or  the  sale 
will  be  void  as  to  creditors,  and  it 
is  immaterial  that  the  firm  busi- 
ness is  conducted  under  a  fictitious 
name.  Newell  v.  Desmond,  83 
Call,  243. 

The  fact  that  an  individual 
creditor  of  a  partner  foregoes  his 
right  to  have  a  fraudulent  convey- 
ance of  the  real  estate  of  such  part- 
ner set  aside  gives  a  partnership 
creditor  no  right  to  attack  such 
conveyance.  Hardy  v.  Mitchell, 
67  Ind.  485. 

A  partner,  although  having  no 
specific  lien  upon  the  land,  may 
have  a  voluntary  conveyance  set 
aside  when  made  by  his  copartner 
for  the  purpose  of  fraudulently 
evading  payment  of  a  partner- 
ship debt.  Barkley  v.  Tapp,  87 
Ind.  25. 

A  voluntary  conveyance  by  a 
member  of  a  partnership,  which 
was  largely  indebted,  of  all  his  in- 
dividual property  without  any 
purpose  to  defraud  the  firm  creditor 


is  constructively  fraudulent.  Bar- 
hydt  v.  Perry,  57  la.  416. 

If,  upon  the  dissolution,  one 
member  takes  certain  lands  and 
agrees  to  pay  a  mortgage  debt 
thereon,  but  fails  so  to  do,  and  sub- 
sequent^ conveys  the  land  to  an- 
other person,  without  considera- 
tion, to  shield  himself  from  pay- 
ment of  this  and  other  debts  as- 
sumed by  him,  and  the  grantee 
gives  a  bond  for  title  to  still  another 
person  for  this  purpose  and  is  so 
received  by  him,  these  convey- 
ances are  void.  Cottle  v.  Harrold, 
72  Ga.  830. 

A  v  oluntary  conveyance  by  a 
partner  of  his  individual  real  estate 
at  the  time  when  the  partnership 
property  is  sufficient  to  pay  part- 
nership debts  is  valid.  Hardy  v. 
Mitchell,  67  Ind.  485. 

One  partner  may  become  the 
debtor  of  his  firm  and  may  lawfully 
secure  such  debt  in  the  same  man- 
ner that  he  can  secure  any  other 
creditor.  His  confession  of  judg- 
ment in  favor  of  the  firm  for  such 
debt,  if  bona  fide,  is  good  against 
subsequent  lien  creditors.  Thomp- 
son's Appeal,  41  Legal  Intel.  338. 

Where  partners  are  in  fact 
insolvent  they  should  be  consid- 
ered in  equity  as  holding  the  part- 
nership effects  in  trust  for  the 
benefit  of  the  firm  creditors,  and 
cannot,  by  a  transfer  of  the  inter- 
est of  one  to  the  other,  defeat  this 
trust.  Re  Cook,  3  Biss.  122 ;  More- 
head  v.  Adams,  18  Neb.  570. 

The  division  by  partners  of  the 
partnership  assets  between  them- 
selves,  and  the  transfer  of  such 


788 


CH.  IV,  SEC.  III.]      JOINT    AND    SEPARATE   PROPERTY. 


*335 


bills  were  remitted  by  the  Liverpool  firm  to  the  London 
firm,  to  be  placed  to  the  credit  of  the  former  in  the  general 
account  between  the  two  houses.     Both  houses  afterwards 


assets  by  the  individual  partners 
in  payment  of  their  private  debts, 
when  the  partnership  is  insolvent, 
has  been  held,  in  point  of  law,  a 
fraud  upon  the  partnership  cred- 
itors. Ransom  v.  Van  Deventer,  41 
Barb.  307. 

R. ,  J.  and  G.  form  a  partnership 
for  the  manufacture  of  tobacco, 
and  in  their  articles  of  copartner- 
ship they  say  it  is  understood  that 
G.  shall  contribute  for  the  purposes 
of  the  business  such  an  amount  of 
capital  as  he  may  be  able  to  com- 
mand, which,  when  contributed, 
is  to  be  placed  to  his  credit  on  the 
books  of  the  concern,  to  be  used 
only  in  conducting  the  business, 
and  to  bear  interest  at  six  per  cent, 
per  annum;  .  .  .  and,  in  order 
to  protect  G.  against  any  losses 
that  may  arise  from  the  business, 
hereby  pledge  and  assign  to  him  all 
the  present  and  future  interest  in 
the  stock,  machinery  and  claims  of 
the  concern.  G.  put  in  $4,200 ;  the 
others  put  in  nothing.  The  busi- 
ness proved  unprofitable,  the  firm 
failed,  and  the  partnership  was 
dissolved.  About  the  commence- 
ment of  the  partnership  they 
bought  machinery,  etc.,  giving  the 
notes  of  the  firm,  and  a  deed  of 
trust  upon  the  machinery,  etc.,  to 
secure  them,  and  on  their  failure 
the  trustees  sold,  and  after  satis- 
fying the  trust  there  was  a  balance 
left.  On  a  contest  between  the 
creditors  of  the  partnership  and  G., 
held,  1.  That  the  property  never 
having  passed  to  the  separate  pos- 
session of  G.,  but  remaining  in  the 
possession  of  the  partnership,  the 


unrecorded  executory  agreement 
aforesaid  was  fraudulent  as  to 
creditors  of  the  firm  without 
notice.  2.  Aboul  the  time  the  firm 
failed,  to  secure  G.  for  his  ad- 
vances, they  made  a  note  payable 
to  their  own  order  for  $4,500, 
secured  by  deed  of  trust  on  the  ma- 
chinery, etc.,  but  the  note  was  not 
indorsed  or  delivered  to  G.  The 
note  not  having  been  indorsed  or 
delivered  to  him  by  the  othei*, 
though  he  took  possession  of  it 
after  the  dissolution,  G.  is  not  en- 
titled to  it.  It  creates  no  liability 
without  negotiation,  and  neither 
G.  nor  any  of  his  partners  could 
afterwards  negotiate  it,  and  conse- 
quently the  deed  made  to  secure  it 
is  a  nullity.  Grasswett  v.  Con- 
nolly, 27  Grat.  19. 

In  Atkins  v.  Saxton,  77  N.  Y. 
195,  it  was  held  that  a  division  of 
copartnership  property  between 
the  partners  in  proportion  to  their 
interests,  for  the  purpose  of  pro- 
tecting the  property  from  seizure 
by  the  individual  creditors  of  one 
of  the  partners,  is  not  unlawful* 
and  cannot  be  avoided  as  a  fraud 
upon  the  individual  creditors.  By 
such  a  transaction  the  other  part- 
ners do  not  acquire  any  of  the 
property  of  the  debtor,  but  only 
separate  their  own  from  his,  so 
that  their  portion  shall  not  be  in- 
terfered with  for  his  debts. 

Where  one  of  the  partners,  by  a 
mortgage  deed,  conveys  to  the 
other  partnership  effects,  to  secure 
debts  alleged  to  be  due  from  the 
one  to  the  other,  which  deed  and 
effects  are  assigned  to  bona  fide 


789 


fr335 


EIGHTS   AND    OBLIGATIONS. 


[book  in. 


becoming  bankrupt,  it  was  held  that  tbe  bills  were  the 
property  of  the  London  firm  and  not  of  the  Liverpool  firm, 
or  of  its  customers.     Lord  C.  J.  Eyre,  in  delivering  judg- 


creditors  of  the  mortgagee  to 
secure  debts  due  from  him  to  such 
creditors,  such  conveyance  was 
held  to  be  valid  against  creditors  of 
the  firm  who  had  no  lien.  Potts  v. 
Blackwell,  3  Jones'  Eq.  449. 

After  a  levy  of  executions  on 
partnership  property  to  satisfy  a 
separate  debt  of  one  partner,  the 
partners  cannot  dissolve  the  part- 
nership, make  a  settlement  of  their 
joint  effects,  in  which  the  debtor 
partner  is  paid  over,  for  his  share, 
an  amount  in  property  (other  than 
that  levied  on)  greater  than  the 
amount  of  the  executions,  and 
thereby  defeat  the  levies  so  made. 
Thompson  v.  Tinnin,  25  Tex. 
(Supp.)  56.  See,  also,  Warren  v. 
Wallis,  42  Tex.  472.  • 

A  release  from  one  partner  to 
another  of  his  interest  in  the  part- 
nership effects,  taken  with  the  full 
knowledge  of,  and  subject  to  all 
the  equities  between,  the  parties,  is 
not  such- a  sale  as  would  deprive 
the  vendor  of  his  right  of  action 
for  goods  which  he  alleged  such 
partners  as  a  firm  had  fraudulently 
obtained  from  him.  Ward  v. 
Wood  burn,  27  Barb.  346. 

If  either  partner  has  contracted 
a  debt  in  his  own  name,  in  which, 
as  between  themselves,  the  other 
partner  should  share,  that  liability 
is  a  sufficient  consideration  as 
against  joint  creditors  for  a  trans- 
fer of.  firm  property,  while  free 
from  the  operation  of  insolvent 
laws,  for  the  payment  of  that  debt. 
Marks  v.  Hill,  15  Gratt.  400. 

A  docket  entry  at  the  instance 
of  a  partner,  assigning  a  firm  claim 


without  consideration,  is  void  as 
against  creditors  of  the  firm. 
Updegraff  v.  Rowland,  52  Pa.  St. 
317. 

An  appropriation  of  partnership 
property  for  the  benefit  of  private 
creditors  of  insolvents  makes  void 
an  assignment  for  creditors.  Ka- 
nauth  v.  Bassett.  34  Barb.  31. 

In  an  assignment  of  all  the 
debtor's  goods,  chattels,  etc.,  exe- 
cuted by  partners,  a  provision  for 
the  payment  of  the  private  and 
individual  debts  of  the  assignors 
out  of  the  residue  remaining  after 
the  payment  of  the  partnership 
debts  offers  no  evidence  of  an  in- 
tention to  hinder,  delay  or  defraud 
creditors.  Turner  v.  Jaycox,  40 
Barb.  104. 

Where  two  partners  in  a  firm 
purchase  the  interest  of  a  third 
partner  and  form  anew  firm,  and 
subsequently  make  an  assignment 
for  the  benefit  of  creditors,  pro- 
viding for  the  payment  of  debts 
due  from  the  new  firm,  or  the  old 
firm,  "  or  either  of  the  members" 
of  the  two  firms,  such  assignment 
is  invalid  as  to  creditors  of  the  old 
firm.  Lester  v.  Pollock,  3  Robt. 
(N.  Y.)  691. 

A  sale  of  partnership  stock  for 
the  purpose  of  paying  the  individ- 
ual debt  of  a  partner  is  void  as 
against  creditors  of  the  firm, 
although  the  money  for  which  such 
debt  was  contracted  has  been  used 
as  part  of  the  capital  of  the  firm. 
Ferson  v.  Monroe,  21  N.  H.  462. 

One  partner  may  assign  his  in- 
terest in  the  partnership  accounts 
and  property  to  his  separate  cred- 


790 


CH.  TV,  SEC.  III.]      JOINT   AND    SEPARATE    PROPERTY. 


*66d 


merit,  adverted  to  the  question  now  under  consideration  in 
the  following  terms: 

"There  can  be  no  doubt  that  as  between  themselves  a  partnership 
may  have  transactions  with  an  individual  partner  or  with  two  or  more 
of  the  partners  having  their  separate  estate  engaged  in  some  joint  con- 


itor,  and  the  assignment  will  be 
good  against  the  creditors  of  the 
firm  afterwards  attaching.  Wilson 
v.  Bowden,  8  Rich.  9;  Norris  v. 
Vernon,  id.  13. 

A  creditor  in  embarrassed  cir- 
cumstances, finding  the  firm  of 
which  he  is  a  member  about  to  fail, 
may  at  fair  prices  make  a  valid 
transfer  of  his  private  property  to 
his  private  creditors  in  payment  of 
honest  private  debts  in  preference 
to  those  of  the  firm ;  provided  ?dso 
there  is  nothing  to  impeach  the 
good  faith  of  the  grantees.  Auburn, 
etc.     Bank  v.  Fitch,  48  Barb.  344. 

Where  a  partner  gave  a  mort- 
gage on  his  separate  property,  cre- 
ating thereby  a  preference  in  favor 
of  a  partnership  creditor,  held, 
that  the  mortgage  was  not  thereby 
void  and  fraudulent  as  against  the 
separate  creditors  of  the  mort- 
gagor; though,  on  complaint  made 
in  their  behalf  as  a  class,  the  mort- 
gage might  be  declared  void  as  to 
such  creditors.  Stewart  v.  Slater, 
6  Duer,  83. 

Where  goods  have  been  pur- 
chased in  the  name  and  on  the 
credit  of  one  copartnership  firm, 
and  turned  over  to  another  copart- 
nership firm  composed  of  some  of 


for  such  goods  or  the  proceeds  of 
the  sale  thereof,  and  apply  the  same 
in  satisfaction  of  their  judgment. 
Dennis  v.  Ray.  9  Ga.  449. 

A  transfer  by  a  partnership  of 
the  partnership  property  to  a  cor- 
poration formed  by  the  partners 
for  the  purpose,  in  payment  for 
which  the  partners  take  the  stock 
of  the  corporation  in  their  individ- 
ual names,  is  not  per  se  fraudulent 
as  to  the  creditors  of  the  partner- 
ship. Persse  &  Brooks  Paper- 
works v.  Willett,  19  Abb.  Pr.  416. 

Where  one  of  two  partners,  with 
the  consent  of  the  other,  sells  and 
conveys  one-half  of  the  effects  of 
the  firm  to  a  third  person,  and  the 
other  partner  afterwards  sells  and 
conveys  the  other  half  to  the  same 
person,  such  sales  and  conveyances 
are  not  prima  facie  void  as  against 
the  creditors  of  the  firm,  but  are 
prima  facie  valid  against  all  the 
world,  and  can  be  set  aside  only  by 
the  creditors  of  the  firm  upon 
their  proving  the  transactions  to  be 
fraudulent  as  against  them.  Kim- 
ball v.  Thompson,  13  Mete.  283. 

Where  one  partner  absconds,  and 
the  other  disposes  of  a  part,  and  is 
disposing  of  the  whole  partnership 
effects,  it  will  be   presumed  that 


the  same  individuals,  without  any  <  they  intend  to  delay  and  hinder 


bona  fide  or  valuable  consideration 
being  paid  therefor,  held,  that  a 
court  of  equity  will  aid  the  judg- 
ment creditors  of  the  copartners 
making  such  transfer  to  follow  the 
goods  into  the  hands  of  the  trans- 
ferees, and  require  them  to  account 


their  creditors  so  as  to  form  good 
ground  for  attachment  against  tli9 
partnership  property.  Sellew  v. 
Ch'risfield,  1  Handy  (Ohio),  86. 

Though  a  creditor  might  object 
to  a  transfer  of  partnership  choses 
in  action  from  the  debtor  firm  to 


791 


*336  RIGHTS    AND   OBLIGATIONS.  [BOOK   III. 

cern  in  which  the  general  partnership  is  not  interested;  and  that 
[*336J  they  may  by  *their  acts  convert  the  joint  property  of  the  general 

partnership  into  the  separate  property  of  an  individual  partner, 
or  into  the  joint  property  of  two  or  more  partners,  or  e  converso.  And 
their  transactions  in  this  respect  will,  generally  speaking,  bind  third 
persons,  and  third  persons  may  take  advantage  of  them  in  the  same 
manner  as  if  the  partnership  were  transacting  business  with  strangers: 
for  instance,  suppose  the  general  partnership  to  have  sold  a  bale  of  goods 
to  the  particular  partnership,  a  creditor  of  the  particular  partnership 
might  take  those  goods  in  execution  for  the  separate  debt  of  that  par- 
ticular partnership." 

Change  of  property  on  change  in  firm.—  Where  a  change 
occurs  in  a  linn  by  the  retirement  of  one  or  more  of  its 
members,  nothing  is  more  common  than  for  the  partners  to 
agree  that  those  who  continue  the  business  shall  take  the 
property  of  the  old  firm  and  pay  its  debts,  or  that  part  of 
the  property  of  the  old  firm  shall  become  the  property  of 
those  by  whom  its  business  is  to  be  continued,  whilst  the 
rest  of  the  property  shall  be  otherwise  dealt  with.  So, 
again,  when  a  partnership  is  first  formed,  or  when  a  new 
partner  is  taken  into  an  existing  firm,  or  when  two  firms 
amalgamate  into  one,  some  agreement  is  generally  come  to 
by  which  what  was  before  the  property  of  some  one  or  more 
only  of  the  members  of  the  firm  becomes  the  joint  property 
of  all  such  members!  All  such  agreements,  if  bona  fide,  and 
not  fraudulent  against  creditors,  are  valid,  and  have  the 
effect  of  altering  the  equitable  ownership  in  the  property 
affected  by  them,  (s) 

In  Ex  parte  Ruffin,  (a)  which  is  the  leading  case  on  this 
subject,  Thomas  Cooper,  a  brewer,  took  James  Cooper  into 
partnership.     That  partnership  was  afterwards  dissolved  by 

their  successors,  yet  a  debtor  to  the  cott,  12  Ch.  D.  461 ;  Varley  v.  Cop- 
firm  cannot  object  that  the  old  firm  pard,  L.  R.  7  C.  P.  505. 
had  no  power  to  dispose  of  its  prop-  (a)  6  Ves.  119.  See,  too,  Ex  parte 
erty  without  first  settling  its  af-  Walker,  4  De  G.  F.  &  J.  509;  Ex 
fairs.  Pease  v.  Rush,  2  Minn.  107.  parte  Sprague,  4  De  G.  M.  &  G.  866 ; 
(z)  Such  an  agreement  is  not  a  Ex  parte  Clarkson,  4  D.  &  Ch:  56; 
breach  of  a  covenant  not  to  assign  Ex  parte  Gurney,  2  M.  D.  &  D. 
without  the  consent  of  the  lessor.  541 ;  Ex  parte  Peake,  1  Madd.  346; 
See  Corporation  of  Bristol  v.  West-  Ex  parte  Fell,  10  Ves.  348. 

792 


CH.  IV,  SEC.  III.]       JOINT   AND    SEPARATE    PROPERTY.  *337 

articles,  by  which  the  buildings,  premises,  stock  in  trade, 
debts  and  effects  were  assigned  to  James  by  Thomas,  who 
retired.  James  afterwards  became  bankrupt,  and  some  of 
the  partnership  debts  being  unpaid,  an  attempt  was  made 
to  have  what  had  been  the  property  of  the  partnership  ap- 
plied in  liquidation  of  those  debts.  But  it  was  held 
that  such  property  was  no  ^longer  the  joint  property  [*337] 
of  the  two  partners,  but  had  been  converted  into  the 
separate  property  of  James. 

Ex  parte  Williams  {b)  was  a  similar  case,  only  that  on 
the  dissolution  no  assignment  was  made.  There  was  not 
even  any  written  agreement  showing  the  terms  on  which 
the  dissolution  took  place.  But  it  was  sworn  that  the  part- 
ner who  continued  the  business  was  to  take  all  the  stock 
and  effects  of  the  old  firm ;  and  it  was  held  that  they  had 
become  his  separate  property,  and  could  not  be  considered 
as  the  joint  property  of  the  dissolved  partnership. 

These  decisions  have  always  been  regarded  as  settling 
the  law  upon  the  subject  of  conversion  of  partnership  prop- 
erty, and  have  been  constantly  followed.  They  were  not, 
it  will  be  observed,  decided  with  reference  to  the  doctrine 
of  reputed  ownership,  but  with  reference  only  to  the  real 
agreement  come  to  between  the  partners.  They  apply  as 
much  to  cases  of  a  change  of  interest  on  death  as  on  retire- 
ment, (c) 

The  case  of  Ex  parte  Owen,  {d)  which  has  been  already 
referred  to,  {e)  shows  that  similar  principles  must  be  applied 
in  order  to  determine  what,  on  the  formation  of  a  partner- 
ship, has  been  converted  from  separate  into  joint  estate.  {/) 

(5)  11  Ves.  3.    Compare  Ex  parte  two  with  the  wills  of  the  deceased 

Cooper,  1  M.  D.  &  D.  358.  partners.     The  wills  and  the  arti- 

(c)See  Re  Simpson,  9  Ch.  572;  cles  together  presented  a  conver- 

■and  compare  Ex  parte  Morley,  8  sion. 

Ch.  1026,  and  Ex  parte  The  Man-  (d)  4  De  G.  &  Sin.  351. 

Chester  Bank,  12  Ch.  D.  917,  and  13  (e)  Ante,  p.  329. 

id.  465.     These  three  cases  turned  (/)  See,  too.  Ex  parte  Barrow,  2 

on  the  construction  of  the  partner-  Rose,  252,  and  Belcher  v.  Sikes,  8 

ship  articles,  combined  in  the  last  B.  &  C.  185,  for  a  case  where  sepa- 

793 


*338 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Agreement  must  be  executed.— In  order,  however,  that 

an   agreement   may  have   the  effect   of    converting    joint 

into  separate  estate,  or  vice  versa,  the  agreement  must  be 

executed,   and    not   be   executory   merely.1     In   Ex  parte 

Wheeler,  (g)  a  retiring  partner  and  a  continuing  partner 

entered  into  an  agreement  in  writing,  by  which  the 
[*338]  retiring  ^partner  assigned  the  stock,  good-will,  lease, 

furniture,  fixtures,  books  and  debts  of  the  firm  to 
the  continuing  partner,  and  the  latter  agreed  to  pay  certain 
debts  of  the  partnership,  for  which  his  father,  he  said,  would 


rate  estate  was  made  joint  by  a 
deed  of  dissolution  not  clearly  ex- 
pressed. 

1  Under  articles  of  partnership 
between  A.  and  B.,  providing  that 
either  party  could  dissolve  the  part- 
nership upon  sixty  days'  notice  in 
writing,  B.  gave  notice,  and,  after 
the  time  limited,  the  parties  agreed 
upon  terms  of  dissolution  and  a 
division  of  the  property.  By  this 
agreement  B.  was  indebted  to  A., 
which  indebtedness  was  to  be  se- 
cured to  A.  by  mortgage.  The 
agreement  was  to  be  reduced  to 
writing  and  signed  by  both  parties. 
B.,  however,  refused  to  sign  the 
agreement  when  written,  or  to  give 
the  mortgage.  The  property  which 
was  to  belong  to  each  was  put  in 
separate  drawers  in  a  safe,  and 
each  partner  had  a  key  of  the 
drawer  in  which  his  part  was  put. 
Held,  that  the  agreement  was  not 
obligatory  on  A. ,  and  had  no  effi- 
cacy to  divide  the  partnership  prop- 
erty. Fitzgerald  v.  Christt,  20  N. 
J.  Eq.  90. 

With  a  view  to  a  dissolution,  two 
partners  agreed  to  divide  their 
stock,  and  that  the  machinery 
which  belonged  to  them  should  be 
given  to  the  party  who  would  give 


the  most  for  it.  They  accordingly 
separated  the  stock  into  "  two 
piles,"  but  no  delivery  was  made, 
and  before  the  arrangement  was 
completed  the  parties  quarreled, 
and  the  settlement  was  interrupted. 
One  of  the  parties  caused  a  de- 
mand to  be  made  for  half  of  the 
property.  Held,  that  enough  had 
not  been  done  to  vest  in  the  plaint- 
iff a  separate,  exclusive  property 
in  the  subject  of  the  suit.  Kon- 
ingsburg  v.  Launitz,  1  E.  D.  Smith, 
215. 

Until  a  partnership  concern  is 
closed  by  a  final  occount,  the  joint 
interest"  in  the  whole  property  re- 
mains; and  if  one  partner  takes 
out  what  he  deems  his  share,  and 
the  residue  is  afterwards  lost,  he 
will  be  compelled  to  account  with 
the  other  partners  for  their  shares 
of  the  amount  drawn  out  by  him. 
Allison  v.  Davidson,  2  Dev.  Eq.  79. 

(g)  Buck,  25.  See,  too,  Ex  parte 
Wood,  10  Ch.  D.  554;  Ex  parte 
Cooper,  1  M.  D.  &  D.  358,  and  the 
case  of  The  Bank  of  England,  3  De. 
G.  F.  &  J.  645,  noticed  ante,  p.  330. 
And  compare  Ex  parte  Gibson,  2 
Mont.  &  Ayr.  4 ;  Ex  parte  Sprague, 
4  De  G.  M.  &  G.  866 ;  Hawkins  v. 
Hawkins,  4  Jur.  N.  S.  1044. 


794 


CH.  IV",  SEC.  III.]       JOINT    AND    SEPARATE    PROPERTY.  "338 

be  security.  The  father,  however,  refused  to  give  any  se- 
curity, and  this  further  act  was  necessary  to  be  done  in 
order  to  complete  the  transfer  of  the  property.  The  con- 
tinuing partner  having  become  bankrupt,  the  court  held 
that  the  property  of  the  old  firm  had  not  been  converted 
into  the  separate  estate  of  the  continuing  partner,  the  agree- 
ment being  still  executoiy  when  the  bankruptcy  occurred. 
Effect  of  fraud. —  Moreover,  an  agreement  which  can  be 
successfully  impeached  for  fraud  will  not  affect  the  prop- 
erty to  which  it  may  relate;  (h)  and  it  must  not  be  for- 
gotten that,  in  the  event  of  bankruptcy,  the  trustee,  as 
representing  the  creditors,  may  be  able  to  impeach,  as  fraud- 
ulent against  them,  agreements  by  which  the  bankrupt 
himself  would  have  been  bound,  (i)  In  a  case  where  both 
the  partnership  and  the  individual  partners  were  insolvent, 
an  agreement  by  one  of  them  transferring  his  interest  to 
the  others,  and  thereby  converting  what  was  joint  estate 
into  the  separate  estate  of  the  transferee,  was  held  invalid ; 
for,  although  no  fraud  may  have  been  intended,  the  neces- 
sary effect  of  the  arrangement  was  to  delay  and  defeat  the 
joint  creditors,  (k)  The  firm  became  bankrupt  shortly  after 
the  assignment  was  made. 

(h)  Ex  parte  Rowlandson,  1  Rose,        (k)  Ex  parte  Mayou,  4  D.  G.  J.  & 

416.  S.  664 ;  Ex  parte  Walker,  4  De  G. 

(i)  See  Re  Kernptner.  8  Eq.  2S6 ;    F.    &    J.    509.     See,  also,  Luff  v. 

Anderson  v.  Maltby,  2  Ves.  Jr.  244 ;    Horner,  3  Fos.  &  Fin.   480,  which 

Billiter  v.  Young,  6  E.  &  B.  40.  seems  to  have  been  a  clear  case  of 

fraud  upon  a  creditor. 
795 


[*339]  *CHAPTER  V. 

OF  SHARES  IN  PARTNERSHIPS. 

Subject  of  present  chapter. —  In  the  present  chapter  it 
is  proposed  to  examine  the  following  subjects: 

§  1.  The  nature  of  a  share  in  a  partnership,  and  the  rules 
which  govern  its  devolution  in  case  of  death. 

§  2.  The  amount  of  each  partner's  share. 

§  3.  The  lien  which  each  partner  has  on  the  joint  prop- 
erty, and  on  the  shares  of  his  copartners. 

§  4.  The  mode  in  which  a  share  is  taken  in  execution  for 
the  separate  debts  of  its  owner. 

§  5.  The  transfer  of  shares. 

Section  I. —  Of  the  Nature  of  a  Share,  and  the  Rules 
which  Govern  its  Devolution  in  Case  of  Death. 

Nature  of  a  share  in  a  firm. —  In  the  absence  of  a  special 
agreement  to  that  effect,  all  the  members  of  an  ordinary 
partnership  are  interested  in  the  whole  of  the  partnership 
property;  but  it  is  not  quite  clear  whether  they  are  inter- 
ested therein  as  tenants  in  common,  or  as  joint  tenants 
without  benefit  of  survivorship,  if  indeed  there  is  any  differ- 
ence between  the  two.  It  follows  from  this  communit}7  of 
interest  that  no  partner  has  a  right  to  take  any  portion  of 
the  partnership  property,  and  to  say  that  it  is  his  exclu- 
sively, (a)  No  partner  has  any  such  right,  either  during 
the  existence  of  the  partnership  or  after  it  has  been  dis- 
solved.1 

(a)  Lingen  v.  Simpson,  1  Sim.  &  est,  but  not  a  separate  interest,  in 
Stu.  600 ;  Cockle  v.  Whiting,  Taml.  any  particular  property  of  the  part- 
55.  And  see  the  cases  cited  in  the  nership,  and  each  has  a  moiety, 
next  note.  or  the  same  species  of  interest,  in 

1  Each  partner  has  a  joint  inter-    the  stock  in  trade,  whether  each 

796 


CH.  V,  SEC.  I.]  SHAKES    IN    PARTNERSHIPS. 


540 


Share  a  right  to  money. —  What  is  meant  by  the  share 
of  a  partner  is  his  proportion  of  the  partnership  assets 
after  they  have  been  all  realized  and  converted  into  money, 
and  all  the  debts  and  liabilities  have  been  paid  and 
discharged,  (b) l  This  it  is,  and  this  only,  which,  *on  [*340] 
the  death  of  a  partner,  passes  to  his  representatives, 


contributes  exactly  in  the  same 
proportion  or  not;  but  their  sev- 
eral degrees  of  intei-est  must  be 
regulated  according  to  the  stipu- 
lated proportions  and  the  different 
conditions  of  the  partnership. 
Neither  partner  has  any  exclusive 
right  to  any  part  of  the  joint  ef- 
fects for  any  sum  due  to  him  until 
a  balance  of  account  be  struck. 
Taft  v.  Schwamb,  80  111.  289. 

If  one  partner  sells  his  interest 
in  specific  property  of  the  firm  the 
other  may  retain  possession  of  it 
for  the  purpose  of  settling  the  busi- 
ness of  the  partnership.  Chase  v. 
Scott,  33  Iowa,  309. 

Any  appropriation  of  the  part- 
nership property  by  one  partner  in 
payment  of  his  individual  debts, 
without  the  consent  of  his  copart- 
ner, is  a  violation  of  his  duty  and 
a  fraud  upon  them.  Filley  v. 
Phelps,  18  Conn.  294.  See  this 
subject  considered  ante. 

Whatever  may  be  the  condition 
of  the  partnership  accounts  or  of 
the  firm  as  to  solvency,  each  part- 
ner has  a  property  in  the  partner- 
ship assets  co-equal  to  his  share  in 
the  firm,  and  retains  such  interest 
until  it  is  divested  by  due  process 
of  law  running  against  him,  or  by 
some  voluntary  act  of  his  copart- 
ners, done  within  the  scope  of  the 
partnership.  Berry  v.  Kelly,  4 
Robt.  106. 

(6)  See  Doddington  v.  Hallet,  1 
Ves.  Sr.  498-9 ;  Croft  v.  Pike,  3  P. 


W.  180;  West  v.  Skip,  1  Ves.  Sr. 
242;  Taylor  v.  Fields,  4  Ves.  396; 
Crawshay  v.  Collins,  15  Ves.  229; 
Featherstonhaugh  v.  Fenwick,  17 
Ves.  298 ;  Darby  v.  Darby,  3  Drew. 
503.' 

i  Smith  v.  Evans,  37  Ind.  526; 
Carter  v.  Bradley,  58  111.  101 ;  Hill 
v.  Beach,  12  N.  J.  Eq.  31;  Douglas 
V.   Winslow,  20  Me.   80;  Perry  v. 
Holloway,  6  La.  Ann.  265;  Schalck 
v.  Harmon,  6  Minn.  265;  Simpson 
v.   Leach,    86    111.    286;    Filley  v. 
Phelps,    18    Conn.    294;    Staats  v. 
Bristow,  73  N.  Y.  264 ;  In  re  Cor- 
bett,  5  Saw.  20G;  Hall  v.   Clagett, 
48  Md.  225;  Conkling  v.  Washing- 
ton  University,    2    Md.    Ch.    497; 
Matlock  v.   Matlock,  15  Ind.  404; 
Menagh  v.  Whit  well,  52  N.  Y.  146; 
Moore  v.  State,  67  Tex.  435 ;  Still  v. 
Focke,  66  Tex.  715;  Hutchinson  v. 
Dubois,  45  Mich.   143;  Strattan  v. 
Tabb,  8  Brady?.  225 ;  Tillar  v.  Cook, 
77  Va.   477;   Taylor  v.   Farmer,  6 
West.  R.  710;  Pilcher's  Succession 
1   So.    Rep.  929;   New   Orleans  v 
Gauthreaux,    32     La.    Ann.    128 
Deeter    v.    Sellers,    102  Ind.    458 
Hines  v.  Dean,   1   Tex.  App.  379 
Lambert  v.  Griffith,  50  Mich.  286 
Ivy  v.  Walker,  58  Miss.  253 ;  Mayer 
v.  Garber,  53  la.    689;  S.  C.  6  N. 
W.  Rep.  63. 

Before  the  interest  of  one  part- 
ner can  be  ascertained  an  account 
must  be  taken.  Tillar  v.  Cook,  77 
Va.  477. 

A  clause  in  the  contract  of  sale 


797 


*340 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


or  to  a  legatee  of  his  share,  (c)  wh!ch  under  the  old  law- 
was  considered  as  bona  notabilia;  (d)  which  on*  his  bank- 
ruptcy passes  to  his  trustee;  {e)  and  which  the  sheriff  can 


of  the  interest  of  a  partner,  that 
the  purchaser  should  acquire  no 
right  to  any  claim  the  vendor 
might  have  against  his  former 
partner,  and  was  to  assume  no  lia- 
bility for  unsettled  accounts  of  the 
vendor  to  his  former  partners,  con- 
strued in  Rosenstiel  v.  Gray,  112 
111.  282. 

Real  estate  forms  no  exception  to 
the  rule  stated  in  the  text,  but 
stands  upon  the  same  footing  as 
personalty,  no  matter  in  whom  the 
legal  title  may  be  vested.  Henry 
v.  Anderson,  77  Ind.  361;  Simp- 
son v.  Leech,  86  111.  286;  Trow- 
bridge v.  Cross,  117  111.  109.  See 
ante. 

An  assignee  of  the  undivided  in- 
terest of  one  partner  in  a  lease  of 
real  estate  not  standing  in  the  firm 
name,  takes  subject  to  firm  debts. 
Chamberlain  v.  Dow,  16  Weekly 
Not.  Cas.  532. 

When  lands  are  bought  by  part- 
nership and  conveyed  to  it  by 
name,  a  purchaser  from  one  of  the 
individual  partners  is  chargeable 
with  notice  of  the  state  of  the  title 
and  of  the  rights  of  the  other  par- 
ties. Brewer  v.  Biowne,  68  Ala. 
210. 

Where  land  is  conveyed  to  a  firm 
to  be  held  as  partnership  property 
according  to  their  respective  inter- 
ests in  the  firm,  and  the  deed  con- 
taining this  statement  is  duly  re- 


corded, a  subsequent  purchaser  of 
an  interest  from  a  partner  before  a 
settlement  of  the  firm  accounts 
takes  it  as  a  personalty,  and  cannot 
maintain  ejectment  against  his 
own  vendee  to  enforce  payment  of 
the  purchase  money.  Du  Bree  v. 
Albert,  100  Pa.  St.  483;  S.  C.  13 
Weekly  Not.  Cas.  248.  See,  also, 
Young  v.  Dunn,  10  Fed.  R.  717;  S. 
C.  4  Woods,  C.  Ct.  331. 

Only  the  individual  partner's 
share  of  the  surplus  remaining 
after  the  payment  of  claims  against 
the  partnership  is  liable  for  his  in- 
dividual debts.  Filley  v.  Phelps, 
18  Conn.  294.     See  post. 

As  long  as  the  debts  of  a  part- 
nership are  outstanding  it  is  irreg- 
ular to  undertake  to  distribute  any 
assets  thereof  amongst  the  part- 
ners.    Hall  v.  Clagett,  supra. 

Either  partner  may  mortgage  his 
interest  in  the  partnership  prop- 
erty, and  the  mortgagee  may  sell 
the  same  on  foreclosure,  and  the 
other  partners  cannot  resist  such 
sale  on  the  ground  that  the  part- 
nership debts  exceed  the  partner- 
ship property.  The  mortgagee  is 
entitled  to  have  the  ultimate  inter- 
est of  the  mortgagor  in  the  prop- 
erty sold,  and  the  purchaser  takes 
that  interest.  The  sale  does  not 
affect  the  right  of  the  other  part- 
ners to  insist  upon  the  application 
of  the  joint  property  to  payment 


(c)  Farquhar  v.  Hadden,  7  Ch.  1. 
See  infra,  book  iv,  ch.  3,  §  3. 

(d)  Ekins  v.  Brown,  1  Spinks, 
Ecc.  &  Adm.  Rep.  400;  A.-G.  v. 
Higgins,  2  H.  &  N.  339.     See,  as  to 


the  locality  of  a  share,  Re  Ewing, 
L.  R.  6  P.  D.  19. 

(e)  See  the  last  note  but  two,  and 
Smith  v.  Stokes,  1  East,  363. 


798 


CH.  V,  SEC.  I.]  SHARES    IN    PARTNERSHIPS. 


540 


dispose  of  under  a  fi.  fa.  issued  at  the  suit  of  a  separate 
creditor,  (f)1  or  under  an  extent  at  the  suit  of  the  crown,  (g) 
It  is,  however,  to  be  observed  that  the  crown  never  holds 
jointly  or  in  common  with  its  subjects,  (h)  Consequently, 
if  a  partner  is  outlawed,  whereby  his  interest  in  the  part- 
nership is  forfeited,  the  other  partners  lose  their  interests 
also;  the  crown  first  taking  the  share  of  the  delinquent 
partner,  and  then  by  its  prerogative  excluding  the  other 
partners  with  whom  it  would  otherwise  be  a  tenant  in  com- 
mon. It  need  hardly  be  said  that  this  prerogative  is  not 
enforced  in  modern  times,  (i) 

Of  the  doctrine  of  non-survivorship  between  partners. 

Jus  accrescendi,  etc. —  It  is  an  old  and  well-established 
maxim  that  Jus  accrescendi  inter  mercatores  locum  non 
habet.  (k)  This  is  a  common  law,  and  not  only  an  equi- 
table maxim,  but  whilst  its  application  in  equity  was  subject 
to  few,  if  any,  exceptions,  (I)  it  was  not  at  law  so  univers- 


of  the  firm  debts,  and  to  the  pay- 
ment of  any  balance  due  them. 
Smith  v.  Evans,  37  Ind.  526. 

In  mining  partnerships  the  firm 
has  no  right  of  pre-emption  as  to 
the  interests  of  retiring  parties,  es- 
pecially when  the  parties  are  ten- 
ants in  common  of  the  mines  and 
not  merely  partners  in  the  business 
of  mining.  First  National  Bank 
v.  Bissell,  2  McCrary,  73;  S.  C.  4 
Fed.  R.  694. 

A  partner  has  an  insurable  inter- 
est in  the  property  of  a  firm,  and 
a  sale  of  insured  property  to  a  firm 
of  which  the  vendor  is  a  member 
does  not  vitiate  his  policy  of  insur- 
ance as  to  the  extent  of  his  inter- 
est in  the  property.  Cowan  v. 
Iowa  State  Ins.  Co.  40  Iowa,  551. 

(/)  Skipp  v.  Harwood,  2  Svvanst. 
586;  Re  Wait,  1  Jac.  &  W.  605; 
Johnson  v.  Evans,  7  Man.  &  Gr. 
240. 


i  See  Menagh  v.  Whit  well,  52  N. 
Y.  146 ;  and  post. 

(g)  R.  v.  Sanderson,  Wightw.  50 ; 
R.  v.  Rock,  2  Price,  198;  R.  v. 
Hodge,  12  id.  537;  Spears  v.  The 
Lord  Advocate,  6  CI.  &  Fin.  180. 

(h)  2  Bl.  Com.  409;  Hales  v.  Petit, 
Plow.  257. 

(i)  See  Collyer  on  Partn.  72.  For- 
feiture for  felony  and  treason  was 
abolished  by  33  and  34  Vict.  ch.  23, 
§  1.     See  ante,  p.  74. 

(7c)  Co.  Lit.  182a. 

(Z)  In  Nelson  v.  Bealby,  4  De  G. 
F.  &  J.  321,  affirming  S.  C.  30 
Beav.  472,  articles  of  partnership 
provided  that  on  the  death  of  A. 
his  executors  should  receive  one- 
half  of  the  assets  from  B. ;  but 
they  were  silent  as  to  what  was  to 
be  done  on  the  death  of  B.  It  was, 
however,  held  that  his  executors 
were  entitled  to  half  the  assets 
from  A. 


799 


*3M 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


ally  applicable  as  the  generality  of  its  terras  might. lead  one 

to  suppose; 
[*341]      "Devolution  of  legal  estate  in  land  —  Rule  as  to 

the  equitable  6S*ate. —  As  regards  real  property 
and  chattels  real,  the  legal  estate  in  them  is  governed  by 
the  ordinary  doctrines  of  real  property  law ; l  and,  therefore, 


"See  the  general  subject  of  part- 
nership real  estate  considered,  ante. 

Partnership  real  estate  preserves 
its  distinct  qualities  and  descends 
to  the  heir,  who  holds  in  common 
with  the  surviving  partners  in  trust 
for  the  purposes  of  the  partnership, 
first  for  the  creditors  and  second 
for  the  members  of  the  firm  and 
their  representatives.  Hanway  v. 
Robertshaw,  49  Miss.  758 ;  Robert- 
shaw  v.  Hanway,  52  id.  713:  Piatt 
v.  Oliver,  3  McLean,  27;  Andrews 
v.  Brown,  21  Ala.  437;  Bassett  v. 
Miller,  39  Mich.  133.  See,  also, 
ante,  652,  note;  Holland  v.  Fuller, 
13  Ind.  195. 

The  surviving  member  of  a  part- 
nership owning  real  property  is 
something  more  than  a  mere  ten- 
ant in  common  with  the  represent- 
atives of  the  estate  of  the  deceased 
partner.  He  is  trustee  for  the  pur- 
pose of  winding  up  the  affairs  of 
the  firm,  and  is  accountable  for  the 
value  of  the  use  and  occupation  of 
the  landed  estate  of  the  partner- 
ship.   Smith  v.  Walker,  38  Cal.  385. 

A  surviving  partner  acquiring 
the  title  to  partnership  real  estate 
and  purchasing  the  possessory  in- 
terest of  the  deceased  partner  from 
the  administrator  of  his  estate  is 
not  to  be  considered  as  holding  in 
trust  for  the  firm.  Blachley  v. 
Coles,  6  Col.  349. 

The  interest  of  the  survivor  in  his 
deceased  partner's  share  of  real  es- 
tate held  in  the  name  of  the  firm 


is  equitable  merely,  and  one  who 
purchases  it  under  a  judgment  and 
execution  at  law  against  the  sur- 
vivor acquires  no  such  title  as  a 
court  of  equity  will  enforce.  Lang 
v.  Waring,  17  Ala.  145. 

As  the  surviving  partner  is 
charged  with  the  payment  of  the 
debts  of  the  firm  he  has  the  right 
in  equity  to  dispose  of  its  real  es- 
tate for  that  purpose ;  and  although 
his  deed  will  not  convey  the  legal 
estate  to  a  purchaser,  yet  it  will 
convey  the  equity  to  him,  and 
through  it  he  may  compel  the  heir 
to  convey  the  legal  title.  Andrews 
v.  Brown,  21  Ala.  437. 

A  surviving  partner,  having  the 
right  to  the  possession  and  control 
of  the  partnership  effects,  may  pro- 
ceed directly  in  equity  to  obtain 
that  possession  and  control,  and  to 
have  partition  of  partnership  real 
estate  standing  in  the  name  of  the 
deceased.  Gay  v.  Palmer,  9  Cal.  616. 

In  Whitman  v.  Boston,  etc.  R.  R. 
Co.  3  Allen,  133,  it  was  held  that  if 
land  is  purchased  by  partners  with 
partnership  funds,  for  partnership 
purposes,  and  is  not  needed  for  the 
payment  of  debts,  the  title  vests  in 
the  members  of  the  firm  as  tenants 
in  common ;  and  after  the  death  of 
one  of  them,  a  petition  for  damages, 
sustained  by  reason  of  the  location 
of  a  railroad  upon  it,  is  properly 
brought  in  the  joint  names  of  his 
administrator  and  the  surviving 
partner. 


800 


CH.  V,  SEC.  I.]  SHARES    IN    PARTNERSHIPS. 


*341 


if  several  partners  are  jointly  seized  or  possessed  of  land 
for  an  estate  in  fee,  or  for  years,  on  the  death  of  any  one 
the  legal  estate  therein  will  devolve  on  the  surviving  part- 
ners; (m)  and  they  can  mortgage  it  for  partnership  debts  (n) 
and  sell  it  for  the  purpose  of  winding  up  the  affairs  of  the 
partnership,  (o)'  But  the  surviving  partners  are,  as  regards 
the  interest  of  the  deceased  partner,  deemed  to  be  trustees 
thereof  for  the  persons  entitled  to  his  estate,  and  are  com- 
pellable to  account  with  them  accordingly,  (p)  This,  how- 
ever, is  only  the  case  on  the  assumption  that  the  property 
in  question  is  partnership  property,  and  forms  part  of  the 
common  stock  in  which  the  deceased  had  an  interest  as  a 
partner,  (q) 


Those  cases  which  hold  that  the 
heirs  of  the  deceased  partner  and 
the  survivors  hold  the  legal  title 
evidently  proceed  upon  the  as- 
sumption that  the  land  was  origi- 
nally held  by  the  partners  as  tenants 
in  common.  If  they  are  considered 
as  holding  as  joint  tenants,  the 
legal  title  will  of  course  remain  in 
the  survivors  alone,  and  no  inter- 
est will  descend  to  the  heirs.  See 
Waugh  v.  Mitchell,  1  Dev.  &  Bat. 
510,  where  it  was  held  that  the 
legal  title  survived  upon  the  death 
of  a  partner,  and  that  a  sale  of  the 
land  ordered  in  a  suit  to  settle  the 
partnership  affairs  bound  the  heirs 
of  the  deceased  partner,  though  not 
parties  to  the  suit.  Waugh  v. 
Mitchell,  1  Dev.  &  B.  Eq.  510. 

A  surviving  partner  has  the  right 
to  control  real  estate  held  by  the 
partners  until  the  partnership  debts 
are  paid  and  the  affairs  of  the  firm 
finally  settled ;  and  until  such  time 
the  widow  of  a  deceased  partner 
has  no  separate  share  in  the  part- 
nership property.  Cobble  v.  Tom- 
linson,  50  Ind.  550. 

Surviving  partner  cannot  parti- 


Vol.  1  —  51 


tion  real  property  of  partnership; 
that  belongs  to  a  court  of  equity. 
Burnside  v.  Savier,  6  Oreg.  154. 

(m)  Jefferys  v.  Small,  1  Vern. 
217;  Elliot  v.  Brown,  3  Swanst. 
489,  n. 

(n.)  Re  Clough,  31  Ch.  D.  324,  and 
ante,  p.  218. 

(o)  Shanks  v.  Klein,  15  Otto,  18 
(Amer.).  See,  also.  West  of  Eng- 
land, etc.  Bank  v.  Murch,  23 
Ch.  D.  138. 

(p)  Jefferys  v.  Small,  1  Vern. 
217;  Lake  v.  [Craddock,  3  P.  W. 
158;  Lake  v.  Gibson,  1  Eq.  Ca.  Ab. 
290;  Elliot  V.  Brown,  3  Swanst. 
489,  n. ;  Lyster  v.  Dolland,  1  Ves.  Jr. 
435;  Jackson  v.  Jackson,  9  Ves. 
596,  597.  See,  also,  Be  Ryan, 
L.  R.  Ir.  3  Eq.  222,  where  the  title 
of  persons  claiming  under  a  de- 
ceased partner  prevailed  against  a 
mortgagee  of  the  surviving  part- 
ner, the  mortgage  being  for  his 
separate  debt,  and  the  mortgagee 
having  notice  of  the  equitable  in- 
terest. As  to  part  of  the  property 
there  was  no  such  notice,  and  as  to 
that  the  mortgagee's  title  prevailed. 

(q)  Morris  v.  Barrett,  3  Y.  &  J. 


801 


*tel 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Devolution  of  choses  in  action. —  As  regards  choses  in 
action,  the  right  to  sue  for  a  debt  owing  to  the  firm,  as 
well  as  the  liability  to  be  sued  for  a  debt  owing  by  it, 
also,  at  law,  devolved,  in  the  event  of  the  death  of  one 
partner,  upon  the  surviving  partners  exclusively,  (r) '     In 


384;  Reilly  v.  Welsh,  11  Ir.  Eq.  22. 
A  case  of  a  lease  acquired  for  the 
purpose  of  a  partnership  which 
was  never  formed.  See  ante,  p. 
331. 

(r)  Kemp  v.  Andrews,  Carth.  170 ; 
Dixon  v.  Hammond,  2  B.  &  A.  310 ; 
Martin  v.  Crompe,  1  Lord  Ray- 
mond, 340,  and  2  Salk.  344.  And 
see  Slipper  v.  Stidstone,  5  T.  R.  493 : 
French  v.  Andrade,  6  T.  R.  582. 
There  is  indeed  an  old  case  in 
which  an  action  of  assumpsit  for  a 
partnership  debt  was  held  to  be 
properly  brought  by  the  executors 
of  a  deceased  partner  and  the  sur- 
viving partners  jointly  (Hall  v. 
Huff  am,  alias  Hall  v.  Rougham,  2 
Lev.  188  and  228,  and  3  Keble,  798) ; 
but  this  case  is  in  direct  opposition 
to  the  last  cited,  and  is  contrary  to 
what  was  clearly  settled  before  the 
Judicature  Acts. 

1  See  Roosvelt  v.  McDowell,  1 
Geo.  489 ;  Robinson  v.  Thompson,  1 
Sm.  &  M.  Ch.  454;  Southard  v. 
Lewis,  4  Dana,  148 ;  Childs  v.  Hyde, 

10  Iowa,  294 ;  Black  v.  Struthers, 

11  id.  459 ;  Maples  v.  Geller,  1  Nev. 
233;  Burgwin  v.  Hastier,  1  Tayl. 
(N.  C.)  124;  Wright  v.  Storrs,  6 
Bosw.  600;  Wilson  v.  Nicholson,  61 
Ind.  241;  Barlow  v.  Coggan,  1 
Wash.  Ter.  (N.  S.)  257;  Davidson 
v.  Weems,  58  Ala.  187;  Skinner  v. 
Bedell,  32  Ala.  44 ;  Davis  v.  Church, 
1  Watts  &  S.  240;  Bernard  v.  Wil- 
cox, 2  Johns.  Cas.  374 ;  Walker  v. 
Galbrath,  3  Head,  315;  Marvin  v. 
McRae,  1  Rice,  171 ;  McCandless  v. 


Hadden,  9  B.  Mon.  185;  Belton  v. 
Fisher,  44111.  33;  Nicklaus  v.  Dahn, 
63  Ind.  87 ;  Wilsou  v.  Soper,  13  B. 
Mon.  411 ;  Voorhees  v.  Childs.  17 
N.  Y.  354;  Higgins  v.  Rockwell,  2 
Duer,  650;  Lane  v.  Doty,  4  Barb. 
534;  Richler  v.  Poppenhausen,  42 
N.  Y.  373;  S.  C.  9  Abb.  Pr.  (N.  S.) 
263;  Watson  v.  Miller,  58  Tex.  289; 
Stanford  v.  Lockwood,  95  N.  Y.  582; 
Ober  v.  Indianapolis,  etc.  R.  R.  Co. 
13  Mo.  App.  81 ;  Harris  v.  Pearce, 
5  Bradw.  622;  Ambs  v.  Caspari,  13 
Mo.  App.  587;  Nehrbose  v.  Bliss, 
88  N.  Y.  600 ;  Miller  v.  Cappel,  2  So. 
Rep.  (La.)  807 ;  Bradley  v.  Brigham, 

4  N.  Eng.  Rep.  (Mass.)  45.  See,  also. 
Palmer  v.  Maxwell,  11  Neb.  598. 
See,  however,  Saunders  v.  Wilder, 
2  Head,  577;  Remson  v.  Pomeroy, 

5  Blackf.  383 ;  Ex  parte  Ware,  48 
Ala.  223. 

An  executor  of  a  deceased  part- 
ner may,  however,  maintain  a  suit 
in  equity  to  discover  the  amount 
due  from  defendant  to  the  partner- 
ship, and  to  recover  such  amount, 
when  it  appears  that  the  surviving 
partner  has  refused  to  join  in  the 
suit.  Kirby  v.  Lake  Shore  &  M.  S. 
R.  Co.  14  Fed.  R.  261 ;  S.  C.  8  Fed. 
R.  462. 

Actions  brought  by  a  firm  do  not 
abate  on  the  death  of  a  partner,  but 
may  be  prosecuted  by  a  surviving 
partner.  Phoenix  Ins.  Co.  v.  Moog, 
81  Ala.  335. 

When  a  partnership  has  been  dis- 
solved by  the  death  of  one  partner, 
the  title  to  the  firm  property  vests 


802 


CH.  V,  SEC.  I.]  SHAKES    IN    PARTNERSHIPS. 


'342 


equity,  ^however,  the  legal  personal  representatives  [*342] 
of  a  deceased  partner  were  entitled  to  have  a  debt 


in  the  survivor  for  the  purpose  of 
winding  up  the  firm  business,  yet 
such  property  is  properly  listed  for 
taxation  in  the  firm  name.  Blodg- 
ett  v.  Muskegon,  27  N.  W.  R.  686. 

The  surviving  member  of  a  part- 
nership succeeds  to  the  firm's  right 
of  action,  notwithstanding  its  dis- 
solution prior  to  the  copartner's 
death,  the  partnership  business 
being  yet  unsettled.  Ober  v.  In- 
dianapolis, etc.  R.  R.  Co.  13  Mo. 
App.  81 ;  Kinsler  v.  McCants,  4 
Rich.  46. 

B.  H.,  after  the  dissolution  of  a 
partnership  between  himself  and 
S.  W.,  made  a  negotiable  promis- 
sory note  in  the  name  of  tho  late 
firm  of  W.  &  H..  payable  to  S.  W. 
and  S.  F.  as  partners,  under  the 
firm  of  W.  &  F. ;  and,  after  a  dis- 
solution of  the  last-named  firm,  and 
the  death  of  S.  W.,  S.  F.,  in  the 
name  of  W.  &  F. ,  indorsed  the  note 
to  himself.  Held,  that  S.  F.  could 
not  maintain  an  action  on  the  note 
as  indorsee ;  but  that,  as  surviving 
promisee,  he  was  entitled  to  re- 
cover on  the  money  counts  against 
B.  H.,  either  as  surviving  promisor, 
if  the  note  had  been  subsequently 
ratified  by  S.  W.,  or  as  sole  prom- 
isor if  it  had  not  been  so  ratified. 
Fowle  v.  Harrington,  1  Cush.  146. 

A  surviving  dormant  partner 
may  sue  alone  upon  a  debt  due  the 
partnership.  Beach  v,  Hayward, 
10  Ohio,  455. 

A  surviving  partner,  suing  to  re- 
cover a  partnership  claim,  may  join 
his  individual  claim  in  the  same 
action.  Davis  v.  Church,  1  Watts 
&  S.  240. 

A  surviving  partner,  in  an  action 


against  himself  to  recover  a  debt 
which  he  individually  incurred, 
can  set  off  a  claim  of  the  firm 
against  the  plaintiff.  Johnson  v. 
Kaiser,  40  N.  J.  Law,  280. 

Services,  part  of  which  were  ren- 
dered to  a  firm  of  which  the  de- 
fendant is  the  surviving  partner, 
the  other  part  under  the  same  con- 
tract to  the  defendant  alone,  may 
be  sued  upon  as  a  single  cause  of 
action.  Butler  v.  Kirby,  53  Wis. 
188. 

A  demand  due  to  the  plaintiff 
as  surviving  partner  of  one  firm 
may  be  joined  in  the  same  action 
with  a  demand  due  to  him  as  the 
surviving  partner  of  another  firm. 
Stafford  v.  Gold,  9  Pick.  533. 

After  death  of  one  partner,  a 
suit  upon  a  bond  to  the  partner- 
ship, brought  by  the  survivor,  join- 
ing the  name  of  the  deceased  as  if 
he  were  still  alive,  cannot  be  sup- 
ported, and  the  erroneous  joinder 
cured  by  proof  that,  at  time  of  suit 
brought,  another  person  of  the 
game  name  with  the  deceased  part- 
ner was  living;  for  this  does  not 
prove  identity.  Teller  v.  Wether- 
ell,  9  Mich.  464. 

A  judgment  recovered  in  the 
name  of  a  surviving  partner,  as 
such,  can  be  enforced  only  in  his 
name  or  that  of  his  personal  rep- 
resentative; a  sci.  fa.  to  revive 
cannot  be  sued  out  on  the  name 
of  the  administrator  of  the  deceased 
partner,  even  after  the  death  of 
the  survivor.  Copes  v.  Fultz,  9 
Miss.  623. 

Where  a  debt  was  originally  due 
to  two  partners,  and  one  has  died, 
and  the  debtor  has  done  nothing 


803 


f342 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    III. 


due  to  the  partnership  brought  into  account  by  the  surviv- 
ing partners,  (s)  and  were  liable  to  be  proceeded  against  by 


to  change  his  original  liability,  the 
action  on  the  debt  must  be  brought 
in  the  name  of  the  surviving  part- 
ner, although,  by  an  agreement 
between  the  parties,  the  beneficial 
interest  was  in  the  deceased.  Clark 
v.  Howe,  23  Me.  560;  Daly  v,  Eric- 
son,  45  N.  Y.  786. 

So,  where  one  of  two  partners 
of  a  firm  retired  from  it,  and  as- 
signed all  his  interest  in  the  store 
accounts  to  the  other,  and  the  lat- 
ter afterwards  died,  held,  that 
actions  to  recover  such  debts 
should  be  in  the  name  of  the  sur- 
viving partner,  and  not  in  that  of 
the  personal  representative  of  the 
deceased  one,  to  whom  they  had 
been  assigned.  Felton  v.  Reid,  7 
Jones'  L.  269. 

The  administrator  of  a  deceased 
partner  was  sued  at  law  by  the  sur- 
viving partner  for  moneys  which 
he  had  collected  from  debtors  of 
the  firm.  Defense,  a  dissolution 
of  the  partnership  before  the  death, 
and  a  division  of  the  accounts  of 
the  firm.  Held,  that,  in  order  to 
make  this  a  good  defense  to  the 
administrator,  he  must  show  a  di- 
vision to  such  an  extent  as  to  vest 
in  each  partner  the  absolute  prop- 
erty in  his  share  of  the  accounts. 
Shields  v.  Fuller,  4  Wis.  102. 

On  the  death  of  one  of  two  part- 
ners, plaintiffs  in  an  action,  the 
survivor,  on  suggesting  the  death, 
may  proceed  to  judgment  without 


any  formal  judgment  in  abate- 
ment of  the  suit  as  to  the  deceased 
being  entered.  Sprawles  v.  Barnes, 
9  Miss.  629. 

The  death  of  a  partner,  co-plaint- 
iff in  the  court  below  and  co-ap- 
pellant in  the  supreme  court,  being 
suggested,  the  case  may  proceed 
to  final  judgment  in  the  name  of 
the  surviving  partner ;  if,  however, 
either  the  surviving  partner  or  the 
appellee  moves  for  a  set.  fa.  to 
make  the  representative  of  the  de- 
cedent's estate  a  party,  it  will  be 
awarded.  Gunter  v.  Jarvis,  25 
Tex.  581. 

A  creditor  of  a  firm,  both  mem- 
bers of  which  are  dead,  may,  to 
satisfy  his  debt,  on  the  proper 
proof,  by  a  surrogate's  order,  pro- 
cure a  sale  of  the  real  estate  of 
one  who  survived  the  other,  al- 
though the.  latter  is  shown  to  have 
left  abundant  assets  to  meet  all 
demands  against  his  estate.  Bridge 
v.  Swain,  3  Redf.  487. 

In  an  action  for  money  paid,  etc., 
for  the  use  of  a  partnership,  one  of 
the  partners  having  died  before 
the  right  of  action  accrued,  the 
promise  must  be  alleged  to  have 
been  made  by  the  survivors  alone ; 
and  if  alleged  to  have  been  made 
by  the  deceased  and  his  survivors 
it  will  be  fatal.  Tone  v.  Goodrich, 
2  Johns.  213. 

Where  a  debtor  of  a  copartner- 
ship   stated    an  account  between 


'  (s)  The  receipt  of  the  survivors 
for  a  debt  due  to  the  firm  is  a  good 
discharge  to  the  debtor  (Brasier  v. 
Hudson,  9  Sim.  1;  Philips  v.  Phil- 
ips, 3  Ha.  281) ;  and  the  surviving 


partner  can,  without  making  the 
executors  of  the  deceased  parties, 
sustain  an  action  for  an  account 
against  a  debtor  to  the  firm.  Haig 
v.  Gray,  3  De  G.  &  Sm.  741. 


804 


CH.  V,  SE0.  I.J  SHARES    IN    PARTNERSHIPS. 


542 


a  creditor  of  the  firm,  (t)    The  Judicature  Acts  have  not 
materially  altered  the  law  in  this  respect,  (w) 


them,  admitting  a  balance  due  from 
himself  for  goods  sold  in  the  life- 
time of  a  deceased  partner,  held, 
that  the  survivors  might  recover 
such  balance  on  an  insimul  cotn- 
putassent,  without  stating  the 
death  of  the  other  partner  and  the 
survivorship ;  the  stating  of  an  ac- 
count being  in  the  nature  of  a  new 
promise  to  the  survivors.  Holmes 
v.  De  Camp,  1  Johns.  34. 

Payment  to  an  executor  or  ad- 
ministrator of  a  deceased  partner 
of  a  partnership  claim  is  no  defense 
to  an  action  by  the  survivor.  Wal- 
lace v.  Fitzsimmons,  1  Dall.  248; 
Rice  v.  Richards,  1  Busb.  Eq.  277. 

A  surviving  partner  is  the  sole 
representative  of  the  partnership 
property,  and  the  representatives 
of  the  deceased  partner  need  not 
be  made  a  party  to  a  proceeding  at 
law  or  in  equity  affecting  such 
property.  Robinson  v.  Thompson, 
1  Smed.  &  M.  Ch.  454;  Jones  v. 
Hardisty,  10  Gill  &  J.  404;  Mat- 
thews r.  Stietz,  5  N.  Y.  Civ.  Proc. 
235;  Phelps  v.  Elliot,  29  Fed.  Rep. 
53 ;  Matney  v.  Gregg,  19  Mo.  App. 
107. 

So  even  though  the  death  of  a 
partner  occurs  pending  a  suit  by  or 
against  the  firm.  In  such  case 
there  is  no  abatement,  etc.  No 
revivor  is  necessary.  Dunman  v. 
Coleman,  59  Tex.  199;  Oram  v. 
Rothermel,  98  Pa.  St.  300 ;  Atlanta 
v.  Dooly,  74  Ga.  702;  Shale  v. 
Schantz,  85  Hun,  622. 

On  dissolution  by  the  death  of  a 
partner  the  legal  title  to  the  per- 
sonal assets  is  cast  on  the  survivor, 


and  the  estate  of  the  deceased  has 
no  ascertained  interest  in  any  part 
thereof  until  the  partnership  debt3 
and  liabilities  have  been  dis- 
charged, leaving  a  residuum.  Lit- 
tle v.  McPherson,  76  Ala.  552. 

The  liability  of  the  representative 
of  a  deceased  partner  is  in  equity, 
and  is  that  of  a  surety,  to  be  en- 
forced by  the  creditor  in  showing 
either  that  the  survivors  are  in- 
solvent in  fact,  or  that  he  has  ex- 
hausted his  remedy  at  law  against 
them.  Fogarty  v.  Cullen,  49  N.  Y. 
Super.  Ct.  397. 

The  statutes  relating  to  the  set- 
tlement of  the  estate  of  a  deceased 
partner  do  not  affect  an  account 
assigned  by  one  partner  during  the 
life-time  of  all  the  partners.  The 
assignee  of  such  an  account  may 
maintain  an  action  thereon  for  his 
own  benefit  in  the  name  of  the  sur- 
viving partners.  Matherson  v. 
Wilkinson,  10  E.  R.  830;  S.  C.  8 
Atl.  R.  684. 

As  to  the  practice  in  Michigan, 
where  one  partner  dies  before  the 
action  is  commenced  for  a  debt  due 
the  firm,  see  Cragin  v.  Gardner,  31 
N.  W.  Rep.  206 ;  S.  C.  7  West.  R. 
647. 

As  to  how  objection  should  be 
made  to  the  improper  joinder  of 
the  administrator  of  a  deceased 
partner  with  the  surviving  partner, 
see  Lass  v.  Eisleben,  50  Mo.  122, 
and  Matney  v.  Gregg,  19  Mo.  App. 
107. 

In  Alabama  partnership  credit- 
ors may  maintain  an  action  at  law 
against  the  personal  representative, 


(t)  Ante,  book  ii,  ch.  2,  §  1. 


(u)  See  ante,  book  ii,  chs.  2  and  3. 


805 


*342 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


Devolution  of  ordinary  chattels. —  As  regards  ordinary 
chattels,  it  was  held,  in  Buckley  v.  Barber,  (v)  that  the  in- 


or  a  bill  in  equity  to  enforce  the 
payment  of  the  estate  of  the  de- 
ceased partner.  Rose  v.  Gunn,  79 
Ala.  411. 

Upon  the  death  of  one  partner, 
creditor  may  proceed  at  law  against 
the  survivor;  or,  at  his  option,  un- 
der the  statute  of  Indiana,  proceed 
against  the  estate  of  the  deceased. 
Ralston  v.  Moore,  105  Ind.  243. 

By  statute  in  South  Carolina  and 
some  other  states,  a  single  action 
may  be  maintained  against  the  sur- 
viving partner  and  the  representa- 
tives of  a  deceased  partner.  Wies- 
enfeld  v.  Byrd,  17  S.  C.  106.  See, 
also,  Simpson  v.  Schutte,  21  Mo. 
App.  639;  Anderson  v.  Pollard,  62 
Ga.  46. 

In  Georgia  it  is  held  to  be  error 
to  allow  a  case  brought  jointly 
against  surviving  partner  and  the 
administrator  of  the  deceased  part- 
ner to  be  discontinued  as  to  the 
former.  Pullen  v.  Whitfield,  55 
Ga.  174;  McNaught  v.  Bostick,  71 
Ga.  782. 

By  statute  in  Pennsylvania  (act 
of  April  11,  1848,  sec.  4\  the  es- 
tate of  a  deceased  partner  is  liable 
for  the  whole  debt  of  the  firm 
whether  the  surviving  partner  is 
solvent  or  insolvent.  For  the  pur- 
pose of  action  against  the  repre- 
sentative the  debt  is  treated  as  if  it 
were  the  individual  debt  of  the  de- 
cedent. Blair  v.  Wood,  108  Pa. 
St.  278. 

It  is  a  fatal  variance  for  one  to 
sue  in  tort  as  a  survivor  of  a  part- 
nership   upon  a  cause    of    action 


which  did  not  arise  till  after  the 
firm  was  dissolved  by  the  death  of 
the  other  partner.  Mead  v.  Ray- 
mond, 52  Mich.  14. 

No  joint  action  can  be  maintained 
against«the  several  administrators 
of  deceased  partners,  for  the  debt 
is  severed  by  the  death  of  either, 
and  the  remedy  must  be  against 
their  estates  severally.  McNally  v. 
Kerswell,  37  Me.  550. 

Where  a  bill  is  brought  against 
partners,  and  one  of  them  dies,  no 
revivor  against  his  representatives 
is  necessary,  but  the  bill  may  pro- 
ceed against  the  survivors ;  and  if 
it  be  dismissed  for  want  of  such  re- 
vival it  is  error.  Hammond  v. 
St.  John,  4  Yerg.  107 ;  Troy  Iron 
&•  Nail  Factory  v.  Winslow,  11 
Blatch.  513. 

Where  a  judgment  has  been  re- 
covered against  surviving  partners 
upon  a  firm  obligation,  and  the 
legal  title  to  the  real  estate  of  the 
firm  is  in  the  survivors  individ- 
ually, neither  the  copartners  nor 
the  copartnership  creditors  will 
have  any  equities  superior  to  the 
judgment  creditors  which  will  pre- 
vent the  attaching  of  a  lien  upon 
the  land.  In  re  Lawrence,  5  Fed. 
Rep.  349. 

One  who  recovers  a  judgment 
against  a  surviving  partner  obtains 
thereby  no  lien  on  a  trust  fund 
created  by  the  deceased  partner 
out  of  the  partnership  property ; 
and  where  such  fund  has  been 
wrongfully  allowed  by  its  trustees, 
who  were  also  partners,  to  remain 


(v)  Buckley  v.  Barber,  6  Ex.  164.     The  Collector  of  Customs,  2  M.  &  S. 
And  see  per  Dampier,  J.,  in  R.  v.     223. 

806 


OH.  V,  SEC.  I.]  SHAKES    IN    PARTNERSHIPS. 


*342 


terest  of  a  deceased  partner  in  chattels  belonging  to  the 
firm  did  not  devolve  upon  the  surviving  partners,1  so  as  to 
enable  them  to  give  a  good  legal  title  to  the  chattels  as 


in  the  business,  the  rights  of  a  re- 
ceiver, appointed  at  the  instance 
of  the  cestuis  que  trustent  of  the 
fund,  to  the  partnership  assets,  are 
prior  to  the  judgment,  if  the  judg- 
ment was  not  obtained  until  after 
the  receiver's  appointment.  Hooley 
v.  Gieve,  9  Abb.  N.  C.  9;  S.  C.  9 
Daly,  104. 

No  suit  at  law  or  in  equity  can, 
in  this  country,  be  sustained 
against  the  x-epresentatives  of  a  de- 
ceased copartner,  or  to  charge  his 
estate  for  the  copartnership  debts, 
if  the  surviving  partners  are  solv- 
ent and  the  assets  of  the  firm  are 
sufficient.  Troy  Iron  &  Nail  Fac- 
tory v.  Winslow,  supra.     See  post. 

In  case  of  the  death  of  one  of  the 
partners  the  creditor  must  exhaust 
his  remedy  against  the  survivor  in 
the  first  instance,  and  having  failed 
to  collect  his  debt  he  may  then  re- 
sort to  an  equitable  action  against 
the  representatives  of  the  deceased 
partner.  Richter  v.  Poppenhausen, 
42  N.  Y.  373;  9  Abb.  Pr.  N.  S.  263. 
See,  also,  Barlow  v.  Coggan,  1 
Wash.  Ter.  (N.  S.)  257.     See  post. 

An  action  will  lie  for  a  partner- 
ship debt  against  the  representa- 
tives of  a  deceased  partner  after 
the  recovery  of  a  judgment  there- 
for against  the  survivor  and  the 
return  of  an  execution  unsatisfied, 
notwithstanding  it  may  be  shown 
that  the  survivor  had  property  out 
of  which  the  execution  might  have 


been  satisfied.  And  payment  of  a 
partnership  debt  may  be  enforced 
against  the  estate  of  the  deceased 
partner  without  bringing  an  action 
against  the  survivor,  if  the  insolv- 
ency of  the  latter  can  be  proved. 
Pope  v.  Cole,  55  N.  Y.  124.  See, 
also,  First  Nat.  Bank  v.  Morgan,  73 
N.  Y.  593. 

Although  the  general  rule  is  that, 
when  one  member  of  a  firm  dies, 
the  legal  remedy  on  its  contracts  is 
against  the  survivors  only,  yet 
where,  pending  an  action  against 
partners,  one  died,  and  his  admin- 
istrators asked  and  obtained  leave 
to  defend,  filed  a  separate  answer, 
and  contested  the  merits,  held, 
that  this  course  waived  any  ob- 
jection to  the  right  of  plaintiff  to 
proceed  at  law  instead  of  in  equity, 
though  it  did  not  relieve  him  from 
the  necessity  of  showing  before  the 
administrator  could  be  charged 
that  the  survivors  were  insolvent. 
Sherman  v.  Kreul,  42  Wis.  33. 

A  creditor  of  a  firm  who  has  re- 
covered a  judgment  against  one 
member  thereof  upon  his  guaranty 
of  a  firm  debt,  and  issued  an  execu- 
tion thereon  which  has  been  re- 
turned unsatisfied,  cannot  main- 
tain an  action,  in  the  nature  of  a 
creditors'  bill,  to  reach  the  equi- 
table assets  of  the  firm ;  a  judgment 
must  first  be  recovered  against  the 
firm  or  the  surviving  partner 
thereof,  and  an  execution  be  issued 


1  When  a  partnership  is  dissolved 
by  the  death  of  one  or  more  of  the 
partners  the  legal  title  to  all  the 
personal  property  belonging  to  the 


firm  becomes  vested  exclusively  in 
the  survivor  as  trustee  for  the  pur- 
pose of  paying  the  debts  of  the 
firm,  and  he  is  entitled  to  the  pos- 


*342 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


against  the   executors   of  the  deceased;   and  that   conse- 
quently such  chattels  might  be  seized  under  a  fi.  fa.  issued 

Condit,  21  N.  J.  L.  659;  Knowles 
v.  Byrnes,  5  Met.  115;  Vanden- 
hewvil  v.  Stores,  3  Conn.  203; 
Keith  v.  Pratt,  5  Ark.  661 ;  Ken- 
nedy v.  Richey,  1  Strobh.  4;  Joys- 
lyn  v.  Taylor,  24  N.  H.  268;  Bonne 
v.  Kay,  5  Ark.  19 ;  Hill  v.  McNeil, 
6  Port.  29;  Hubball  v.  Skiles,  16 
Ind.  138;  Ledden  v.  Colby,  14  N. 
H,  33 ;  Raborg  v.  Bank  of  Columbia, 
1  Har.  &  G.  231;  Culbertson  v. 
Townsend,  6  Ind.  64 ;  Matthews  v. 
Stietz,  5  N.  Y.  Civ.  Proc.  235;  Re 
Lawrence,  5  Fed.  Rep.  349 ;  Man- 
ning v.  Smith,  16  Nev.  85;  Reese 
v.  Kinkead,  17  Nev.  447;  S.  C.  18 
id.  128. 


thereof;  and  returned  unsatisfied. 
Lewishon  v.  Drew,  15  Hun,  467. 

Where  one  of  several  members 
of  a  firm  removes  from  the  state 
equity  has  jurisdiction  to  subject 
his  individual  estate  to  the  claims 
of  the  creditors  of  the  firm,  such 
estate  not  being  bound  by  any 
judgment  at  law  which  the  cred- 
itors might  recover  against  the 
firm.  Farrar  v.  Haselden,  9  Rich. 
Eq.  331. 

As  to  what  averments  the  dec- 
laration should  contain  in  an  ac- 
tion by  or  against  a  surviving  part- 
ner upon  a  partnership  demand, 
see  Perth  Amboy  Manufg.  Co.  v. 


session    and  control    of  the    firm 
assets  for  the  purpose  of  winding 
up  its  affairs  and  distributing  the 
residue  among  the  parties  entitled. 
Andrews  v.   Brown,  21   Ala.  437; 
Hanway  v.   Robertshaw,  49  Miss. 
758;    Robertshaw   v.  Hanway,    52 
Miss.  713 ;  Filley  v.  Phelps,  18  Conn. 
294;  Strange  v.  Graham,  56  Ala.  614 ; 
Barry  v.  Briggs,  22  Mich.  201 ;  For- 
rester v.   Oliver,   1  Bradwell,  259; 
Knox  v.    Schepler,  2   Hill  (S.  C), 
595;  Holland  v.  Fuller,  13  Ind.  195; 
Whitmore    v.    Shiverick,    3    Nev. 
288;    Bassett    v.   Miller,   39    Mich. 
183;  Crescent  Ins.  Co.  v.  Camp,  64 
Tex.  521 ;  Blaker  v.  Sands,  29  Kan. 
551 ;  Little  v.  McPherson,  76  Ala. 
552;   Matthews  v.  Stietz,  5  N.  Y. 
Civ.  Proc.  235;  Way  v.  Stebbins, 
47  Mich.  296;  Shipe's  Appeal,  114 
Pa.  St.   205.     See,  also,  Rammels- 
berg  v.  Mitchell,  29  Ohio   St.   22. 
See,  however,  Skipwith  v.  Lea,  16 
La.    Ann.    247;    McKowan  v.  Mc- 
Guire,  15  id.  637;  Adams  v.  Ward, 


26  Ark.  135;  Putnam  v.  Parker,  55 
Me.  235;  Wilson  v.  Soper,  113  B. 
Mon.  411.     See  post. 

The  surviving  partner,  though 
legally  vested  with  the  title  to  all 
firm  assets,  is  also  trustee  to  dis- 
pose of  them  for  the  best  interests 
of  the  decedent's  estate,  and  is 
bound  to  keep  its  representative 
fully  informed  of  their  condition. 
Heath  v.  Waters,  40  Mich.  457. 
See,  also,  Ogden  v.  Astor,  4  Sandf. 
311;  Justices  v.  McLaren,  1  Ga. 
289. 

In  a  suit  to  recover  upon  a  bill  of 
exchange  drawn  by  partners,  upon 
the  ground  that  the  defendants 
were  liable  as  administrators  de 
son  tort  of  one  of  the  partners  who 
was  dead,  the  answer  alleged  that 
the  survivor  had  assets  as  such  suf- 
ficient to  pay  all  partnership  liabil- 
ities, and  that  the  defendants  had 
applied  all  the  property  of  the  de- 
ceased to  discharge  of  his  individ- 
ual liability.   Held,  that  the  answer 


808 


CH.  V,  SEC.  I.]  SHARES    IN   PARTNERSHIPS. 


*342 


on  a  judgment  obtained  against  the  executors  by  a  separate 
creditor  of  the  deceased  partner,  (x) 


was  good  on  demurrer.  New  Mar- 
ket Nat.  Bank  v.  Locke,  89  Ind. 
428. 

Partnership  assets  cannot  be  ap- 
plied to  the  payment  of  a  higher 
rate  of  interest  than  that  estab- 
lished by  law.  upon  an  agreement 
made  by  the  survivor  with  the 
creditor  to  which  the  other  partner 
was  not  a  party.  Wiesenfeld  v. 
Byrd,  17  S.  C.  106. 

Where  one  of  two  partners,  car- 
rying on  the  business  in  his  own 
name,  deposits  money  of  the  firm 
in  his  own  name  in  a  bank,  the 
other  partner  has  the  right  to 
change  the  account  during  the  life 
of  the  partner  in  whose  name  the 
deposit  was  made,  and  place  it  to 
the  credit  of  the  firm  account,  and 
after  his  death  check  it  out  as  sur- 
viving partner.  Commercial  Na- 
tional Bank  v.  Proctor,  98  111.  558. 

The  representatives  of  a  deceased 
partner,  before  the  partnership 
business  has  been  settled  and  the 
debts  paid,  and  while  they  have 
not  yet  been  let  into  joint  posses- 
sion by  the  surviving  partner,  have 
but  an  equitable  interest  in  the 
partnership  property,  and  are  not 
tenants  in  common  at  law;  and 
the  right  of  action  at  law  for  any 


trespass  upon,  or  injury  to,  the 
property,  which  in  this  case  was  a 
store  leased  by  the  firm,  during 
this  interval,  is  vested  solely  in 
the  surviving  partner.  Pfeffer  v. 
Steiner,  27  Mich.  537. 

A  sm-viving  partner  has  a  right 
to  the  possession  and  control  of  the 
partnership  property  for  the  pur- 
pose of  settling  and  closing  the 
business,  and  not  for  the  purpose  of 
carrying  it  on.  Cline  v.  Wilson, 
26  Ark.  154.  See  Adams  v.  Ward, 
id.  135.     See  post. 

A  surviving  partner,  though  he 
has  a  legal  right  to  the  partnership 
effects,  yet,  in  equity,  is  consid- 
ered merely  as  the  trustee  to  pay 
the  partnership  debts,  and  to  dis- 
pose of  the  effects  of  the  concern 
for  the  benefit  of  himself  and  the 
estate  of  his  deceased  partner.  If 
he  continues  the  partnership  busi- 
ness with  the  partnership  funds  he 
is,  as  a  general  rule,  liable  to  ac- 
count for  all  profits  made  thereby, 
and  the  losses,  if  any,  must  be 
borne  by  himself.  Skidmore  v. 
Collier,  15  N.  Y,  Supreme  Ct.  50. 
See,  also,  Forrester  v.  Oliver,  1 
Brad  well,  259. 

Upon  the  death  of  one  member 
of  the  firm  the  survivor  is  bound 


(x)  This  case  was  certainly  per- 
plexing. It  made  a  useless  distinc- 
tion between  land,  debts  and  ordi- 
nary chattels ;  it  logically  involved 
the  consequence  that  a  surviving 
partner  could  only  properly  sell  his 
share  of  a  partnership  chattel ;  and 
it  was  inconsistent  with  the  prin- 
ciples which  induced  courts  of 
equity  to   decline    (except    under 


special  circumstances)  to  grant  a 
receiver  at  the  instance  of  the  ex- 
ecutors of  a  deceased  against  a  sur- 
viving partner.  In  Taylor  v.  Taylor, 
7  Mar.  1873,  Lord  Justice  James, 
sitting  for  V.-C.  Wickens,  expressed 
his  disapproval  of  Buckley  v.  Bar- 
ber. All  this  is,  however,  of  little 
consequence  now. 


809 


*342 


EIGHTS    AND    OBLIGATIONS. 


[BOOK   HI. 


Good-will. —  The  extent  to  which  good-will  survives  will 
be  noticed  hereafter.  (?/) 


in  equity  to  apply  the  joint  estate 
to  the  payment  of  the  joint  debts ; 
and  the  representatives  of  the  de- 
ceased partner,  and,  in  case  of 
bankruptcy,  the  creditors  of  the 
firm,  may  enforce  this  equity.  Re 
Clap,  2  Low.  168;  Wilson  v.  Simp- 
son, 89  N.  Y.  619. 

A  partner,  by  his  will,  made  his 
brother,  who  was  his  copartner, 
executor,  and  devised  to  him  the 
residue  of  his  estate  in  trust  for 
certain  purposes,  and  authorized 
him  to  use  in  his  business  the  prop- 
erty given  him  in  trust  until  it 
should  be  wanted  for  distribution. 
Held,  that  the  intent  of  the  will 
was  that  the  residue  only  should 
be  used  in  business,  and  that  the 
surviving  partner  was  bound  to 
settle  the  affairs  and  pay  the  debts 
of  the  firm  in  the  usual  way  not- 
withstanding this  clause.  Re  Clap, 
supra. 

The  surviving  partner  carried  on 
the  business  as  before,  and  notified 
creditors  and  others  dealing  with 
him  that  his  brother's  capital  re- 
mained in  the  business;  he  paid 
the  greater  part  of  the  joint  debts, 
and  contracted  new  debts ;  he  con- 
verted a  part  of  the  joint  property 
into  money,  but  less  in  value  than 
the  sum  of  the  joint  debts,  and  be- 
came bankrupt,  having  in  posses- 
sion bank  stock  and  other  specific 
assets,  standing  in  the  name  of  the 
firm,  without  change  since  the 
death  of  his  brother.  Held,  that  a 
joint  creditor  of  the  old  firm,  who 
had  not  received  the  notice  above 
mentioned,  could  require  that  joint 


property  remaining  in  specie,  as  it 
stood  at  the  death  of  the  deceased 
partner,  should  be  applied  to  the 
payment  of  his  debt  in  exclusion 
of  the  separate  creditors  of  the 
bankrupt.  It  seems  that  if  the 
creditor  had  received  the  notice 
above  mentioned  it  would  not  have 
affected  his  lien,  unless  he  had 
done  some  act  amounting  to  an 
election.     Re  Clap,  supra. 

The  fact  that  the  surviving  part- 
ner was  executor  and  trustee  of 
the  deceased  partner  does  not  af- 
fect the  rights  of  joint  creditors, 
for  equitable  rights  are  not  lost  by 
the  merger  or  union  of  different 
titles  in  one  person;  and  when 
bankruptcy  occurs  the  creditors 
may  themselves  assert  the  lien, 
which,  while  the  surviving  part- 
ner is  solvent,  is  vested  in  the  ex- 
ecutor of  the  deceased  partner. 
Re  Clap,  supra. 

The  rights  and  liabilities  of  a  de- 
ceased partner  under  the  partner- 
ship devolve  upon  the  surviving 
partner.  In  the  settlement  with 
the  representatives  of  the  former 
the  latter  would  be  entitled  to 
credit  for  a  judgment  for  a  firm 
debt  recovered  against  him  with- 
out his  collusion  or  neglect.  Hanna 
v.  Wray,  77  Pa.  St.  27. 

If  representatives  of  a  deceased 
partner  undertake,  without  au- 
thority, to  affect  the  rights  of  the 
partnership  by  agreement  with  a 
firm  creditor,  as  to  a  matter  over 
which  the  survivor  had  entire  con- 
trol, and  not  in  its  nature  sever- 
able, equity,  in  relieving  him,  must 


(2/)  See  book  iii,  ch.  9,  §  2. 


810 


CH.  V,  SEC.  I.J  SHAKES    IN   PARTNERSHIPS. 


*342 


«  .  Before  quitting  the  present  subject  it  may  be  observed 
that  the  doctrine  of  non-survivorship  amongst  partners  is 


treat  the  agreement  as  wholly  in- 
operative upon  the  firm.  Lock- 
wood  v.  Mitchell,  7  Ohio  St.  387. 

The  partnership  funds  in  the 
hands  of  garnishees  may  be  or- 
dered to  be  paid  over  to  separate 
creditors  of  the  surviving  partner 
on  their  giving  bond  and  security 
to  answer  any  claim  which  may 
afterwards  be  made  on  the  funds. 
Knox  v.  Schepler,  2  Hill  (S.  ft), 
595. 

In  Bush  v.  Clark,  127  Mass.  Ill, 
however,  it  was  held  that  assets  of 
a  partnership  in  the  hands  of  the 
surviving  partner  at  his  death  are 
so  far  his  personal  estate  that  the 
probate  court  may  make  an  allow- 
ance therefrom  to  his  widow,  al- 
though the  assets  are  insufficient 
to  pay  the  partnership  creditors  in 
full. 

On  the  death  of  the  surviving 
partner  his  personal  representative 
succeeds  to  his  right  to  collect  the 
outstanding  accounts  of  the  firm. 
Costley  v.  Wilkerson,  49  Ala.  210. 

The  administrator  of  a  surviving 
partner  stands  in  the  same  position 
as  the  surviving  partner  in  his  life- 
time. Though  he  has  the  legal 
title  to  the  partnership  assets,  yet 
they  are  assets  of  the  firm,  and 
not  of  his  intestate,  and  should 
neither  be  inventoried  as  property 
of  his  intestate,  nor  be  accounted 
for  as  property  of  his  intestate. 
The  administrator  is  in  fact  a 
trustee,  whose  duty  it  is  to  collect 
the  partnership  property  and  pay 
the  debts  of  the  firm;  and  after 
the  surplus  is  ascertained,  and  the 
interests  therein  settled,  to  pay  the 
share  of  the  partner  first  deceased 


to  his  personal  representatives,  and 
bring  the  share  of  the  partner  last 
deceased  into  the  account  of  his 
estate.  Thomson  v.  Thomson,  1 
Bradf.  24. 

If  all  the  members  of  a  firm  die, 
whether  within  jurisdiction  of  the 
same  or  different  probate  courts, 
the  assets  of  the  firm  do  not  be- 
come confused  with  the  estate  of 
the  last  survivor,  but  continue  a 
separate  existence,  and  the  rights 
of  the  representatives  or  successors 
of  the  several  partners  can  only  be 
determined  in  equity.  Theller  v. 
Such,  57  Cal.  447. 

When  a  partnership  agreement, 
to  take  effect  in  futuro,  is  dissolved 
by  the  death  of  one  of  the  part- 
ners before  the  time  fixed  for 
commencing  business,  no  estate 
intended  to  be  contributed  by 
either  partner  vests  in  the  part- 
nership, nor  does  the  survivor  take 
anything  as  such.  Cline  v.  Wil- 
son, 26  Ark.  154. 

In  the  articles  of  copartnership 
it  was  agreed  that,  in  the  case  of 
the  death  of  one  partner,  the  other 
should  have  the  right  to  recover 
the  fourth  part  of  a  certain  chattel, 
and  against  that  he  should  pay  to 
the  estate  of  the  deceased  the  sum 
of  $1,000  after  the  estate  of  de- 
ceased should  have  paid  all  his  debts 
which  he  owed  to  the  partnership 
up  to  the  date.  Held,  that  this 
clause  gave  the  surviving  partner 
an  option  of  purchase,  and  did  not 
import  an  absolute  covenant  or  en- 
gagement. Scharringhausen  v. 
Luebsen,  52  Mo.  337. 

As  to  statutory  duty  of  surviv- 
ing partner  under  act  of  Indiana 


811 


*343 


BIGHTS   AND   OBLIGATIONS. 


[BOOK    III. 


not  confined  to  merchants  nor  even  to  traders,  but  extends 
to  partners  generally,  (s)  But  it  does  not  apply  to  societies 
not  having  gain  for  their  object,  and  the  members  of  which 
are  merely  joint  tenants  of  the  property  they  hold,  (a) 

[*343]  *0f  the  doctrine  that  shares  are  personal  estate. 

Shares  personal  estate.— From  the  principle  that  a 
share  of  a  partner  is  nothing  more  than  his  proportion  of 
the  partnership  assets  after  they  have  been  turned  into 
money  and  applied  in  liquidation  of  the  partnership  debts, 

of  1877,  to  file  bond,  inventory  and  ordered  by  the  probate  court  to  sell 
appraisement,  see  Adams  v.  Mar-  the  partnership  effects  at  private 
steller,  70  Ind.  381. 

The  failure  of  the  surviving  part- 
ners to  give  bond  and  qualify 
under  the  statute  of  Missouri  as 
administrators  of  the  partnership 
assets  only  subjects  them  to  the 
contingency  of  being  deprived  of 
such  assets  and  the  administrator 
of  the  individual  estate  of  the  de- 
ceased partner  coming  forward 
and  giving  additional  bond  with 
the  view  of  taking  them  in  charge. 
If  the  individual  administrator 
fails  to  qualify  as  administrator  of 
the  partnership  estate  the  assets 
must  necessarily  remain  in  the 
hands  of  the  surviving  partners, 


sale  for  cash,  and  takes  a  note 
therefor  payable  to  himself,  the 
right  of  action  on  the  note  is  in  him 
alone  during  his  life,  and  devolves 
to  the  personal  representative  after 
his  death.  The  administrator  de 
bonis  non  of  the  partnership  estate 
is  not  entitled  to  the  notes  as  a 
part  of  the  partnership  assets. 
McGilway  v.  Clement,  6  Mo.  App. 
598. 

To  maintain  an  action  on  the 
bond  of  a  surviving  partner  the 
plaintiff  must  show  that  he  had  a 
claim  against  the  partnership. 
State  v.  Myers,  9  Mo.  App.  44. 

One  who  has  paid   money  to  a 


who,  as  such,  are  proprietors  for    surviving  partner  under  a  judg- 


the  use  of  the  firm,  and  have  com 
mon  authority  to  devote  them  to 
the  payment  of  firm  debts.  Where 
the  survivors  settle  up  the  firm 
affairs  and  acknowledge  that  the 
individual  share  of  the  deceased 
therein,  after  the  payment  of  firm 
debts,  is  a  certain  sum,  his  admin- 
istrator can  maintain  an  action 
therefor.  Holman  v.  Nance,  84 
Mo.  674. 

Where    an   administrator    of  a 
partnership  estate  in  Missouri  is 


ment  subsequently  reversed  can- 
not, after  final  settlement,  recover 
against  the  surviving  partner,  the 
surety  on  his  bond.  State  v.  My- 
ers, 9  Mo.  App.  44. 

(z)  See  Buckley  v.  Barber,  6  Ex. 
164;  Aunand  v.  Honiwood,  2  Ch. 
Ca.  129;  Jefferys  v.  Small,  1  Vern. 
217:  Lake  v.  Gibson,  1  Eq.  Ca.  Ab. 
290;  Lake  v.  Craddock,  3  P.  W. 
158. 

(a)  As  an  instance,  see  Brown  v. 
Dale,  9  Ch.  D.  78. 


812 


CH.  V,  SEC.  I.]  SHAKES    IN    PARTNERSHIPS.  *344 

it  necessarily  follows  that,  in  equity,  a  share  in  a  partner- 
ship, whether  its  property  consists  of  land  or  not,  must,  as 
between  the  real  and  personal  representatives  of  a  deceased 
partner,  be  deemed  to  be  personal  and  not  real  estate,  unless 
indeed  such  conversion  is  inconsistent  with  the  agreement 
between  the  parties,  (b) l  And,  although  the  decisions  upon 
this  point  are  conflicting,  the  authorities  which  are  in  favor 
of  the  above  conclusion  certainly  preponderate  over  the 
others. 

In  Thornton  v.  Dixon,  (c)  the  court  recognized  the  rule 
that  partnership  property  must  be  considered  as  personal 
estate;  but  held  that  the  lands  which  were  there  in  ques- 
tion could  not  be  so  considered,  as  they  had  been  conve3red 
to  all  the  partners  in  common,  and  there  was  no  agreement 
for  a  sale. 

In  Bell  v.  Phyn,  (d)  partners  in  trade  purchased  with  the 
funds  of  the  firm  a  share  in  a  plantation,  and  kept  the  ac- 
counts relating  to  the  estate  in  the  partnership  books;  and 
it  was  held,  upon  the  authority  of  the  last  case,  that,  assum- 
ing the  land  to  have  become  partnership  property,  it  ought 
not  to  be  regarded  as  personal  estate. 

In  Randall  v.  Randall,  (e)  the  partners  were  farmers, 
maltsters  and  biscuit-makers.  They  bought  land  for  the 
farming  business,  and  it  was  held  that,  as  it  was  not  ac- 
quired for  the  purpose  of  any  partnership  in  trade,  the  land 
could  not  be  treated  as  personalty. 

In  Cookson  v.  Oookson,  (f )  a  father  who  was  seized  in  fee 
of  land,  on  which  he  carried  on  business  as  a  bottle  manu- 
facturer, took  his  son  into  partnership  and  conveyed  a  share 
in  the  land  to  him.  The  land  was  declared  by  the  articles 
of  partnership  to  be  partnership  property.  But,  on 
the  death  of  the  *father,  it  was  held  that  his  share  ['*344] 

(6)  See,  as  to  this,  Steward  v.  with  the  subject  of  partnership 
Blakeway,  4  Ch.  603,  and  6  Eq.  479.    real  estate. 

iThis  subject  will  be  found  con-        (c)  3  Bro.  C.  C.  199. 
sidered  and  the    cases    collected,        (d)  7  Ves.  453. 
ante,   in  the    note  in    connection        (e)  7  Sim.  271. 

(/)  8  Sim.  529. 
813 


*344  RIGHTS    AND    OBLIGATIONS.  [BOOK    in. 

in  the  land  was  to  be  treated  as  real  estate,  no  sale  being 
required  for  the  payment  of  the  partnership  debts  for  any- 
other  purpose. 

These  are  the  cases  which  militate  against  the  rule  under 
discussion.     The  following  are  those  which  support  it: 

In  Ripley  v.  Waterworth,  (g)  partnership  land  was  con- 
veyed to  trustees  upon  trust,  upon  a  dissolution  of  the  part- 
nership, to  sell  and  pay  the  partnership  debts  and  divide 
the  residue  of  the  money  arising  from  the  sale  amongst  the 
partners;  and  it  was  held,  upon  the  death  of  one  of  them, 
that  his  share  in  the  land  was  personal  estate,1  although 
the  land  was  not  in  fact  sold,  and  the  deceased's  share  in  it 
was  purchased  by  the  surviving  partners  under  a  clause  en- 
abling them  to  do  so,  and  contained  in  the  conveyance  to 
the  trustees. 

In  Townshendx.  Dcvaynes,  (A)  two  persons  in  partnership 
as  paper-makers  purchased  paper-mills  for  the  use  of  the 
firm  and  paid  for  them  out  of  its  funds.  It  was  agreed 
that  on  the  death  of  either  the  survivor  should  have  the 
option  'of  purchasing  his  share.  One  of  the  partners  died 
and  his  share  was  purchased  by  the  survivor.  It  was  held 
that  the  whole  of  the  purchase  money  formed  part  of  the 
personal  estate  of  the  deceased,  although  most  of  the 
money  was  paid  in  respect  of  the  interest  of  the  deceased 
in  the  mills. 

In  Phillips  v.  Phillips,,  (i)  two  persons  in  partnership  as 
brewers  purchased  public-houses  for  the  purposes  of  their 
trade  and  had  them  conveyed  to  both  in  fee.  On  the  death 
of  one  of  them  it  was  held  that  his  share  in  the  houses  was 
to  be  treated  as  personal  estate. 

Broom  v.  Broom  (k)  is  a  decision  to  the  same  effect  as  the 
last,  and  decided  on  its  authority. 

(g)  7  Ves.  425.  (t)  1M.&K  649.    See  ante,  p. 

1  See  Davies  v.  Games,  12  Ch.  Div.  332,  note  (k),  as  to  the  estates  which 
813 ;  28  W.  R.  16.  were  devised,  and  which  were  held 

(h)  1  Mont.  Part,  note  2  A.  Appx.     not  converted  into  personalty, 
p.  96.     See,  too,  11  Sim.  498,  n.  (fc)  3  M.  &.  K.  443. 

814 


CM.  V,  SEC.  I.]  SHARES    IN    PARTNERSHIPS.  *'345 

In  Morris  v.  Kearsley,  (l)  a  partnership  of  brewers  was 
possessed  of  real  estate,  conveyed  parti}7  to  the  partners  as 
tenants  in  common,  and  partly  to  one  or  more  of  the 
partners  in  trust  *for  the  firm;  and  it  was  decided  [*345] 
that  the  several  lands,  hereditaments  and  premises 
belonging  to  the  partnership  ought  to  be  considered  as  per- 
sonal estate. 

In  Houghton  v.  Houghton,  (m)  two  brothers,  A.  and  B., 
were  partners  as  soap-boilers.  They  purchased  land  for  the 
purposes  of  their  trade,  took  a  conveyance  to  themselves  as 
tenants  in  common,  and  mortgaged  the  land  for  the  pur- 
chase money.  They  then  built  on  the  land,  insured  the 
buildings,  and  paid  the  expenses  and  the  interest  on  the 
mortgage  debt  out  of  the  partnership  funds.  A.  died  in- 
testate, and  B.  took  another  brother,  C,  into  partnership. 
B.  and  C.  paid  off  the  mortgage,  and  took  a  reconveyance 
to  themselves  as  joint  tenants  in  fee,  and  expended  money 
in  building  and  insurance,  defraying  the  expense,  as  well  as 
providing  the  mortgage  money,  out  of  the  funds  of  the  part- 
nership. On  B.'s  death  it  was  held  that  the  land  and  build- 
ings had  clearly  become  partnership  property,  and  that  it 
ought,  therefore,  to  be  treated  as  personal  estate. 

In  Darby  v.  Darby,  (n)  two  brothers  embarked  in  joint 
speculations  in  land.  Their  scheme  was  to  buy  land,  con- 
vert it  into  building  sites,  and  then  sell  it  at  a  profit.  This 
was  done  on  several  occasions,  the  land  being  generally 
conveyed  to  one  of  them  only.  On  the  death  of  that  one 
it  was  held  that  his  interest  in  all  the  land  bought  by  both, 
and  still  unsold,  was  personal  and  not  real  estate. 

In  Essex  v.  Essex,  (o)  two  brothers  were,  under  the  will  of 
their  father,  seized  of  freehold  lands.  They  agreed  to  be- 
come partners  as  curriers  and  tanners  for  fourteen  years, 
and  to  carry  on  their  business  on  those  lands.    It  was  stipu- 

(I)2Y.&  C.  Ex.  139.  The  report  (m)  11  Sim.  491. 
does  not  state  how,  when,  or  for  (n)  3  Drew.  495. 
what  purpose,  the  property  was  (o)  20  Beav.  442. 
originally  acquired. 

815 


*346  EIGHTS   AND    OBLIGATIONS.  [BOOK    III. 

lated  that  if  either  died  during  the  copartnership  term  the 
other  should  take  his  share  in  the  freeholds,  and  that  the 
entirety  thereof,  including  the  plant  and  tan-pits,  should  be 
valued  at  5,000/.  The  fourteen  years  expired,  but  the  part- 
nership was  continued  as  before.  On  the  death  of  one  of 
the  partners  it  was  held  that  his  share  in  the  freeholds  was 
to  be  regarded  as  personal  estate,  they  having  been  con- 
verted by  the  agreement  for  sale. 
[*34:6]  -In  Watere/'  v.  Waterer,  (p)  the  property  of  a 
nurseryman,  devised  by  him,  with  the  good-will  of 
his  business,  to  his  sons  as  tenants  in  common  was,  on  the 
death  of  one  of  them,  treated  as  personal  and  not  as  real 
estate. 

There  are  also  various  dicta  of  Lord  Eldon  in  favor  of 
the  broad  principle  that  partnership  property  is  to  be  re- 
garded as  personal  and  not  as  real  estate.  (  q) 

Result  of  the  cases. —  Upon  the  whole,  therefore,  it  is 
submitted : 

1.  That,  notwithstanding  Thornton  v.  Dixon,  Bell  v. 
Phyn,  and  Randall  v.  Randall,  the  true  rule  is,  as  stated 
by  the  vice-chancellor,  Kindersley,  in  Darby  v.  Darby,  (r) 
"  that,  whenever  a  partnership  purchases  real  estate  for  the 
partnership  purposes,  and  with  the  partnership  funds,  it  is, 
as  between  the  real  and  personal  representatives  of  the 
partners,  personal  estate."  (s) 

2.  That,  notwithstanding  CooTcson  v.  Coohson,  no  satisfac- 
tory distinction,  with  reference  to  the  question  of  conver- 
sion, can  be  drawn  between  land  purchased  with  partner- 
ship moneys  and  land  acquired  in  any  other  wray,  provided 
such  land  is,  in  the  proper  sense  of  the  expression,  an  asset 
of  the  partnership,  (t) 

(p)  15  Eq.  402,  noticed  ante,  p.  (s)  See,  in  addition  to  the  cases 

333.     See,   also,    Murtagh  v.  Cos-  referred  to  above,  Holroyd  v.  Hol- 

tello,  7  L.  R.  Ir.  428.  royd,  7  W.  R.  426. 

(g)See  the  judgment  of  V.  C.  (t)  See  per  Lord  Eldon  in  Jack- 

Kindersley  in  Darby   v.  Darby,  3  son  v.  Jackson,  9  Ves.  593.     "It  is 

Drew.  499,  etc.  very  difficult  to  make  a  distinction 

(r)  3  Drew.  506.  between  a  joint  tenancy  by  will, 

816 


OH.  V,  SEC.  I.]  SHAKES    IN   PARTNERSHIPS.  *3i7 

3.  That  the  general  rule  may,  nevertheless,  be  excluded 
by  an  agreement,  express  or  implied,  to  the  effect  that  the 
land  shall  not  be  sold.  The  reason  of  the  rule  excludes  its 
application  in  such  a  case,  (u) 

Upon  this  ground  it  was  held,  in  a  recent  and  difficult 
case,  that  a  farm  and  quarry  worked  by  co-owners  in  part- 
nership, and  additional  lands  bought  by  them  out  of  their 
profits  for  the  purposes  of  their  business,  were  not  to  be 
treated  as  converted  into  money.  The  court  held 
that  no  partner  could  *have  enforced  a  sale,  either  [*347] 
of  the  original  farm  and  quarry  or  of  the  subsequent 
additions  to  it.  (%) 

The  rule  only  applies  to  partnership  property. —  It  is 
well  settled  that  the  doctrine  of  conversion  does  not  apply 
to  co-owners  as  distinguished  from  copartners;  nor  to  prop- 
erty owned  by  persons,  who,  although  they  may  be  part- 
ners in  profits,  are  only  co-owners  of  the  land  which  yields 
them.  Thus,  where  two  out  of  three  partners  were  owners 
of  land  occupied  by  the  firm,  and  for  which  the  firm  paid  a 
rent,  and  the  land  was  in  fact  kept  distinct  from  the  joint 
property  of  the  three  partners,  it  was  properly  held,  on  the 
death  of  one  of  the  two  partners  to  whom  the  rent  was 
paid,  that  his  interest  in  the  land  was  not  to  be  considered 
as  personal  but  as  real  estate,  (y)  So,  if  land  belongs  to  all 
the  partners  as  tenants  in  common,  but  not  as  partners,  and 
that  land  is  used  by  them  for  partnership  purposes,  but  is 
nevertheless  intended  to  remain  vested  in  them  as  tenants 
in  common,  and  not  to  form  part  of  the  assets  of  the  firm, 
the  share  of  each  partner  will  be  real  and  not  personal  es- 
tate, (z)  In  the  case  now  supposed,  co-owners  of  land  are 
partners,  but  the  co-ownership  continues  unaffected  by  the 

by  a  gratuitous    deed,  or   a  pur-  (y)  Rowley   v.    Adams,    7  Beav. 

chase.     The  law  of  merchants,  if  548 ;  Balmain  v.  Shore,  9  Ves.  500. 

it  applies  to  one,  must  apply  to  all."  See.  too,  Phillips  v.  Phillips,  ante, 

(u)  Steward  v.  Blakeway,  4  Ch.  p.  332. 

603,  and  6  Eq.  479.  (z)  Steward  v.  Blakeway,  4  Ch. 

(a?)  Ibid.  603,  and  6  Eq.  479. 
Vol.  1  —  52                       817 


*348  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

partnership.  But  it  is  not  possible  on  this  ground  to  uphold 
Thornton  v.  Dixon,  Bell  v.  Phyn,  Randall  v.  Randall  or 
Cookson  v.  Cookson.  In  each  of  these  four  cases  the  land 
had  become  part  of  the  assets  of  the  firm  or  it  had  not;  if 
it  had,  these  four  cases  are  in  direct  conflict  with  those 
which  have  been  alluded  to  above;  whilst,  if  it  had  not, 
the}7  are  in  no  less  direct  conflict  with  other  cases  which 
are  authorities  on  the  question  what  is  and  what  is  not 
property  of  the  firm. 

Doctrine  of  conversion  has  only  a  restricted  applica- 
tion.—  The  doctrine  of  conversion,  which  has  just  been  con- 
sidered, merely  amounts  to  this:  that  on  the  death  of  a 
partner  his  share  in  the  partnership  property  is  to  be  treated 
as  money  and  not  as  land.  It  follows,  however,  from  this 
doctrine  that  probate  duty  and  legacy  duty  are  payable  in 
respect  of  the  share  of  a  deceased  partner  in  part- 
[-34:8]  nership  real  estate;  (a)  and  a  partner's  share  in 
such  estate  is  clearly  within  the  Charitable  Uses 
Act,  9  Geo.  2,  ch.  36.  {b) 

Qualification  lor  vote. —  Whether  a  partner's  share  in 
partnership  real  estate  can  give  him  a  qualification  for  vot- 
ing on  elections  of  members  of  parliament  has  been  much 
discussed  of  late.  It  is  settled  that  if  a  partner  has  no  in- 
terest in  partnership  realty  as  distinguished  from  the  money 
arising  from  its  sale,  his  interest  in  it  does  not  confer  a 
qualification;  (c)  but  unless  this  is  the  case  the  equitable 

(a)  See,  as  to  probate  duty,  A.-G.  by  the  house  of  lords  (12  App.  Ca. 

v.  Hubbuck,  13  Q.  B.  D.  275,  and  672),  which  restored  the  judgment 

10  id.   488;    A.-G.    v.    Marquis  of  of  the  divisional  court  in  14  Q.  B. 

Ailesbury,  W.  N.  1887,  p.  172;  re-  D.  895.     Matson  v.  Swift,  8  Beav. 

versing  S.  C.  16  Q.  B.  D.  408;  A.-G.  368,  must  be  taken  as  now  over- 

v.  Brunning,  8  Ho.  Lo.  Ca.  243.  As  ruled.      See     Lord     Macnaghten's 

to  legacy  duty,  Forbes  v.  Steven,  judgment,  12  App.  Ca.  696. 
10  Eq.  178.    Custance  v.  Bradshaw,        (b)  Ashworth  v.  Munn,  15  Ch.  D. 

4  Ha.  315,  is  to  the  contrary,  but  363. 
it  cannot  now  be  relied  upon.  (c)  "Watson  v.  Black,  16  Q.  B.  D. 

The  decision  of  the  court  of  ap-  270;  Bennett  v.  Blain,  15  C.  B.  N. 

peal  in  A.-G.  v.  Marquis  of  Ailes-  S.  518;  Freeman  v.  Gainsford,   18 

bury,  16  Q.  B.  D.  408,  was  reversed  id.  185.     See,  also,  Spencer  v.  Har- 

818 


CH.  V,  SEC.  II.]  SHARES    IN    PARTNERSHIPS.  *349 

doctrine  of  conversion,  which  has  no  practical  operation 
until  his  death,  does  not  deprive  him  of  the  qualification 
which  he  would  otherwise  have  as  a  joint  tenant  or  tenant 
in  common,  (d) 

A  share  in  a  cost-book  mining  company  is  not  an  interest 
in  land  within  the  fourth  section  of  the  statute  of  frauds;  (V) 
nor  is  it  goods  or  chattels  within  the  seventeenth  section.  (/) 

Section  II. —  Of  the  Amount  of  Each  Partner's  Share. 

The  proportions  in  which  the  members  of  a  firm  are  en- 
titled to  the  property  of  the  firm,  or,  in  other  words,  the 
amount  of  each  partner's  share  in  a  partnership,  depends 
upon  the  agreement  into  which  the  partners  have  entered. 

Shares  are  prima  facie  equal. —  In  the  event  of  a  dis- 
pute between  the  partners  as  to  the  amount  of  their  shares, 
such  dispute,  if  it  does  not  turn  on  the  construction  of  writ- 
ten documents,  must  be  decided  like  any  other  pure 
question  of  fact;  (g)  and  if  there  is  no  evidence  *from  [*349] 
which  any  satisfactory  conclusion  as  to  what  was 
agreed  can  be  drawn,  (h)  the  shares  of  all  the  partners  will 
be  adjudged  equal,  (i)1 

rison.  5  C.  P.  D.  97:  Wadmore  v.  (i)  Robinson  v.  Anderson,  20  Beav. 

Dear,  L.  R.  7  C.  P.  212.  98,  and  7  De  G.  M.  &  G.  239 ;  Pea- 

(d)  Baxter  v.  Brown,  7  Man.  &  cock  v.  Peacock,  16  Ves.  49;  Web- 
Gr.  198 ;  Rogers  v.  Harvey,  5  C.  B.  ster  v.  Bray,  7  Ha.  159 ;  Farrar  v. 
N.  S.  3.  Beswick,  1  M.  Rob.  527. 

(e)  Watson  v.  Spratley,  10  Ex.  *  A  business  apparently  carried 
222.  Compare  Vice  v.  Anson,  7  on  in  partnership,  without  specific 
B.  &  C.  409 ;  Boyce  v.  Green,  Batty,  terms,  is  presumed  to  be  upon 
608.  equal  terms,  both  as  to  profit  and 

(/)  Watson  v.  Spratley,  10  Ex.  loss,    and    the   partners    are    pre- 

222.  sumed    to    be    equally   interested 

(gr)  See  Peacock  v.   Peacock,  16  until  the  contrary  is  shown.     Farr 

Ves.  49 ;  McGregor  v.   Bainbridge,  r\  Johnson,  25  111.  522 ;  Moore  v. 

7  Ha.  164;  Binford  v.  Dommett,  4  Bare,  11  Iowa,  198:  Stein  v.  Rob- 

Ves.  756.  ertson,  30  Ala.  286 ;  Roach  v.  Perry, 

(li)  Stewart  v.  Forbes,  1  Mac.  &  16  111.  37;  Ratzer  v.  Ratzer,28  N.  J. 

G.  137;  Webster  v.  Bray,  7  Ha.  159:  Eq.  136;  Wolfe  v.  Gilmer,  7  La. 

Copland  V.  Toulmin,  7  CI.  &  Fin.  Ann.  583 ;  Unruh's  Estate,  13  Phila. 

319  3£7;  State  v.  Brower,  93  N.  C.  344 

819 


*34.9 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    III. 


Observations  on  this  rule.—  This  rule  no  doubt  occasion- 
ally leads  to  apparent  injustice;  but  it  is  not  easy  to  lay 
down  any  other  rule  which,  under  the  circumstances  sup- 
posed, could  be  fairly  applied.  It  is  sometimes  suggested 
that  the  shares  of  partners  ought  to  be  proportionate  to 
their  contributions;  but,  without  in  any  way  denying  this, 
it  may  be  asked  how  is  the  value  of  each  partner's  contribu- 
tion to  be  measured?  Certainly  not  merely  by  the  capital 
he  may  have  brought  into  the  firm.  His  skill,  his  connec- 
tion, his  command  of  the  confidence  and  respect  of  others, 
must  all  be  taken  into  account;  and  if  it  is  impossible  to  set 
a  money  value  on  each  partner's  contribution  in  this  respect, 


Ligare  v.  Peacock,  109  111.  94; 
Hutchinson  v.  Dubois,  45  Mich. 
143;  Brewer  v.  Browne,  68  Ala. 
210;  Richard's  Estate,  1  Woodw. 
D.  (Pa.  St.)  3G2.  Quine  v.  Quine,  17 
Miss.  155;  Taylor  v.  Taylor,  2 
Murph.  70 ;  Jones  v.  Jones,  1  Ired. 
Eq.  332;  Turnipseed  v.  Goodwin.  9 
Ala.  372;  Honore  v.  Colmesnil,  1 
J.  J.  Marsh.  506;  Rider  v.  Gilbert, 
16  Hun,  163. 

In  Robinson  v.  Simmons,  5  N. 
Eng.  Rep.  (Mass.)  743,  it  is  said  that 
profits  should  usually  be  divided 
according  to  capital,  after  deduct- 
ing such  share  as  is  attributable  to 
services  of  surviving  partner. 

In  equity  each  partner  has  an 
interest  in  the  firm  property  in 
proportion  to  his  contributions  to 
its  funds.  Clapham  v.  Crabtree, 
72  Me.  473. 

Articles  of  copartnership  pro- 
vided that  two  partners,  who  were 
to  put  in  $2,500,  should  pay  the 
other  interest  on  the  excess  of  cap- 
ital put  in  by  him,  such  capital 
being  a  building  and  machinery 
valued  at  $9,615,  and  that  the 
losses  in  business  and  profits  should 
be  divided,  one-half  to  him,  and  the 


other  half  among  the  other  two; 
and  further  provided  that  the  part- 
nership might  be  renewed  when 
the  term  expired,  and  in  that  event 
the  partners  should  become  equal 
owners  in  the  capital  stock.  The 
partnership  was  renewed  by  in- 
dorsement on  the  original  articles. 
Held,  that  each  became  an  equal 
owner;  and  that  the  property  put 
in  by  the  first  having  been  de- 
stroyed by  fire  the  loss  should  be 
borne  equally  by  all.  Taft  v. 
Schwamb,  80  111.  289. 

In  case  of  an  association  for  man- 
ufacturing purposes,  not  incorpo- 
rated, in  the  absence  of  an  agree- 
ment to  the  contrary  each  will  be 
liable  to  equal  proportions  for  any 
loss  that  may  be  sustained ;  but  if, 
by  the  articles  of  association,  they 
are  to  share  in  the  profits  in  pro- 
portion to  the  stock  each  puts  in, 
then  the  loss  must  be  shared  in  the 
same  manner.  Flagg  v.  Stowe,  85 
111.  164. 

Where  there  is  no  stipulation  to 
the  contrary  it  will  be  presumed 
that  the  losses  will  be  shared  in 
proportion  with  the  profits.  Op- 
penheimer  v.  Clemmons,  18  Fed. 
120 


CH.  V,  SEC.  II.]  SHARES    IN    PARTNERSHIPS.  *350 

it  is  obviously  impossible  to  determine  in  the  manner  sug- 
gested the  shares  of  the  partners  in  the  partnership.  Nor 
can  it  be  said  to  be  unreasonable  to  infer,  in  the  absence  of 
all  evidence  to  the  contrary,  that  the  partners  themselves 
have  agreed  to  consider  their  contributions  as  of  equal 
value,  although  they  may  have  brought  in  unequal  sums  of 
money,  or  be  themselves  unequal  as  regards  skill,  connection 
or  character.  Whether,  therefore,  partners  have  contributed 
money  equally  or  unequally,  whether  they  are  or  are  not  on 
a  par  as  regards  skill,  connection  or  character,  whether  they 
have  or  have  not  labored  equally  for  the  benefit  of  the  firm, 
their  shares  will  be  considered  as  equal  unless  some  agree- 
ment to  the  contrary  can  be  shown  to  have  been  entered 
into,  (k) 

Meaning  of  equality. —  When  it  is  said  that  the  shares  of 
partners  are  prima  facie  equal,  although  their  capitals  are 
unequal,  what  is  meant  is  that  losses  of  capital,  like  other 
losses,  must  be  shared  equally;  but  it  is  not  meant 
that,  on  a  final  settlement  of  accounts,  *capitals  con-  [*350] 

Rep.  886.     See,  also,  Richard's   Es-  ceeds    of    their    business,    which, 

tate,  1  Woodw.  D.  (Pa.  St.)  362.  though  registered  in  his  own  name, 

Partners   share    equally   in    the  he  has  in  repeated  letters  acknowl- 

profits  and  losses  of  a  firm,  in  the  edged  to  be  their  joint  property, 

absence  of  any  agreement  to  the  Delamour  v.  Roger,  7  La.  Ann.  153. 
contrary,     notwithstanding     they        As  between  the  parties  forming 

may  have  put  in  unequal  portions  a    partnership    the    executive    or 

of  capital.     Griggs  v.  Clark,  23  Cal.  managing  partner  may  bind  him- 

427.     See  post.  self  to  repay  to  the  other  partner, 

It  is  competent,  however,  for  on  dissolution,  the  capital  ad- 
partners,  as  between  themselves,  vanced  by  him,  whether  profits 
to  agree  upon  a  disproportionate  are  made  or  not.  Ford  v.  Mc- 
interest  as  to  profits  and  losses.  Bride,  45  Tex.  498. 
Articles  of  copartnership  construed  (fc)  See  the  last  three  notes.  Pea- 
as  to  this  point.  Welsh  v.  Can-  cock  v.  Peacock,  2  Camp.  44,  and 
field,  60  Md.  469.  Sharpe  v.  Cummings,  2  Dowl.  &  L. 

Where  the  concubine  of  defend-  504,  which  was  apparently  decided 

ant  has  contributed  equally  with  on  its  authority,  cannot  be  sup- 

him  her  labor  and  capital  in  a  uni-  ported.      See,   as    to    Scotch   law, 

versal  partnership  she  will  be  en-  Thompson  v.  Williamson,  7  Bli.  N. 

titled  to   half  the  profits  and  im-  S.  432;  3  Ross,  L.  C.  on  Com.  Law, 

movables  acquired  with  the  pro-  381. 

821 


*350  EIGHTS    AND   OBLIGATIONS.  [BOOK    III. 

tributed  unequally  are  to  be  treated  as  one  aggregate  fund 
which  ought  to  be  divided  between  the  partners  in  equal 
shares.  (/) 

Evidence  showing  inequality.— An  agreement  for  in- 
equality may  be  conclusively  inferred  from  the  mode  in 
which  the  partners  have  dealt  with  each  other  and  from 
the  contents  of  the  partnership  books,  (m)  Moreover,  if  an 
agreement  for  inequality  clearly  at  one  time  existed,  no 
presumption  of  any  alteration  in  this  respect  will  arise  from 
the  mere  fact  that  some  of  the  original  members  have  re- 
tired. In  the  absence  of  evidence  to  the  contrary  the  infer- 
ence is  that  the  shares  of  the  retiring  members  have  been 
taken  by  the  continuing  parties  in  the  proportions  in  which 
these  last  were  originally  interested  in  the  concern,  (n) 

Rule  as  to  presumptive  equality  applies  to  partner- 
ships in  single  transactions. —  The  rule  that  the  shares  of 
partners  are  equal,  unless  they  have  otherwise  agreed,  ap- 
plies not  only  to  persons  who  are  partners  in  business  gen- 
erally, but  also  to  those  who  are  partners  as  regards  one 
single  matter  only.  Thus,  in  Robinson  v.  Anderson,  (o) 
where  two  solicitors,  not  in  partnership,  were  jointly  re- 
tained to  defend  certain  actions,  and  there  was  no  satisfac- 
tory evidence  to  show  in  what  proportions  they  were  to 
divide  their  remuneration,  it  was  held  that  the}7  were  en- 
titled to  share  it  equally,  although  they  had  been  paid  sep- 
arately and  had  done  unequal  amounts  of  work.  The 
master  of  the  rolls,  after  observing  on  the  importance  in 
such  cases  of  attending  to  the  onus  probandi,  said: 

"Now  I  should  entertain  no  doubt,  even  if  I  had  not  been  confirmed 
by  the  two  cases  of  Webster  v.  Bray,  and  McGregor  v.  Bainbridge,  that 
where  two  solicitors  undertake  a  matter  of  business  on  behalf  of  a  client, 

(I)  See  infra,  ch.  8,  §  1,  on  part-  (o)  20  Beav.  98,  and  7  De  G.  M.  & 
neiship  accounts.  G.  239.     See,  too,  Webster  v.  Bray, 

(m)  As  in  Stewart  v.  Forbes,  1  7  Ha.  159,  and  McGregor  v.  Bain- 
Mac.  &  G.  137.  bridge,   id.    164,   note;   Hanslip  v. 

(7i)  Robley  v.  Brooke,  7  Bli.  N.  S.     Kitton,  8  Jur.  N.  S.  835,  V.-C.  S. 
90.  And  see  Copland  v.  Toulmin,  7 
CI.  &  Fin.  349. 

822 


CH.  V}  SEC.  II.]  SHAKES    IN    PARTNERSHIPS. 


^351 


the  same  rule  would  follow  in  that  as  in  any  other  undertaking  where 
two  persons  carry  on  a  business  jointly  on  behalf  of  themselves,  or  as 
agents  of  other  persons.  It  is,  in  point  of  fact,  a  limited  partnership  for 
a  particular  sort  of  business.  Assuming  nothing  to  have  been  said  as  to 
the  manner  in  which  the  profits  were  to  be  divided,  it  appears  to  me  to 
follow,  as  a  necessary  consequence  of  law,  that  they  are  to  be  divided 
equally  between  them.  And,  although  one  may  do  more  business 
and  have  exerted  himself  more  *than  the  other,  yet,  if  nothing  is  [*351] 
said  upon  the  subject  of  profits,  the  presumption  is  that  they  are 
to  be  equally  divided  between  them.  It  appears  to  me  that  if  the  clients 
had  gone  to  Mr.  Robinson  and  Mr.  Anderson  and  said,  '  We  wish  you 
to  undertake  the  business  for  us,'  and  thereupon  Mr.  Robinson  and  Mr. 
Anderson  had  both  said,  'We  agree  to  do  so,'  and  nothing  had  taken 
place  between  them  as  to  the  manner  in  which  they  were  to  be  paid, 
the  necessary  consequence  would  have  been  that,  after  payment  of  tho 
costs  out  of  pocket,  the  net  profits  made  by  the  business  would  have 
been  divisible  equally  between  them,  and  that  neither  of  them  could 
say  to  the  other,  '  I  have  done  more  business  than  you  have,  and  am 
therefore  entitled  to  a  larger  share  of  profits.'  It  was  the  duty  of  the 
party  who  intended  that  this  should  not  be  a  partnership  transaction,  and 
that  he  should  be  paid  for  the  amount  of  business  which  he  did  without 
participating  in  that  of  the  other,  so  to  express  himself." 

Applications  of  rule  where  one  firm  comprises  another. 

A  question  of  some  difficulty  arises  when  a  firm,  say  of  two 
partners,  engages  in  a  partnership  speculation  with  a  third 
person  not  a  member  of  that  firm.  Is  the  interest  of  such 
person  in  the  speculation  to  be  treated  as  one-half,  the  other 
two  persons  being  treated  as  one?  or  is  the  interest  of  each 
of  the  three  to  be  treated  as  equal,  each  taking  one-third? 
The  answer  to  these  questions  must  depend  upon  whether 
the  two  partners  entered  into  the  speculation  as  a  firm  or 
as  two  individuals.  If  the  former,  there  will,  in  substance, 
be  only  two  parties  interested  in  the  speculation,  and  the 
profits  thereof  must  be  divided  into  two  equal  parts;  whilst 
if  the  latter  is  the  case,  there  will  be  three  parties  inter- 
ested, and  the  profits  must  be  divided  into  three  equal 
parts,  (p) 

(p)  See  Warner  v.  Smith,  1  DeG.     held  to  be  divisible  into  two  and 
J.  &  S.  337,  where  the  profits  were    not  three  parts. 

823 


--'352  EIGHTS   AND   OBLIGATIONS.  [BOOK    III. 

Section  III. —  Of  the  Lien  which  Each  Partner  has  on 
the  Property  of  the  Firm,  and  on  the  Shares  of 
His  Copartners. 

In  order  to  discharge  himself  from  the  liabilities  to  which 
a  person  may  be  subject  as  partner,  every  partner  has  a 
right  to  have  the  property  of  the  partnership  applied  in 
payment  of  the  debts  and  liabilities  of  the  firm. 
[*352]  And,  in  order  to  secure  a  ^proper  division  of  the 
surplus  assets,  he  has  a  right  to  have  whatever  may 
be  due  to  the  firm  from  his  copartners,  as  members  thereof, 
deducted  from  what  would  otherwise  be  payable  to  them 
in  respect  of  their  shares  in  the  partnership. 

Foundation  of  partner's  lien. —  In  other  words,  each 
partner  may  be  said  to  have  an  equitable  lien  on  the  part- 
nership property  for  the  purpose  of  having  it  applied  in 
discharge  of  the  debts  of  the  firm;  and  to  have  a  similar 
lien  on  the  surplus  assets  for  the  purpose  of  having  them 
applied  in  payment  of  what  may  be  due  to  the  partners  re- 
spectively, after  deducting  what  may  be  due  from  them  as 
partners,  to  the  firm,  (q) l 

(q)  West  v.  Skip,  1  Ves.  Sr.  239;  charge  the  firm  with  the  amount 

Skipp  v.  Harwood,  2  Swanst.  586:  paid. 

Doddington  v.  Hallett,  1  Ves.  Sr.  ]  See  Matlock  v.  Matlock,  5  Ind. 
498  and  499;  Ex  parte  Ruffin,  6  404;  Strange  v.  Graham,  56  Ala. 
Ves.  119;  Ex  parte  Williams,  11  614;  Wade  v.  Rusher,  4  Bosw.  537; 
id.  3 ;  Holderness  v.  Shackels,  8  B.  Allen  v.  Hawley,  6  Fla.  142 ;  Boyce 
&C.  612.  Smith  v.  De  Silva,  Cowp.  v.  Coster,  4  Strobh.  Eq.  25;  Hunt 
469,  can  hardly  be  reconciled  with  v.  Benson,  2  Humph.  459;  Sage  v. 
the  other  cases ;  but  see  upon  it  the  Chollar,  21  Barb.  596;  Talbot  v. 
observations  of  Lord  Tenterden,  in  Pierce,  14  B.  Mon.  195 ;  Saloy  v. 
8B.  &C.  618.  As  to  the  right  of  a  Albrecht,  17  La.  Ann.  75;  Parish 
minority  of  partners  to  insist  on  v.  Lewis,  1  Freem.  (Miss. )  Ch.  299 ; 
the  payment  of  a  partnership  debt  Donelson  v.  Posey,  13  Ala.  752; 
out  of  the  partnership  assets,  see  Duryea  v.  Burt,  28  Cal.  569 ;  Pear- 
the  observations  of  Turner,  V.-C,  son  v.  Keedy,  6  B.  Mon.  128; 
in  Stevens  v.  The  South  Devon  Black  v.  Bush,  7  id.  210;  Crooker 
Rail.  Co.  9  Ha.  326.  Any  member  v.  Crooker,  46  Me.  250;  Williams  v. 
of  an  ordinary  firm  is  at  liberty  to  Love,  2  Head,  80;  Frith  v.  Law- 
pay  any  debt  of  the  firm,  and  to  rence,   1    Paige,  434;    Con  well  v. 

824 


CH.  V,  SEC.  III.]  SHAKES    IN   PARTNERSHIPS. 


552 


Consequences  of  the  lien  —  To  what  property  it  at- 
taches.—  This  right,  lien,  quasi-l\en,  or  whatever  else  it 
may  be  called,  does  not  exist  for  any  practical  purpose 
until  the  affairs  of  the  partnership  have  to  be  wound  up 


Sandidge,  8  Dana,  273;  Meador  v. 
Hughes,  14  Bush,  652;  Warren  v. 
Taylor,  60  Ala.  218;  Parker  v. 
Parker,  65  Barb.  205 ;  Meridan  Nat. 
Bank  v.  Brand,  51  Ind.  56;  Pearl 
v.  Pearl,  1  Tenn.  Ch.  206;  Neison 
i'.  Hayner,  66  111.  487;  McCauley 
v.  Fulton,  44  Cal.  355,  and  cases 
there  cited;  Moore  v.  Steele,  67 
Tex.  435 ;  Tracy  v.  Walker,  1  Flip. 
C.  C.  41 ;  Nicholv.  Stewart,  36  Ark. 
612 ;  Brown  v.  Young,  1  Tex.  App. 
(Civ.)  712;  Holloway  v.  Turner,  61 
Ind.  217;  Fiske  v.  Gould,  12  Fed. 
Rep.  372;  Dieckmann  v.  St.  Louis, 
19  Mo.  App.  9 :  Flannagan  v.  Shuck, 
82  Ky.  617;  Taylor  v.  Farmer,  6 
West.  Rep.  710;  Scott  v.  Kenan,  94 
N.  C.  296.  See,  also,  Ex  parte 
Shepherd,  3  Tenn.  Ch.  189 ;  Miller 
v.  Price,  20  Wis.  117;  White  v. 
Colfax,  33  N.  Y.  Superior  Ct. 
297. 

The  representatives  of  a  deceased 
partner  have  a  lien  upon  the  whole 
of  the  firm  assets  for  the  amount 
of  the  deceased  partner's  share. 
Hooley  v.  Gieve,  9  Abb.  N.  C.  8;  9 
Daly,  104. 

As  to  the  lien  of  a  mining  part- 
ner under  section  2514,  code  of  Cal- 
ifornia, see  Morganstern  v.  Thrift, 
66  Cal.  577. 

Where,  on  the  dissolution  of  a 
firm,  goods  equal  in  value  to  firm 
indebtedness  are  left  with  the  one 
who  continues  the  business,  to  be 
converted  into  money  with  which 
to  pay  the  firm  debts,  he  is  not  a 
purchaser  so  as  to  subject  the 
goods  to  his  individual  debts,  but 


is  a  trustee  for  the  payment  of  the 
firm  liabilities ;  and  the  trust  may 
be  enforced  in  equity  by  the  retir- 
ing partner  for  the  benefit  of  firm 
creditors  as  against  subsequent 
purchasers  or  execution  creditors 
with  notice  of  the  equities  of  the 
retiring  partner.  Parker  v.  Mer- 
ritt.  105  111.  293. 

The  lien  of  a  partner  attaches  to 
firm  real  estate  as  well  as  to  per- 
sonalty. Flannagan  v.  Shuck, 
supra;  Taylor  v.  Farmer,  supra. 

A  partner's  lien,  even  upon  the 
real  estate  of  his  firm  for  advances 
made  to  it,  is  a  personal  lien  purely 
in  equity,  and  expires  with  the  ex- 
tinction of  the  claim  by  the  bar  of 
the  statute  of  limitations.  Rice  v. 
Pennypacker,  5  Del.  279. 

A  partner,  although  not  in  the 
ordinary  sense  a  purchaser  of  the 
firm  goods,  has  a  right  superior  to 
a  person  who  claims  them  by  vir- 
tue of  a  secret  lien.  Boynton  v. 
Isaac,  37  Leg.  Intel.  232. 

An  agreement  between  two  firms 
to  purchase  hogs  and  pack  pork 
one  season  on  joint  account  con- 
stituted a  partnership  as  to  that  ad- 
venture, and,  whether  regarded  as 
a  partnership  or  on  joint  account, 
the  same  equities  exist  between  the 
parties.  The  fact  that  one  firm 
had  control  of  the  product  and 
could  alone  sell  did  not  destroy  the 
right  of  the  other  to  have  the  part- 
nership assets  applied  to  the  pay- 
ment of  the  partnership  debts. 
Meader  v.  Hughes,  14  Bush,  652. 

The  effects  of  a  partnership  can- 


*352 


EIGHTS   AND   OBLIGATIONS. 


[book  in. 


or  the  share  of  a  partner  has  to  be  ascertained ;  nor  has 
any  partner  a  right  to  insist,  as  against  a  judgment  creditor 
of  the  firm,  that  he  shall  have  recourse  to  the  assets  of  the 


not  be  exempted  from  payment  of 
the  firm  debts  without  the  consent 
of  all  the  partners;  and  if  a  mere 
dissolution  takes  place,  it  will  be 
presumed  that  the  one  partner  to 
whom  the  assets  are  handed  over 
holds  them  in  trust  to  pay  the  firm 
debts,  etc.  People  v.  Till,  3  Neb. 
261. 

The  members  of  a  firm  during 
its  existence  may  consent  to  the 
appropriation  of  the  firm  assets  to 
the  payment  of  the  individual 
creditors  of  each  partner  or  to  the 
individual  creditors  of  one  partner. 
Williamson  v.  Adams,  16  Bradw. 
564. 

A  partnership  transfer  by  one 
partner  of  his  interest  to  his  co- 
partner as  against  a  firm  creditor 
is  a  question  of  good  faith.  If  the 
transaction  is  honest,  it  transfers 
the  interest  as  against  firm  cred- 
itors, who,  having  no  lien  on  the 
property  independent  of  the  part- 
ners, cannot  complain.  Shinier  v. 
Huber,  14  Phila.  402;  Mortley  v. 
Flanagan,  38  Ohio  St.  401. 

So  a  sale  by  one  partner  of  his 
interest  to  his  copartner,  upon  his 
agreeing  to  pay  the  firm  debts,  cre- 
ates a  personal  obligation  to  pay, 
and  the  right  to  sell  and  dispose  of 
the  assets  is  vested  by  the  sale  in 
the  copartner  free  from  any  lien 
thereon  for  the  payment  of  the 
firm  indebtedness.  Williamson  v. 
Adams,  16  Bradw.  564;  Goembel 
v.  Arnett,  100  111.  34;  Fulton  v. 
Hughes,  63  Miss.  61;  Parker  v. 
Merritt,  105  III.  293.  See,  also, 
Stanton  v.  Westover,  101  N.  Y. 
265,  and  post. 


Where,  however,  there  has  been 
no  sale  of  a  partner's  interest,  but 
the  assets  are  left  with  the  copart- 
ner to  sell  and  dispose  of  to  pay 
the  debts,  the  right  of  retiring 
partner  to  have  the  assets  so  ap- 
plied continues.  Williamson  v. 
Adams,  16  Bradw.  564. 

In  Menagh  v.  Whitwell,  53  N. 
Y.  147,  however,  it  was  held  that 
where  a  partner  sells  his  interest 
to  a  stranger,  or  it  is  sold  upon  ex- 
ecution against  him,  his  right  to 
have  the  partnership  debts  paid, 
and  his  liability  therefor  dis- 
charged out  of  the  property,  is  not 
divested  by  the  sale.  This  right  is 
not  affected  by  the  fact  that  the 
separate  interests  of  all  the  partners 
are  thus  disposed  of. 

A  partner  in  a  dissolved  firm  has 
a  lien  on  the  partnership  realty  for 
the  amount  due  him  on  general 
settlement  of  the  partnership  ac- 
counts superior  to  the  execution 
lien  of  post-dissolution  creditors  of 
another  member  of  the  firm,  al- 
though it  had  been  dissolved  for 
five  years,  and  the  title  stood  in 
the  name  of  the  individual  mem- 
bers of  the  firm.  The  extent  of 
this  lien  also  stated.  Lauo  v. 
Jones,  9  Lea  (Tenn.),  627. 

Where  a  member  of  a  firm  in 
good  faith  transfers  his  interest  in 
partnership  property  to  A.,  who, 
with  the  other  members  of  the  firm, 
transfers  it  for  a  valuable  consider- 
ation to  B.,  the  firm  and  the  mem- 
bers of  it  being  insolvent,  and  C, 
a  simple-contract  creditor  of  the 
firm,  files  his  bill  to  subject  the 
property  to  the  payment  of  the 
26 


OH.  V,  SEC.  III.]  SHAKES    IN    PARTNERSHIPS. 


*352 


firm  before  seeking  to  obtain  payment  from  the  partners 
individually,  (r)  But  when  partnership  accounts  have  to 
be  taken,  and  the  shares  of  the  partners  have  to  be  ascer- 


debt,  held,  C.  has  no  specified  lien 
on  the  property,  and  there  being 
no  trust  which  a  court  of  equity 
can  enforce  the  bill  cannot  be  sus- 
tained. Case  v.  Beauregard,  99 
U.  S.  119. 

Where  one  partner  expends 
money  drawn  by  him  upon  his  own 
account  from  the  firm's  funds  in 
improvements  on  his  wife's  sepa- 
rate property  and  in  payment  of 
interest  upon  a  mortgage  thereon, 
and  there  is  no  proof  that  it  was 
done  fraudulently  or  without  his 
copartner's  knowledge,  the  copart- 
ner is  not  entitled  to  a  lien  upon 
the  wife's  property.  Sharp  v.  Hib- 
bins,  9  Atl.  R.  113. 

Where,  in  the  articles,  it  is  stip- 
ulated that  one  partner  shall  hold 
a  lien  upon  the  property  of  the 
firm  as  indemnity  for  any  liability 
he  may  incur  as  surety  for  the 
other,  and  afterwards  the  other 
partner  mortgages  his  interest  to  a 
third  person  without  notice  of  this 
stipulation,  the  mortgage  will  be 
postponed  to  the  lien  created  by 
the  stipulation.  Lewis  v.  Harrison, 
81  Ind.  278.  See  Wilcox  v.  Mat- 
thews, 44  Mich.  192. 

If  the  executor  of  a  deceased 
partner  consents  to  the  surviving 
partner's  continuing  the  business 
with  the  firm  assets,  his  lien  on 
property  thereafter  acquired  will 
be  postponed  to  that  of  creditors 
when  a  case  arises  for  an  equitable 
marshaling  of  assets ;  in  such  case 
the  beneficiaries  of  the  deceased 
partner's  estate  cannot  have  prior- 


ity over  the  claims  of  partnership 
creditors.  Hoyt  v.  Sprague,  103 
U.  S.  613. 

If  the  assets  of  a  firm,  composed 
of  A.  B.  and  C,  are  applied  to  pay 
the  debts  of  a  former  firm  of  A. 
and  B.,  without  C.'s  consent,  A. 
and  B.  are  liable  in  solido  to  A.,  B. 
and  C,  and  A.  and  B.  in  equity 
are  liable  to  C.  for  his  share  of  such 
debts.  Raigul's  Appeal,  80  Pa.  St. 
234. 

D.  and  P.  shipped  a  cargo  on  a 
foreign  voyage  on  a  joint  account 
in  the  name  of  D. ;  after  the  vessel 
sailed  D.  assigned  his  undivided 
moiety  for  the  benefit  of  creditors, 
and  the  return  cargo  came  into  the 
hands  of  his  trustees.  They  refused 
to  pay  P.  more  than  his  undivided 
moiety  of  the  proceeds  of  the  re- 
turn cargo,  but  it  appearing  that 
in  fact  he  had  paid  more  than  his 
moiety  on  account  of  this  partner- 
nership  transaction,  and  with  a 
view  to  it,  held,  upon  a  bill  filed 
against  the  trustees,  of  which  he 
was  one,  that  he  had  a  lien  on  D.'s 
moiety  of  the  proceeds  for  his  re- 
imbursement. Pierce  v.  Tiernan, 
10  Gill  &  J.  253. 

If,  on  the  settlement  of  the  firm 
affairs,  one  partner  is  found  to  be 
indebted  to  the  other,  the  latter 
may  retain  enough  of  the  firm  as- 
sets to  cancel  the  indebtedness,  if 
they  are  in  his  hands,  and  the  firm 
debts  are  all  paid ;  but  if  he  does 
not  have  such  means  in  his  hands, 
and  cannot  procure  them,  his  only 
remedy  is  to  collect  the  amount 


(r)  See  ante,  p.  299. 


827 


*352 


EIGHTS   AND   OBLIGATIONS. 


[BOOK    III. 


tained,  the  lien  of  the  partners  on  the  assets  of  the  partner- 
ship and  on  each  other's  shares  becomes  of  the  greatest 
importance.  "Whilst  the  partnership  lasts  the  lien  attaches 
to  everything  that  can  be  considered  partnership  property, 
and  is  not,  therefore,  lost  by  the  substitution  of  new  stock 
in  trade  for  old.  (s)     Further,  on  the  death  or  bankruptcy 


from  his  partner  as  a  debtor.  Mack 
v.  Woodruff,  87  111.  570. 

That  a  partnership  may  happen 
to  be  in  debt  does  not,  however, 
give  one  partner  the  right  to  pre- 
vent the  other  from  taking  posses- 
sion of  the  partnership  property. 
Carithers  v.  Jarrell,  20  Ga.  842. 

A  retiring  partner  who,  upon 
dissolution  of  a  firm,  has  with- 
drawn part  of  the  assets  for  his  in- 
dividual use,  will  not  be  sustained 
in  holding  such  fund,  unless  there 
is  clear  proof  that  the  fund  left  for 
creditors  of  the  firm  was  ample 
for  all  demands.  That  he  has  in- 
vested the  fund  withdrawn  in  a 
homestead  gives  it  no  protection, 
at  least  as  against  proceedings  in 
equity.  Re  Sauthoff,  16  Bankr. 
Keg.  181. 

Ordinary  joint  owners  may  at 
their  pleasure  sell  their  joint  inter- 
est and  then  destroy  their  joint 
tenancy.  A  partner  cannot  sell  his 
interest  in  the  partnership  property 
so  as  to  deprive  his  co-tenants  of 
their  lien  on  the  property  for  part- 
nership debts  or  liabilities  due  from 
the  party  selling,  nor  can  a  mort- 
gage executed  by  one  partner  have 
such  effect.  Whitmore  v.  Shiver- 
ick,  3  Nev.  288. 

In  a  controversy  between  one 
partner  and  a  purchaser  from  the 
other,  after  the  dissolution  of  the 
partnership,  it  is  competent  to 
6how  that  the  partnership  debts 


had  all  been  paid  prior  to  the  sale. 
Hobendobler  v.  Lyon,  12  Kan.  279. 

The  lien  of  a  partner  on  partner- 
ship effects  arises  on  a  balance  due 
him  on  the  partnership  accounts 
occurring  after  as  well  as  before  a 
dissolution.  Hodges  v.  Holeman, 
1  Dana,  50. 

One  part  owner  of  merchandise, 
who  has  given  bonds  as  principal 
to  secure  the  payment  of  the  du- 
ties thereon,  and  who  afterwards 
pays  the  duties,  acquires  no  lien 
upon  the  merchandise  by  virtue 
of  any  statute  of  the  United  States. 
Ladd  v.  Billings,  15  Mass.  15. 

Where  one  of  the  members  of  a 
partnership  put  in,  as  part  of  his 
share  of  the  capital,  the  land  on 
•which  mills  (the  partnership  prop- 
erty) were  built,  but  did  not  make 
any  conveyance  to  the  others,  and 
sold  out,  reserving  a  lien  on  the  land 
for  the  price,  and  on  a  settlement 
was  found  indebted  to  another 
partner,  held,  that  it  was  erro- 
neous, after  decreeing  against  him 
personally  the  amount  of  his  defi- 
ciency, to  decree  him  to  convey 
the  land  to  the  firm  for  the  benefit 
of  purchasers,  and  thereby  defeat 
his  own  lien.  Savage  v.  Carter,  9 
Dana,  408. 

(s)  See  West  v.  Skip,  1  Ves.  Sr. 
239 ;  Skipp  v.  Harwood,  2  Swanst. 
586;  Stocken  v.  Dawson,  9  Beav. 
239,  and  17  L.  J.  (Ch.)282.  Compare 
the  cases  in  the  next  note  but  one. 


828 


CH.  V,  SEC.  III.]  SHARES   IN   PARTNERSHIPS. 


*353 


of  a  partner,  bis  lien  continues  in  favor  of  his  representa- 
tives or  trustees,  and  does  not  terminate  until  his 
share  *has  been  ascertained  and  provided  for  by  the  [-"353] 
other  partners,  (t)  But  after  a  partnership  has  been 
dissolved  the  lien  is  confined  to  what  was  partnership  prop- 
erty at  the  time  of  the  dissolution,  and  does  not  extend  to 
what  may  have  been  subsequently  acquired  by  the  persons 
who  continue  to  carry  on  the  business.  In  this  respect  the 
lien  in  question  differs  from  the  lien  of  a  mortgagee  on  a 
varying  stock  in  trade  assigned  to  him  as  a  security  for  his 
loan.  (u). 

Lien  exists  only  on  partnership  assets.— It  follows  from 
the  principle  on  which  the  lien  of  a  partner  is  founded  that 
it  only  extends  to  the  property  of  the  firm,  and  to  the  sep- 
arate interest  of  each  partner  in  such  property.1     In  those 


(£)  See  Stockton  v.  Dawson,  9 
Beav.  239;  affirmed,  17  L.  J.  Ch. 
282,  and  the  cases  cited  in  note  (s). 

(u)  Payne  v.  Hornby,  25  Beav. 
280.  See,  too,  Nerot  v.  Burnand,  4 
Euss.  247,  and  2  Bli.  N.  S.  215,  ante, 
p.  326;  Ex  parte  Morley,  8  Ch. 
1026.  Compare  the  cases  in  the 
last  note  but  one. 

1  The  lien  which  partners  have 
upon  the  partnership  property,  to 
enforce  its  application  to  the  pay- 
ment of  the  partnership  debt,  at- 
taches to  all  their  joint  property, 
but  relates  no  further.  Partners, 
as  such,  have  no  other  equities  in 
relation  to  the  separate  property  of 
each  other  than  separate  creditors. 
Mann  v.  Higgins,  7  Gill,  265.  See, 
also,  Mack  v.  Woodruff,  87  111.  570; 
Evans  v.  Bryan,  95  N.  C.  174; 
Nicholl  v.  Stewart,  36  Ark.  612. 

Copartners  cannot  claim  an  equi- 
table lien  in  property  purchased  by 
one  partner  with  money  which  he 
has  drawn  by  their  consent  from 
the  firm,  though  in  excess  of  his 


share.  McCormick  v.  McCormick, 
7  Neb.  440. 

Where  one  conveys  his  interest 
in  copartnership  lands  to  his  co- 
partner, he  is,  in  the  event  of  his 
partner's  death  before  payment  and 
in  the  absence  of  fraud,  entitled  to 
a  vendor's  lien  for  the  purchase 
price,  provided  there  are  no  cred- 
itors cf  the  estate  of  his  copartner. 
Reese  v.  Kinkead,  18  Nev.  126. 

Where  a  partner  in  a  firm  pur- 
chased a  slave  in  his  own  name, 
but  used  the  means  of  the  firm  for 
a  small  part  of  the  purchase  money, 
and  the  slave  was  afterwards  em- 
ployed, in  part,  in  the  service  and 
for  the  convenience  of  the  firm, 
without  compensation  for  such  em- 
ployment, held,  that  the  partner 
purchasing  the  slave  was  charge- 
able in  an  account  between  the 
partners  for  money  of  the  firm  ap- 
plied to  his  own  use,  but  that  the 
firm  had  no  lien  on  the  slave  for 
such  money.  Cabaniss  v.  Clark,  31 
Miss.  423. 


829 


*353  EIGHTS    AND   OBLIGATIONS.  [BOOK   III. 

cases,  therefore,  where  there  is  a  partnership  in  profits  only, 
but  that  which  produces  those  profits  belongs  exclusively  to 
one  of  the  partners,  the  lien  of  the  others  is  confined  to  the 
profits,  and  does  not  extend  to  that  which  produces  them,  (x) 
Moreover,  if  two  persons  engage  in  a  joint  adventure,  each 
consigning  goods  for  sale  upon  the  terms  that  each  is  to 
have  the  produce  of  his  own  goods,  neither  of  them  will 
have  a  lien  on  the  goods  of  the  other,  nor  on  the  produce 
of  such  goods,  although  each  may  have  raised  the  money 
to  pay  for  his  own  goods  by  a  bill  drawn  on  himself  by  the 
other,  and  ultimately  dishonored,  (y) 

Lien  exists  as  against  all  persons  claiming  a  share  in 
the  assets. —  The  lien  of  each  partner  exists  not  only  as 
against  the  other  partners,  but  also  against  all  persons  claim- 
ing through  them  or  any  of  them;  and  it  is  therefore  avail- 
able against  their  executors,  execution  creditors  and  trustees 
in  bankruptcy,  (s)  To  hold,  however,  that  this  lien  could 
be  enforced  against  persons  purchasing  partnership  prop- 
erty would  be  in  effect  to  prevent  any  sale  of  that  prop- 
erty without  the  consent  of  the  whole  firm,  and  would 
practically  stop  all  partnership  trade.  Whilst,  therefore, 
a  person  who  purchases  a  share  of  a  partner  takes  that 
share  subject  to  the  liens  of  the  other   partners,  (a) 1  a 

Where  one  partner  simply  puts  (a)  Cavander  v.  Bulteel,  9  Ch.  79. 

into  the  firm  the   use  of  his  ma-  *  Boyce  v.  Coster,  4  Strobh.  Eq. 

chinery  or  other  personal  property,  25 ;  Glynn  v.  Phetteplace,  26  Mich, 

and  the  other  advances  money  and  383. 

assumes  liabilities,  the  latter  being  Each  member  of  a  partnership 
in  possession  will  have  the  right  to  has  a  lien  on  the  shares  of  his  co- 
retain  the  property  until  he  is  re-  partners  for  extra  advances  made 
imbursed  for  any  excess  paid  by  by  him,  enforceable  on  the  dissolu- 
him,   and   for    indemnity  against  tion  of  the  partnership;  and  where 
outstanding  liabilities.      Flagg   v.  a  new  partner  bought  the  interest 
Stowe,  85  111.  165.  of  a  retiring  partner,  who  was  in- 
(x)  See  infra,  as  to  the  lien  of  co-  debtee!  to  the  firm,  agreeing  to  in- 
ovvners.  demnify  him  against  all  the  pari- 
ty) Ex  parte  Gemmel,  3  M.  D.  &  nership     debts,     held,   that    they 
D.  198.  must  be  considered  as  purchasers 
(z)  West  v.  Skip,  and  other  cases  with  notice,  and  that  the  lien  of 
cited,  ante,  note  (s).  the   remaining   partner   must    be 

830 


CII.  V,  SEC.  III.]  SHARES    IN   PARTNERSHIPS.  *35± 

*person  who  l>ona  fide  purchases  from  one  partner  [*354] 
specific   chattels  belonging  to  the  firm   acquires  a 
good  title  to  such  chattels,  whatever  liens  the  other  partners 
might  have  had  on  them  prior  to  their  sale,  (b) l 

In  Re  Lang 'mead 's  Trusts  a  partnership  between  A.  and 
P.  was  dissolved.  A.  retired,  and  by  deed  agreed  to  exe- 
cute an  assignment  to  B.  of  the  partnership  assets  (part  of 
which  consisted  of  a  policy  of  which  the  partners  were  as- 
signees), and  B.  agreed  to  covenant  to  pay  the  partnership 
debts,  and  indemnify  A.  against  them.  No  further  instru- 
ment was  executed.  A.  died,  and  B.  afterwards  assigned 
the  polic}7-  by  way  of  mortgage  to  a  person  who  had  notice 
of  the  deed.  A.'s  executors  were  afterwards  compelled  to 
pay  partnership  debts  which  ought  to  have  been  discharged 
by  B.,  and  B.  became  bankrupt.  The  policy  being  adversely 
claimed  by  the  mortgagee,  by  A.'s  executor,  and  by  a  pur- 
chaser from  B.'s  assignees,  it  was  held  that,  even  if  A.  and 
his  executors  had  been  entitled  to  pursue  any  portion  of  the 
partnership  property  in  the  hands  of  B.,  and  to  have  it  ap- 
plied in  payment  of  the  partnership  debts,  yet  that  they 

satisfied   before  a  mortgage  given  not  bona  fide  purchasers  of  it  for 

by  the  new  partners  on  the  share  value.     Wade  v.  Rusher,  4  Bosw. 

bought  by  them  to  the  retired  part-  537;  Meridan  Nat.  Bank  v.  Brandt, 

ner  could  be  paid  out  of  the  part-  51   Ind.   56;  Williams  v.   Love,  2 

nership  effects ;  that  advances  made  Head,  80 ;  Pierce  v.  Wilson,  2  Iowa, 

subsequently  to  the   date  of   the  20;  Addison  v.  Burckmyer,  4  Sandf. 

mortgage  must  he  postponed  to  it ;  Ch.  498. 

and  that  on  a  bill  to  foreclose  such        One  partner  cannot,  by  a  convey- 

mortgage  all  the  members  of  the  ance  in  trust  for  the  payment  of  his 

partnership  are  necessary  parties,  individual  and  partnership  debts, 

Conwell  v.  Sandidge,  8  Dana,  273.  defeat  the  lien  of  the  other  partner 

(b)  See  Re  Langmead's  Trusts,  20  on  the  partnership  funds.     Bank 

Beav.  20,  and  7  De  G.  M.  &  G.  353.  of  Kentucky  v.  Herndon,  1  Bush, 

1  The  partner  to  whom  a  balance  359. 
is  due  has  a  lien  upon  the  partner-  Parties,  however,  who  have  pur- 
ship  property  and  upon  other  prop-  chased  and  in  good  faith  paid  for 
erty  into  which  it  may  have  been  the  stock  of  a  partnership  concern 
converted  by  the  debtor  partner,  are  not  liable  for  the  debts  of  that 
not  only  as  against  him,  but  as  concern,  nor  are  the  goods  liable, 
against  all  assignees  of  it  who  are  Frank  v.  Peters,  9  Ind.  343. 

831 


<zu 


EIGHTS    AND    OBLIGATIONS. 


[book  III. 


had  no  such  right  as  against  the  purchaser  from  B.,  though 
with  notice,  for  he  was  not  bound  to  see  to  the  application 
of  the  purchase  money,  (c) 

No  lien  on  a  partner's  share  for  ordinary  debts  due 
from  him  to  firm. —  The  lien  of  partners  on  the  partnership 
property  extends,  as  has  been  stated,  to  whatever  is  due  to 
or  from  the  firm,  by  or  to  the  members  thereof,  as  such. 
It  does  not,  however,  extend  to  debts  incurred  between  the 
firm  and  its  members  otherwise  than  in  their  character  of 
members.1  It  has  therefore  been  held  that  where  a  partner 
borrowed  money  from  the  firm  for  some  private  purpose  of 
his  own,  and  then  became  bankrupt,  his  assignees  were  en- 
titled to  his  share  in  the  partnership,  ascertained  without 
taking:  into  account  the  sum  due  from  him  to  the  firm  in 
respect  of  this  loan;  and  that  the  solvent  partners  were 
driven  to  prove  against  his  estate  in  order  to  obtain  pay- 
ment of  the  money  lent,  (d) 


(c)  See  Re  Langmead's  Trusts,  20 
Beav.  20,  and  7  De  G.  M.  &  G.  353. 

1  Although  one  partner  has  a  lien 
upon  the  partnership  effects  for 
moneys  advanced  by  him  to  the 
partnership  beyond  his  share  of  the 
capital,  he  has  no  such  lien  for 
money  advanced  or  lent  to  an  in- 
dividual partner,  though  a  mort- 
gage or  judgment  against  such 
partner,  if  properly  executed  or 
entered,  will  be  a  prior  lien  on  such 
partner's  share.  Uhler  v.  Semple, 
20  N.  J.  Eq.  288. 

Money  borrowed  or  goods  bought 
by  one  partner  on  his  own  security 
only,  whether  before  or  during  the 
existence  of  the  partnership,  al- 
though used  for  partnership  pur- 
poses, and  with  the  knowledge  of 
the  other  partner,  is  not  sufficient 
to  make  the  lender  a  creditor  of  the 
firm ;  and  the  partner's  lien  for  the 
advance,  beyond  his  share,  is  only 
inter   se,  and  not  a  lien    against 


creditors  of  the  firm.  Ketchum  v. 
Durkee,  1  Hoffm.  538. 

The  maker  of  a  bond  of  indem- 
nity, executed  by  a  firm  to  release 
an  attachment  on  their  stock  of 
goods,  upon  the  promise  that  the 
goods  so  released  shall  be  held  for 
the  maker's  indemnity,  has  an  equi- 
table lien  on  such  stock  of  goods 
for  the  amount  he  was  compelled 
to  pay  by  reason  of  such  bond  of 
indemnity,  and  this  lien  may  be 
enforced  as  against  the  general  as- 
signee of  the  firm  for  the  benefit  of 
creditors.  Arnolds.  Morris,  7 Daly, 
498. 

{(I)  See  Ryall  v.  Rowles,  1  Ves.  Sr. 
348,  and  1  Atk.  165 ;  and  Melioruc- 
chi  v.  The  Royal  Exchange  Assur. 
Co.  1  Eq.  Ca.  Ab.  8,  and  Croft  v. 
Pike,  3  P.  W.  180.  Perhaps  Smith 
v.  De  Silva,  Cowp.  469,  was  de- 
cided on  this  principle,  as  suggested 
by  Lord  Tenterden  in  8  B.  &  C. 
618. 


832 


CH.  V,  SEC.  III.]  SHARES   IN    PARTNERSHIPS. 


*355 


*Loss  of  lien. —  Further,  a  partner's  lien  on  part-  [*355] 
nership  property  is  lost  by  the  conversion  of  such 
property  into  the  separate  property  of  another  partner. 
Therefore,  if  on  a  dissolution  it  is  agreed  between  the  part- 
ners that  the  property  of  the  firm  shall  be  divided  in  specie 
among  them,  and  that  the  debts  shall  be  paid  in  some  speci- 
fied manner;  and  if  the  property  is  accordingly  divided, 
but  the  debts  remain  unpaid,  the  lien  which  each  partner 
had  on  the  property  before  its  division  is  gone;  and  conse- 
quently no  partner  has  a  right  to  have  the  specific  things 
allotted  to  any  other  partner  brought  back  into  the  com- 
mon stock,  and  applied  in  liquidation  of  the  partnership 
liabilities,  (e)1     Upon  the  same  principle,  if  two  partners 


(e)  Lingen  v.  Simpson,  1  Sim.  & 
Stu.  600.  And  see  Re  Langmead's 
Trusts,  7  De  G.  M.  &  G.  353,  the 
judgment  of  L.  J.  Turner. 

i  Robertson  v.  Baker,  11  Fla.  192; 
Giddings  v.  Palmer,  107  Mass.  269 ; 
White  v.  Chapin,  134  id.  230;  Han- 
over Nat.  B'kr.  Klein,  64  Miss.  141. 


See,  however,  Morss  v.  Gleason, 
64  N.  Y.  204,  where  it  was  held 
that  where  a  member  of  a  firm 
transfers  his  interest  therein  to  a 
third  person,  who  is  received  into 
the  firm  as  a  partner  in  his  stead, 
he  thereafter  occupies  the  position 
simply  of  surety  for  the  firm  debts 


The  lien  of  partners  upon  the  to  the  extent  that  the  assets  of  the 
partnership  property  may  be  lost,  firm  are  sufficient  for  their  pay- 
either  by  a  sale  in  good  faith  to  a  ment,  and  that  such  assets  are 
third  person,  or  by  the  retirement  held  by  the  new  firm,  charged  with 
of  one  partner  from  the  firm,  dis-  a  trust  for  the  payment  of  the  debts 
posing  of  his  interest  to  the  other  of  the  old  firm.  See,  also,  Ketchum 
partner,  or  to  a  third  person  with  v.  Durkee,  1  Hoff .  538. 
his  copartner's  consent,  aud  taking  In  Biddle  v.  Moore,  3  Penn.  St. 
the  assumption  of  his  copartner  or  161,  A.,  by  the  articles  for  a  disso- 
of  a  third  person  to  discharge  all  lution  of  partnership  with  B., 
the  firm  debts.  McGregor  v.  Ellis,  agreed  to  convey  certain  land  to  B. 
2  Disney  (Ohio),  286;  Croone  v.  in  consideration  of  B.'s  assuming 
Bivens,  2  Head,  339 ;  West  v.  Chos-  and  paying  the  debts  of  the  con- 
ten,  12  Fla.  315 ;  Griffith  v.  Buck,  cern,  except  certain  ones  specified, 
13  Md.  102;  Andrews  v.  Mann,  31  which  A.  agreed  to  pay  on  being 
Miss.  322 ;  Miller  v.  Estill,  5  Ohio  furnished  with  notes  of  third  per- 
St.  508;  Vosper  v.  Kramer,  31  N.  sons  to  a  certain  amount.  The 
J.  Eq.  420 ;  Ladd  v.  Griswold,  4  land  was  subsequently  sold  by  the 
Gilm.  25 ;  Parish  v.  Lewis,  1  Freem.  sheriff  as  the  property  of  B.  Held, 
(Miss.)  Ch.  299 ;  Hapgood  v.  Corne-  that  it  was  co  i  petent  for  A.,  by  an 
veil,  48  111.  64 ;  Smith  v.  Edwards,  equitable  ejectment  and  condi- 
7  Humph.  106.  See  ante.  tional  verdict,  to  enforce  payment 
Vol.  I  — 53                        833 


*355 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


consign  goods  for  sale,  and  direct  the  consignee  to  carry 
the  proceeds  of  the  sale  equally  to  their  separate  accounts 

of  the  purchase  money  due  him- 
himself,  the  debts  of  the  firm,  and 
those  debts  which  he  had  agreed 
to  pay  on  conditions  not  performed 
byB. 

A  promise  by  a  partner  who  has 
purchaser  his  copartner's  entire 
interest  in  the  firm  that  he  will 
pay  the  firm  debts  creates  only  a 
personal  obligation,  and  not  a  lien 
on  the  partnership  effects,  which 
may  still  be  used  by  him  in  pay- 
ment of  his  individual  debts ;  and 
when  so  applied  the  individual 
creditor,  taking  them  without  no- 
tice of  any  such  promise,  stands  in 
the  position  of  a  purchaser  for  a 
valuable  consideration,  and  holds 
free  of  any  firm  creditor's  lien. 
Hapgood  v.  Cornevell,  48  111.  64. 
See  ante. 

So  a  mere  covenant  by  a  remain- 
ing partner  to  pay  the  partnership 
debts,  and  to  indemnify  the  out- 
going partner  against  th  m,  raises 
in  his  favor  no  equity  to  have  the 
firm  property  applied  to  the  pay- 
ment of  the  firm  debts.  Upon 
such  a  covenant  the  outgoing  part- 
ner can  look  only  to  the  personal 
indemnity,  and  cannot  require  the 
application  of  the  partnership 
property  to  the  payment  of  the 
debts.  Cory  v.  Long,  2  Sweeny, 
491. 

Where  one  partner  sells  out  to 
another  the  former's  interest  in  the 
partnership,  the  question  whether 
the  former  has  a  right,  after  the 
sale,  to  require  the  partnership  es- 
tate to  be  applied  to  the  partner- 
ship debts  in  his  exoneration, 
depends  upon  the  true  meaning  of 
the  contract  of  sale  in  this  respect. 


Under  the  contract  in  this  case  the 
vendor  has  a  right  to  have  all  the 

assets  of  the  partnership  so  applied. 
Shackleford  v.  Shackleford,  32 
Grat.  481. 

But  if  one  partner  assigns  his  in- 
terest to  his  copartner,  who  binds 
himself  to  appropriate  the  partner- 
ship property  to  the  payment  of  the 
debts  of  the  firm,  the  assignee  be- 
comes a  trustee  for  the  creditors 
and  for  the  assignor,  and  will  be 
compelled  by  a  court  of  equity  to 
discharge  his  trust.  Sedan  v.  Will- 
iams, 4  McLean,  51. 

Where  two  partners  agreed  with 
an  ex-partner  that  certain  notes 
should  be  applied  to  the  payment 
of  debts  of  the  partnership  of 
which  the  three  were  members,  the 
ex-partner  thereby  acquires  a  mere 
equity  to  have  this  agreement  per- 
formed, which  can  only  be  en- 
forced against  those  who  have  no- 
tice of  it.  Commercial  Bank  of 
Manchester  v.  Lewis,  21  Miss. 
226. 

A.,  being  a  mere  nominal  part- 
ner in  a  firm,  having,  in  fact,  a 
salary,  left  it,  taking  a  bond  of  in- 
demnity against  the  partnership 
debts  from  the  other  partners,  who 
formed  a  new  partnership,  and  the 
new  firm  assigned  a  part  of  the 
partnership  property  to  a  creditor 
in  payment  of  a  debt.  A.,  having 
paid  debts  of  the  old  firm,  filed  his 
bill  in  equity  to  have  such  assign- 
ment set  aside  as  fraudulent  as  to 
him.  Held,  that  A.  had  no  right 
of  preference  over  any  other  cred- 
itor of  the  new  firm,  as  he  was  a 
simple  contract  creditor  of  it,  and 
had  his  remedy  at  law  like  other 

184 


CH.  V,  SEC.  III.]  SHAKES    IN   PARTNERSHIPS. 


*355 


without  any  reserve,  and  this  is  done,  neither  partner  has 
any  lien  on  the  share  of  the  other  in  those  proceeds;  al- 


creditors.     Stone    v.    Manning,    2 
Scam.  530. 

If,  on  the  formation  of  a  new 
firm  by  the  addition  of  another 
partner,  the  original  stock  of  goods 
is  credited  equally  to  the  two  old 
partners  as  their  respective  shares 
of  the  capital  stock  of  the  new 
company ;  and,  on  the  death  of  one 
of  the  original  partners,  his  admin- 
istrator obtained  a  decree  in  chan- 
cery, on  settlement  of  the  partner- 
ship accounts,  for  the  intestate's 
share  of  the  partnership  effects, 
the  surviving  original  partner  has 
no  lien  on  this  fund  for  the  pay- 
ment of  the  original  partnership 
debts.  Coffin  v.  McCullough,  30 
Ala.  107. 

A  sale  by  a  commercial  partner, 
on  the  eve  of  failing,  of  all  his  in- 
terest in  the  partnership  to  his  co- 
partner, is  void,  and  will  be  set 
aside.  The  partnership  property 
is  the  common  pledge  of.  the  part- 
nership creditors,  who  must  be 
paid  out  of  it  before  the  individual 
creditors  of  the  members;  and,  if 
not  fully  paid,  they  may  pursue 
either  partner,  but  with  no  higher 
rights  upon  his  individual  prop- 
erty than  his  individual  creditoi's 
have.  Saloy  v.  Albrecht,  17  La. 
Ann.  75. 

When  a  partner  purchases  his 
copartner's  entire  interest  in  the 
firm,  takes  upon  himself  all  the 
partnership  debts,  and  afterwards 
absconds,  leaving  his  individual 
and  the  partnership  debts  unpaid 
a  court  of  equity  will  reinvest  the 
retiring  partner  with  his  original 
rights  as  partner,  giving  him  a 
lien  on  the  partnership  assets  for 


the  payment  of  partnership  debts. 
McGown  v.  Sprague,  23  Ala.  524. 

Where  one  partner  sells  out  his 
interest  in  a  firm  to  a  third  person 
and  takes  securities  for  the  price, 
they  form  no  part  of  the  firm  as- 
sets, but  are  his  private  property, 
and  upon  or  over  which  his  former 
copartner  has  no  lien  or  control. 
The  latter  may  file  a  bill  to  wind 
up  the  concern  and  have  its  assets 
applied  to  the  payment  of  its  debts ; 
but,  in  order  to  do  so,  he  must 
bring  in  as  defendants  the  persons 
owning  the  interest  of  the  retiring 
partner,  who  held  their  purchase 
subject  to  the  partnership  account- 
ing. Glynn  v.  Phetteplace,  26 
Mich.  383. 

A  partnership  lien  is  waived  by 
a  partner's  purchase  of  his  de- 
ceased partner's  interest  at  admin- 
istrator's sale.  Hart  v.  Clark,  54 
Ala.  490. 

The  acceptance  by  one  partner 
of  a  mortgage  made  by  another 
partner  to  secure  a  balance  due 
from  him  has  been  held  to  vacate 
and  neutralize  the  partnership  lien 
to  that  extent.  Robertson  v. 
Baker,  11  Fla.  192. 

See,  however,  Hodges  v.  Hoce- 
man,  1  Dana,  50,  where  it  was 
held  that  the  lien  of  a  partner  for 
a  balance  on  the  partnership  ac- 
counts is  not  an  incident  of  the 
legal  title  to  the  effects,  but  re- 
sults from  the  partnership,  and  is 
not  affected  by  the  mortgages  of 
either  partner  on  his  share. 

So,  in  Warren  v.  Taylor,  60  Ala. 
218,  it  was  held  that  where  the 
partnership  name  is  used  with  the 
consent  of  both  partners  in  borrow* 


835 


*355 


KIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


though  it  would  have  been  otherwise  if  they  had  remained 
part  of  the  common  property  of  the  two.  (f) 

No  lien  if  partnership  is  illegal. —  If  a  partnership  is 
illegal  its  members  have  no  lien  upon  their  common  prop- 
erty or  upon  each  other's  shares  therein ;  {g)  unless  it  be 
by  virtue  of  some  agreement  not  affected  by  the  illegality. 

Lien  of  co-owners. —  Mere  co-owners  have  no  such  lien 
as  is  enjoyed  by  copartners,  (h)  But  a  part  owner  of  a 
ship  has  a  right  to  have  the  gross  freight  applied  in  the 
first  place  in  payment  of  the  expenses  incurred  in  earning 
it.  (t) 


ing  money  for  the  individual  ac- 
commodation of  one.  who  exe- 
cutes to  the  other  a  mortgage  on 
his  interest  in  the  partnership 
property  as  security,  and  the  latter 
pays  the  debt,  his  lien  as  a  partner 
upon  the  partnership  property  for 
the  sum  so  paid  is  not  dependent 
on  the  mortgage  or  its  registra- 
tion, and  is  superior  to  the  lien  of 
a  prior  unrecorded  mortgage  of 
which  he  had  no  notice,  but  which 
was  recorded  before  his,  and  was 
given  for  the  individual  debt  of  his 
copartner.  See,  also,  Irwin  v.  Bid- 
well,  72  Penn.  St.  244. 

Though  real  property,  purchased 
with  the  effects  and  used  for  the 
purposes  of  a  mercantile  firm,  may 
in  equity  be  liable  to  discharge 
the  balance  due  from  the  company 
to  any  partner  in  preference  to  the 
private  creditor  of  any  other  part- 
ner, it  is  nevertheless  competent 
to  the  members  of  such  copartner- 
ship to  acquire  such  property 
jointly  as  individuals,  or  to  lose 
the  lien  aforesaid  by  acts  tending 
to  mislead  or  deceive  creditors  or 


purchasers  in  this  particular;  as 
where  the  deed  neither  describes 
the  parties  purchasing  as  mer- 
chants and  partners,  nor  states 
that  the  purchase  was  made  for 
the  use  of  the  firm,  but  merely 
purports  a  conveyance  to  them  as 
individuals.  Forde  v.  Herron(  4 
Munf.  316. 

(/)  See  Holroyd  v.  Griffiths,  3 
Drew.  428.  In  Holderness  v.  Shack- 
els,  8  B.  &  C.  612,  the  transfer  to 
each  partner  was  subject  to  the 
lien,  which  was  not  therefore  lost. 

(g)  See  Evving  v.  Osbaldiston,  2 
M.  &  Cr.  88. 

(h)  Re  Leslie,  23  Ch.  D.  552;  Kay 
v.  Johnston,  21  Beav.  536;  ante, 
book  i,  ch.  1,  §  6. 

(i)  See  Green  v.  Briggs,  6  Ha. 
395;  Alexander  v.  Simms,  18  Beav. 
80,  and  5  De  G.  M.  &  G.  57 ;  Lind- 
say v.  Gibbs,  22  Beav.  522,  and  3 
De  G.  &  J.  690.  See,  as  to  the  lien 
of  the  master  on  freight,  Bristow 
v.  Whitmore,  6  De  G.  &  J.  325 ;  re- 
versing S.  C.,  Johns.  96;  Smith  v. 
Plummer,  1  B.  &  A.  582. 


836 


CH.  V,  SEC.  IV.]  SHAKES    IN    PARTNERSHIPS. 

Section  IV. —  Of  the  Mode   in  which  a  Share  is  [*356] 
Taken  in  Execution  for  the  Separate  Debts 
of  its  Owner. 

Execution  against  a  partner  for  a  separate  debt. —  The 

nature  of  a  partner's  share  in  partnership  property,  and  the 
effect  of  the  lien  noticed  in  the  preceding  sections,  are  well 
seen  when  a  separate  judgment  creditor  of  a  partner  seeks 
to  levy  execution  upon  that  partner's  share  in  the  partner- 
ship. Such  a  creditor  has  always  been  at  liberty  to  execute 
his  judgment,  not  only  against  his  debtor's  separate  prop- 
erty, but  also  against  the  property  of  any  firm  in  which  the 
debtor  may  be  a  partner.  This  at  first  sight  seems  ex- 
tremely unjust;  inasmuch  as  it  looks  like  taking  one  man's 
property  for  another  man's  debt ;  but  in  truth  the  creditor 
gets  only  what  belongs  to  his  debtor,  although  it  must  be 
confessed  that  executions  of  the  nature  in  question  put  the 
debtor's  partners  to  no  small  inconvenience. 

In  order  to  explain  the  consequences  of  an  execution 
against  the  partnership  property  for  a  separate  debt  of  one 
of  the  partners,  it  will  be  convenient  to  examine  the  law  as 
it  stood  before  the  Judicature  Acts  with  reference  to 

1.  The  duty  of  the  sheriff. 

2.  The  position  of  the  purchaser  from  him. 

3.  The  position  of  the  execution  debtor. 

The  position  of  the  execution  creditor  and  of  his  debtor's 
copartner  will  appear  in  the  course  of  this  examination. 
The  effect  of  the  Judicature  Acts  will  then  be  noticed. 

1.  Of  the  duty  of  the  sheriff. 

1.  Of  the  duty  of  the  sheriff.— There  has  been  consider- 
able doubt  as  to  the  proper  mode  of  levying  execution 
against  the  property  of  a  firm  upon  a  judgment  recovered 
against  one  of  its  members  only,  (k) 

Sheriff  seizes  the  partnership  property.—  Before  the 
time  of  Lord  Mansfield  it  seems  that  the  sheriff  was  in  the 

Qc)  Burton  v.  Green,  3  Car.  &  P.  306. 

837 


*35T  BIGHTS    AND    OBLIGATIONS.  [BOOK   III. 

habit  of  acting  upon  the  supposition  that  each  partner  was 
entitled  to  an  undivided  share  of  every  article  belonging  to 
the  firm  without  reference  to  the  state  of  the  partnership 
accounts;  and  in  executing  a  fi.fa.  against  a  part- 
[*35Y]  ner  for  his  *separate  debt  the  sheriff  seized  the  whole 
of  the  partnership  effects  (or  of  so  many  of  them  as 
were  requisite)  and  sold  the  undivided  share  of  the  judg- 
ment debtor  therein.  (/) 

The  sheriff  seized  the  whole  of  every  chattel  which  he 
sold,  because  he  could  not  otherwise  seize  the  share  of  the 
execution  debtor.  But  he  did  not  sell  the  whole  of  what 
he  seized,  because  his  authority  was  limited  by  the  writ  to 
the  goods  and  chattels  of  the  debtor,  and  an  undivided 
share  can  be  sold  though  it  cannot  alone  be  seized.  As 
stated  by  Lord  Holt  in  Hey  don  v.  Heydon,  (m)  (where  there 
were  two  partners,  against  one  of  whom  a  judgment  had 
been  obtained)  "  the  sheriff  must  seize  all  because  the  moi- 
eties are  undivided ;  for  if  he  seize  but  a  moiety  and  sell 
that,  the  other  will  have  a  right  to  a  moiety  of  that  moiety ; 
but  he  must  seize  the  whole  and  sell  a  moiety  thereof  un- 
divided, and  the  vendee  will  be  tenant  in  common  with  the 
other  partner."  (n) 

Lord  Mansfield's  innovation  —  Modern  rule. —  Lord 
Mansfield  endeavored  to  introduce  what  at  first  sight  ap- 
pears to  be  a  more  equitable  practice.  In  his  time  the 
sheriff  seems  to  have  seized  and  sold  the  whole  of  a  suffi- 
cient portion  of  the  partnership  goods  (instead  of  selling 
only  an  undivided  share  thereof),  and  then  an  account  was 
directed  to  be  taken  of  the  judgment  debtor's  share  of  the 
proceeds  of  the  sale,  and  that  share,  or  a  sufficient  part  of 
it,  was  handed  over  to  the  execution  creditor,  (o)     This, 

(J)  See  Heydon  v.  Heydcn,  1  Salk.  (m)  1  Salk.  392. 

392;  Jackey  v.  Butler,  2  Ld.  Ray-  (n)  See,  too,  per  Tindal,  C.  J.,  in 

mond,  871 ;  Backhurst  v.  Clinkard,  Johnson  v.  Evans,  7  Man.  &  Gr. 

1  Show.  (K.  B.)  169;  Pope  v.  Ha-  249,  250. 

man,  Comb.  217;  Mariott  v.  Shaw,  (o)    See    Eddie    v.    Davidson,    2 

Comyn,  277 ;  Dutton  v.  Morrison,  17  Dougl.  650. 
Ves.  205 ;  Re  Wait,  1  Jac.  &  W.  608. 

838 


OH.  V,  SEO.  IV.]  SHAKES    IN    PARTNERSHIPS. 


*358 


however,  was  a  very  imperfect  mode  of  proceeding;  for  it 
was  impossible  to  ascertain  the  share  of  the  debtor  partner 
in  the  goods  seized  without  taking  all  the  partnership  ac- 
counts, and  this  a  court  of  law  had  no  power  to  do.  Lord 
Mansfield's  innovation  was  therefore  discontinued;  (p)  and 
it  was  finally  settled,  in  conformity  with  the  older 
cases,  that  the  sheriff's  duty  was,  and  it  still  is,  *to  [*358] 
seize  the  whole  of  the  partnership  effects  (seizable 
under  a,Jl.  fa.),  or  of  so  much  of  them  as  may  be  requisite, 
and  to  sell  the  undivided  share  of  the  debtor  partner 
therein,1  without  reference  to  the  state  of  the  accounts  as 
between  him  and  his  copartners,  (q) 2 


(p)  See  Parker  v.  Pistor,  3  Bos.  & 
P.  288;  Chapman  v.  Koops,  id. 
289 ;  Morley  v.  Strombom,  3  Bos.  & 
P.  254.  Lord  Eldon  greatly  disap- 
proved of  it.  See  Waters  v.  Tay- 
lor, 2  V.  &  B.  301. 

i  See  Phillips  v.  Cook,  24  Wend. 
389;  Lee  v.  Bullard,  3  La.  Ann. 
462;  United  States  v.  Williams,  4 
McLean,  236.  See,  also,  Nelson  v. 
Conner,  3  La.  Ann.  456;  Thomas  v. 
Lusk,  13  id.  277 ;  Wiles  v.  Maddox, 
26  Mo.  77 ;  Morgan  v.  Watmough, 
5  Whart.  125;  Wright  v.  Ward,  65 
Cal.  525.  See,  also,  Grant  v.  Will- 
iams, 1  Tex.  App.  (Civ.)  153.  See, 
however,  Jarvis  v.  Dyer,  4  Dev.  L. 
367. 

The  personal  property  of  a  firm, 
subject  to  levy  upon  execution 
against  a  partner  for  his  individual 
debts,  consists  of  the  tangible  per- 


sonal property  of  the  firm  only; 
and  an  actual  and  not  a  merely 
constructive  levy  must  be  made 
thereon.  The  sheriff  must  sell  only 
the  interest  of  the  partner  pro- 
ceeded against.  A  sale  of  the  part- 
ner's interest  in  the  firm  generally, 
pursuant  to  a  merely  constructive 
levy,  passes  no  title  to  the  pur- 
chaser. Read  v.  McLanahan,  47  N. 
Y.  Super.  Ct.  275.  See,  also, 
Harris  v.  Phillips,  4  So.  W.  Rep. 
196,  for  a  construction  of  section 
3018,  Mansfield's  Ark.  Digest. 

The  levy  of  an  execution  against 
one  member  of  a  firm,  general  or 
limited,  upon  the  whole  partner- 
ship property  instead  of  the  execu- 
tion debtor's  interest,  and  a  sale 
thereof,  constitutes  the  officer  exe- 
cuting the  same  a  trespasser  ab 
initio  as  to  the  remaining  part- 


(q)  See  Helmore  v.  Smith,  35  Ch. 

D.  436 ;  Holmes  v.  Mentze,  4  A.  & 

E.  127 ;  S.  C.  5  Nev.  &  Man.  563, 
and  4  Dowl.  Pr.  Ca.  300;  Johnson 
v.  Evans,  7  Man.  &  Gr.  240.  In 
Holmes  v.  Mentze  it  was  held  that 
a  sheriff,  who  for  the  debt  of  one 
partner  executed  a  fl.  fa.  against 


the  property  of  the  firm,  was  not 
entitled  to  make  the  execution  > 
creditor  and  the  copartner  of  the 
debtor  interplead;  but  that  if  the 
execution  creditor  denied  the  part- 
nership he  was  bound  to  indemnify 
the  sheriff. 
2  See  Bardell  v.  Perry,  19  Vt.  292. 


839 


*358 


EIGHTS    AND    OBLIGATIONS. 


[book  III. 


ners.     Spalding  v.  Black,  22  Kan. 
55. 

Upon  an  execution  against  one 
partner  the  sheriff  should  take  pos- 
session of  the  partnership  property 
and  sell  the  interest  of  the  execu- 
tion debtor;  and  he  may  deliver 
the  possession  of  the  entire  prop- 
erty to  the  purchaser  who  becomes 
a  tenant  in  common  with  the  other 
partner.  Such  seizure,  sale  and 
delivery  is  not  a  conversion  of  the 
other  partner's  interest  although  at 
the  time  of  the  levy  and  sale  the 
execution  debtor  would  have  had 
no  interest  in  the  partnership  prop- 
erty had  there  been  an  accounting 
between  the  partners.  Wright  v. 
Ward,  65  Cal.  525;  Kaufman  v. 
Schoeffel,  46  Hun,  571.  See,  also, 
Lee  v.  Wilkins,  65  Tex.  295 ;  Traf- 
ford  v.  Hubbard,  6  East.  Rep.  693; 
S.  C.  8  Atl.  Rep.  690 ;  4  Atl.  Rep. 
762;  2  New  Eng.  Rep.  617;  3  New 
Eng.  Rep.  865.     See  post,  note  1. 

The  power  of  the  sheriff  to  take 
possession  of  the  whole  property  is 
merely  incidental  to  the  right  to 
reach  the  debtor's  interest,  and  is 
to  be  exercised  as  far  as  possible  in 
harmony  with,  not  in  hostility  to, 
the  rights  of  the  other  partners. 
When,  therefore,  the  sheriff  ex- 
ceeds this  limit,  and  instead  of 
levying  on  the  debtor's  interest 
levies  upon  and  seizes  the  property 
as  the  sole  property  of  the  debtor, 
he  is  a  trespasser.  Atkins  v.  Sax- 
ton,  77  N.  Y.  195;  Daniel  v.  Owens, 
70  Ala.  297;  Snell  v.  Crowe,  3 
Utah,  26.  See,  however,  Lee  v. 
Wilkins,  65  Tex.  295. 

Where  an  officer  levying  upon 
the  interest  of  one  partner  in  part- 
nership property  gives  notice  that 
he  will  sell  the  entire  property,  but 
does  not  do  so,  but  afterwards  de- 


livers the  property  to  the  receiver 
at  the  instance  of  the  complaining 
party,  he  does  not  by  giving  such 
notice  become  liable  to  the  plaintiff 
in  attachment  in  an  action  for 
damages.  Hershfield  v.  Claflin,  25 
Kan.  166;  S.  C.  37  Am.  Rep.  237. 

The  interest  of  one  partner  in  the 
partnership  property  may  be  at- 
tached, or  taken  and  sold  on  execu- 
tion, for  his  separate  debt.  See 
Sitler  v.  Walker,  1  Freern.  Ch. 
(Miss.)  77;  Place  v.  Sweetzer,  16 
Ohio,  142;  James  v.  Stratton,  32 
111.  202:  Newhall  v.  Buckingham, 
14  id.  405;  White  v.  Jones,  38  111. 
159;  Dow  v.  Say  ward,  14  N.  H.  9; 
S.  C.  12  id.  271 ;  Marston  v.  Dew- 
berry, 21  La.  Ann.  518;  Nixon  v. 
Nash,  12  Ohio  St.  647;  Chopin  v. 
Wilson,  27  Ln.  Ann.  444;  Saunders 
v.  Bartlett,  12  Heisk.  316;  Wilson 
v.  Strobach,  59  Ala.  488;  Weaver 
v.  Ashcroft,  50  Tex.  428 ;  Peoples' 
Bank  v.  Shryock,  48  Md.  427 ;  and 
the  cases  above  cited.  See,  also, 
Meyberg  v.  Steagall,  51  Tex.  351. 

An  execution  against  firm  prop- 
erty on  a  judgment  confessed  by 
one  partner  against  himself,  for  a 
debt  alleged  to  be  due  by  the  firm, 
is  irregular  and  will  be  set  aside. 
Vandegrif t  v.  Redheff er,  10  Weekly 
Not.  Cas.  484. 

Replevin  lies  against  an  officer 
who  has  attached  partnership  prop- 
erty on  the  writ  against  one  part- 
ner. Fay  v.  Duggan,  135  Mass.  242. 
Injunction  is  the  proper  remedy 
by  copartners  to  protect  their  in- 
terest against  the  improper  seizure 
of  partnership  property  to  satisfy 
the  separate  debt  of  one  partner. 
Brown  v.  Young,  1  Tex.  App. 
(Civ.)  712. 

An  attachment  of  the  goods  of 
the  firm  by  creditors  of  one  part- 


840 


CH.  V,  SEC.  IV.]  SHARES    IN    PARTNERSHIPS. 


f358 


ner  is  not  valid  against  a  subse- 
quent attachment  of  the  same 
goods  by  partnership  creditors. 
Adams  v.  Hunter,  42  Leg.  Intel. 
205. 

So  the  attachment  of  partnership 
assets  by  an  individual  creditor  is 
illegal  and  must  be  dissolved  and 
the  attached  property  surrendered 
to  the  liquidator  of  the  partnership. 
New  Orleans  v.  Gauthreaux,  32  La. 
Ann.  1126. 

The  interest  of  a  copartner  in  the 
partnership  property  may,  in  Rhode 
Island,  be  attached  by  an  indi- 
vidual creditor  of  such  copartner. 
In  such  case  the  sheriff  may  seize 
a  chattel  and  deliver  it  to  the  pur- 
chaser of  the  interest  attached,  who 
becomes  a  tenant  in  common  of 
such  chattel  with  the  other  part- 
ners, but  subject  to  the  partnership 
debts  and  equities.  Randall  v. 
Johnson,  13  R.  I.  338. 

That  the  defendant  copartner  has 
overdrawn  his  account  with  the 
firm  does  not  invalidate  an  attach- 
ment of  his  interest.  Trafford  v. 
Hubbard,  6  E.  R.  693;  S.  C.  8  Atl. 
R.  690 ;  4  Atl.  R.  762 ;  2  N.  Eng.  R. 
617;  3N.  Eng.  R.  865. 

Creditors  of  a  partner  may  reach 
his  interest  in  the  firm  property, 
but  cannot  satisfy  their  demands 
out  of  his  copartner's  interest. 
Dieckmann  v.  St.  Louis,  9  Mo. 
App.  9. 

Where  an  attachment  is  issued 
against  partners  separately  a  writ 
should  be  levied  on  the  land  owned 
by  them  respectively,  and  no  title 
will  pass  by  the  levy  of  a  writ 
issued  against  one  on  the  land  of 
another.  Armistead  v.  Cocke,  62 
Miss.  198. 

A  creditor  of  an  individual  part- 
ner has  a  right  to  sell  on  execution, 


and  the  purchaser  acquires  on  such 
sale,  only  that  partner's  interest  in 
the  firm  property,  that  is,  what  of 
the  partnership  property  belongs  to 
the  debtor    partner    after  paying 
the  debts  due  by  the  firm  and  his 
own  debt  to  the  firm.     Merrill  v. 
Rinker,   1  Baldw.  528;  Lyndon  v. 
Gorham,    1    Gall.    367;    White  v. 
Dougherty,  Mart.  &  Y.  309  ;M'Carty 
v.  Emlen,  2  Yeates,  190;  Dower  v. 
Stauffer,  2  N.  J.  L.  198;  Knox  v. 
Schepler,  2  Hill  (S.  C),  595;  Knox 
v.  Summers,  4  Yeates,  477 ;  Tappan 
v.  Blaisdell,  5  N.  H.  189;  Pierce  v. 
Jackson,  6  Mass.  242 ;  Fish  v.  Her- 
rick,  6  id.  271;  Place  v.  Sweetzer, 
16  Ohio,   142;  Witler  v.  Richards, 
10  Conn.  37;  Jones  v.  Thompson,  12 
Cal.  191 ;  Filley  v.  Phelps,  18  Conn. 
294;  Gibson  v.  Stevens,  7  N.  H.  352; 
Brewster  v.  Hammett,  4  Conn.  540; 
Menagh  v.  Whitwell,  52  N.  Y.  146; 
Williams   v.   Gage,   49  Miss.    777; 
Hutchinson    v.   Dubois,    45  Mich. 
143;  Mitchusson  v.  Wadsworth,  1 
Tex.    App.    (Civ.)   546;    Farley    v. 
Moag,  79  Ala.  148 ;  Boro  v.  Harris, 
13  Lea,. 36  (real  estate);  Wallace's 
Appeal,  104  Pa.   St.   559;  S.  C.  14 
Weekly  Not,   Cas.   164;   Schley  v. 
Hale,  1  Tex.  App.  (Civ.)  523 ;  Deane 
v.    Hutchinson,   40  N.    J.    Eq.  83; 
Daniel  v.  0«-eiis,  70  Ala.  297 ;  Clem- 
ents v.  Jessup,  36  N.  J.  Eq.  569.  See, 
also,  Peck  v.  Schultze,  1  Holmes, 
28,  and  cases  there  cited ;  Ploss  v. 
Thomas,  6  Mo.  App.  157;  Richard 
v.  Allen,  9  Cent.  Rep.  (Pa.)  596;  S. 
C.  11  Atl.  Rep.  552. 

And  it  makes  no  difference 
whether  the  company  creditor,  at 
the  time  of  giving  the  credit,  knew 
of  the  existence  of  the  partnership 
or  not ;  for  the  effect  of  the  credit 
given  to  increase  the  funds  of  the 
partnership  is  the  same  whether  it 
841 


*358 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    III. 


be  a  known  or  a  dormant  partner- 
ship. Witler  v.  Richards,  10  Conn. 
37. 

The  limit  of  the  assessment  of 
value  in  a  proceeding  under  the 
sheriff's  act,  where  the  property  of 
a  firm  has  been  seized  under  an  ex- 
ecution against  one  of  the  partners, 
is  the  value  of  the  debtor  partner's 
interest.  Ploss  v.  Thomas,  6  Mo. 
App.  157. 

In  an  action  against  the  members 
of  a  firm  an  attachment  was  issued 
against  S.,  one  of  the  partners, 
which  was  levied  upon  the  firm 
property.  The  firm  was  at  the 
time  insolvent,  and  soon  after 
made  an  assignment  to  defendant. 
Judgment  was  thereafter  obtained 
and  execution  issued  in  the  attach- 
ment suit,  under  which  the  sheriff 
sold  •'all  the  right,  title  and  inter- 
est which "  S.  had  in  the  property 
at  the  time  of  the  levy  of  the  at- 
tachment. Plaintiff  was  the  pur- 
chaser. In  an  action  brought  to 
determine  the  title  to  the  property, 
held,  that,  as  the  firm  assets  were 
insufficient  to  pay  its  debts,  the  in- 
terest of  S.  therein  was  nothing, 
and  plaintiff  took  nothing  by  his 
purchase.  (Van  Brunt  v.  Apple- 
gate,  44  N.  Y.  544,  distinguished.) 
Staats  v.  Bristow,  73  N.  Y.  265. 

Equity  will  interfere  to  prevent 
a  separate  creditor  levying  on  firm 
effects  from  standing  in  any  better 
position  than  that  of  his  debtor. 
Thompson  v.  Frist,  15  Md.  24. 

Where  an  execution  against  one 
of  two  partners  for  his  individual 
debt  was  levied  upon  partnership 
goods,  and  the  goods  were  sold  at 
a  constable's  sale,  and  the  other 
partner  replevied  the  goods  from 
the  purchaser,  held,  that  the  meas- 
ure of  damages  against  the  plaintiff 


in  replevin  was  only  the  value  of 
the  interest  of  the  debtor  partner 
in  the  goods  at  the  time  of  the  sale ; 
that  is,  his  share  of  the  surplus 
after  all  demands  against  the  firm 
should  be  paid.  Sutcliffe  v.  Dohr- 
man,  18  Ohio,  181. 

Where  partnership  property  is 
sold  under  separate  executions 
against  the  partners  individually 
the  proceeds  represent  the  several 
interests  of  the  partners  and  not 
that  of  the  partnership,  and  the 
fund  should  be  distributed  accord- 
ingly. Vandike's  Appeal,  57  Pa. 
St.  9.  See,  also,  Cooper's  Appeals, 
26  Penn.  St.  262. 

The  interest  of  a  partner  who 
contributes  only  time,  labor  and 
skill  in  the  partnership  property 
may  be  levied  on  and  sold  by  exe- 
cution against  him  as  an  individ- 
ual. Knight  v.  Ogden,  2  Tenn.  Ch. 
473. 

It  is  not  an  interest  in  any  par- 
ticular piece  of   property,   but  in 
the  firm  assets  after  the  settlement 
of  the  firm  accounts,  that  is  liable 
for  a  partner's  separate  debts.    At- 
wood   v.    Meredith,   37   Miss.    635 
Hutchinson  v.  Dubois,  45  Mich.  143 
Daniel    v.    Owens,    70    Ala.    297 
Gerard  v.   Bates.  S.  Ct.  111.   March 
28,   1888;    Tait  v.  Murphy,  80  Ala. 
440.      See,    however,    Carillon    v. 
Thomas,  6  Mo.  App.  574. 

The  specific  credits  of  a  partner- 
ship cannot  be  seized  under  execu- 
tion against  oue  of  the  partners  or 
surviving  partner.  The  entire  in- 
terest of  a  partner  may  be  seized 
and  sold;  but  no  specific  asset, 
credit  or  property  of  the  partner- 
ship is  liable  to  seizure  under  exe- 
cution against  one  of  the  partners. 
Levy  v.  Cowan,  27  La.  Ann.  556 ; 
Marston  v.  Dewberry,  21  id.   518; 


842 


CH.  V,  SEC.  IV.]  SHAKES    IN    PARTNERSHIPS. 


'60t 


Daniel  v.  Owens,  70  Ala.  297; 
Stumph  v.  Bauer,  76  Iud.  157; 
Gerard  v.  Bates,  supra. 

The  purchaser  at  the  sale  of  a 
specific  article  does  not  acquire  the 
right  to  hold  possession  of  the 
property  purchased  as  against  the 
other  members  of  the  firm.  Daniel 
v.  Owens,  70  Ala.  297. 

In  Kansas  an  officer  holding  an 
attachment  against  the  property  of 
an  individual  partner  may  levy  the 
same  on  his  interest  and  take  the 
partnership  property  or  a  portion 
thereof  into  his  possession  and  sell 
the  interest  of  the  partner  in  such 
property.  Hershfield  v.  Claflin,  25 
Kan.  166;  S.  C.  37  Am.  Rep.  237. 
In  Alabama  an  execution  issued 
on  a  judgment  against  A.  and  B., 
composing  the  firm  of  "A.  &  B.," 
may  be  levied  on  property  belong- 
ing to  the  partnership  or  to  either 
of  the  parties  individually.  Lein- 
kauff  v.  Munter,  76  Ala.  194. 

An  execution  against  a  surviving 
partner  for  a  firm  debt  will  be  good 
as  respects  him  and  firm  property 
in  his  hands,  but  a  nullity  as  re- 
spects the  individual  estate  of  a  de- 
ceased partner.  Duquesne  National 
Bank  v.  Mills,  22  Fed.  R.  611. 

A  debt  due  to  a  partnership  is 
not  liable  to  attachment  at  the  suit 
of  a  creditor  of  one  of  the  partners, 
where  the  partnership  is  a  continu- 
ing one,  and  where  there  has  been 
no  adjustment  of  the  partnership 
affairs.  Peoples'  Bank  v.  Shryock, 
48  Md.  427 ;  Lyndon  v.  Gorham,  1 
Gall.  367;  Bulfinch  v.  Winchen- 
bach,  3  Allen,  161 ;  Sweet  v.  Reed, 
12  R.  I.  121.     See  post. 

A.  was  garnished  as  a  debtor  of 
B.,  who  was  a  member  of  a  firm, 
and  A.  confessed  that  he  did  owe 
B.,  but,  in  fact,  the  debt  was  due 


the  firm.  Held,  in  an  action  by  the 
firm  to  recover  this  debt,  that,  as 
the  property  of  the  firm  could  not 
be  attached  for  the  private  debts  of 
its  members,  A.'s  confession  and 
payment  of  the  debt  was  no  dis- 
charge of  the  partnership  debt. 
Cook  v.  Arthur,  11  Ired.  L.  407. 

P.    and  L.  made  a  contract  by 
which  L.,    who   owned  a  patent- 
right,   authorized    P.    to    sell  the 
same  in  certain  states  of  the  Union, 
and  it  was  agreed  that  P.  was  to 
sell  the  same ;  that  out  of  all  prop- 
erty and  money  received  by  P.,  by 
means  of  such  sales,  the  expenses 
thereof  should   first   be   paid,  and 
the  remainder  should   be  equally 
divided  between  P.  and  L.,  and  that 
this  division    should  be   made  as 
early  as  reasonably  could  be,  and 
from  time  to  time,  whenever  any 
such  money  or  property  should  be 
received.     The  transaction  of  the 
business  thus  provided  for  neces- 
sitated the  incurring  of  expenses, 
which  did  not  apply  solely  to  any 
particular  sale,  but  to  the  whole 
business  together.     Held,  that  un- 
der this  contract  the  proceeds   of 
the  sales  previous  to  a  settlement 
of  the.r  expenses  belonged  to  P.  and 
L.  jointly,  and  no  part  thereof  to 
either  of  them  severally,  and  that 
individual  creditors  of  neither  party 
could  by  means  of  the  trustee  pro- 
cess attach  such  party's  interest  in 
any  of  their  joint  property  in  the 
hands  of  a  third  person,  whether 
such  property  was  tangible,  or  was 
a  debt  due  from  such  third  person 
to  P.  and  L.     Towne  v.  Leach,  33 
Vt.  747. 

In  Maine,  however,  it  is  held 
that  the  debtor  of  a  firm  can  be 
holden  as  trustee  of  one  of  the 
partners  in  an  action  in  which  that 


843 


-358 


EIGHTS    AND    OBLIGATIONS. 


[book  III. 


partner  is  principal  defendant,  if 
neither  the  creditor  of  the  firm  nor 
any  partner  interpose.  Thompson 
v.  Lewis,  34  Me.  167. 

In  Maine,  also,  it  is  held  that  a 
creditor  of  one  of  a  firm  may  attach 
such  partner's  interest  in  a  specific 
portion  of  a  stock  of  goods  belong- 
ing to  the  firm,  and  is  not  required, 
in  order  to  render  the  attach- 
ment regular,  to  take  the  partner's 
interest  in  the  entire  stock  of  goods. 
Fogg  v.  Lawry,  68  Me.  78.  See, 
also,  Carillon  v.  Thomas,  6  Mo. 
App.  574. 

A  valid  lien  as  against  a  debtor 
who  is  a  member  of  a  partnership 
may  be  acquired  by  attaching  all 
his  interest  in  the  effects  of  the  firm 
and  summoning  the  other  partners 
as  trustees ;  and  such  lien  may  be 
preserved  by  notice  to  the  parties 
concerned,  and  such  other  acts  de- 
signed to  give  notoriety  to  the  at- 
tachment as  the  nature  of  the  prop- 
erty will  admit,  although  posses- 
sion cannot  be  taken  and  the  prop- 
erty removed  to  the  exclusion  of 
the  other  partners.  Treadwell  v. 
Brown,  43  N.  H.  290. 

A  judgment  lien  against  one  of 
the  partners  of  a  firm  individually 
has  been  held  to  constitute  a  lien 
on  the  interest  of  that  partner  in 
the  partnership  property,  which 
entitles  the  purchaser  of  it,  when 
sold,  to  possession,  divested  of 
liens  for  firm  debts  not  reduced  to 
judgments.  Green  v.  Ross,  24  Ga. 
613. 

Partnership  property  may  be  at- 
tached for  the  individual  debt  of 
one  of  the  partners  after  the  dis- 
solution of  the  partnership,  and 
after  a  receiver  has  been  appointed 
by  a  decree  of  a  court  of  equity  in 
a  sister  state,  to  get  in  and  dispose 


of  the  assets.     Schatzill  v.  Bolton, 
2  McCord,  478. 

In  Louisiana,  however,  a  creditor 
of  partners  in  a  state  of  liquidation 
cannot,  for  a  debt  not  due  by  the 
partnership,  seize  a  partnership 
asset,  nor  acquire  any  rights  by 
seizing  the  interest  therein  of  the 
individual  partners.  Smith  v.  Mu- 
Micken,  3  La.  Ann.  319. 

Such  a  creditor  must  await  the 
liquidation  of  the  partnership;  but 
he  may  meanwhile  lay  hold  of  his 
debtors'  residuary  interest  in  the 
partnership  generally,  by  levying 
a  seizure  in  the  hands  of  the  part- 
nership or  its  representative  charged 
with  its  liquidation.  Smith  v. 
McMicken,  supra;  Davis  v.  Carroll, 
11  La.  Ann.  705. 

It  has  been  held  that  upon  ex- 
ecution against  one  partner  the 
sheriff  may  levy  on  that  partner's 
undivided  interest  in  goods,  and 
take  the  goods  into  his  exclusive 
possession,  and  that  though  the 
firm  debts  exceed  the  firm  effects. 
Andrews  v.  Keith.  34  Ala.  722.  See, 
however,  post,  690,  691,  note. 

A  sheriff  who  has  levied  upon  the 
interest  of  one  partner  on  the  suit 
of  his  separate  or  individual  creditor 
may  release  the  levy  when  the 
partnership  is  insolvent,  and  the 
sale  of  the  partner's  interest  would 
have  been  unproductive  of  any- 
thing to  satisfy  the  execution.  On 
a  motion  against  the  sheriff  for  his 
failure  to  collect  the  money  due  on 
the  judgment,  it  is  competent  for 
him  to  prove  the  insolvency  of  the 
partnership.  Wilson  v.  Strobach, 
59  Ala.  488. 

In  Massachusetts,  however,  if  an 
officer  attach  and  take  possession 
of  personal  property  of  a  firm  on  a 
writ  against  one  partner  who  has 


844 


CH.  V,  SEC.  IV.]  SHARES    IN    PARTNERSHIPS. 


*358 


no  equitable  interest  in  such  prop- 
erty, he  is  a  trespasser.  Cropper 
v.  Coburn,  2  Curt.  465.  And  see 
post,  691,  note;  Warren  v.  Wallis, 
38  Tex.  225. 

To  a  bill  brought  under  Mas- 
sachusetts General  Statutes,  chap- 
ter 113,  section  2,  clause  11,  by  a 
creditor  of  one  rnember  of  a  firm 
against  all  the  partners,  to  reach 
and  apply  the  amount  found  due 
such  member  on  liquidation,  the 
debtors  of  the  firm  cannot  be  made 
parties.  Tobey  v.  McFarlin,  115 
Mass.  98. 

A  sheriff  cannot,  upon  an  execu- 
tion issued  in  an  attachment  suit 
brought  against  the  members  of  a 
limited  partnership,  levy  upon,  and 
sell,  the  right,  title  and  interest  of 
a  special  partner  in  the  goods, 
chattels,  assets  and  accounts  of 
the  firm.  Harris  v.  Murray,  28  N. 
Y.  574. 

Under  Georgia  code,  section 
1919  —  making  the  firm  property 
first  liable  to  pay  the  firm  debts  — 
the  undivided  interest  of  a  partner 
therein  is  not  liable  to  levy  and  sale, 
even  after  dissolution,  but  must  be 
reached  by  process  of  garnishment. 
Anderson  v.  Chenney,  51  Ga.  372. 

A  partner's  wrongful  appropria- 
tion of  the  partnership  property 
does  not  take  the  same  out  of  the 
provisions  of  the  Georgia  code, 
section  1919,  exempting  a  partner's 
interest  in  the  assets  from  levy  and 
sale.  Holifield  v.  White,  52  Ga.  567. 
See,  also,  holding  that  a  part- 
ner is  entitled  to  an  exemption  in 
partnership  property,  Blanchard  v. 
Paschal,  68  Ga.  32 ;  S.  C.  45  Am.  E. 
474;  Harris  v.  Visscher,  57  Ga.  229 ; 
Hunnicutt  v.  Summey,  63  id.  586; 
Russell  v.  Lennon,  39  Wis.  570 ;  S. 
C.  20  Am.   Rep.  60 ;  O'Gorman  v. 


Fink,  57  id.  649 ;  S.  C.  46  Am.  Rep. 
58;  McNair  v.  Rewey,  62  id.  167 
Chipman  v.  Kellogg,  60  Mich.  438 
Skinner  v.  Shannon,  44  Mich.  86 
S.  C.  38  Am.  Rep.  232;  Waite  v. 
Mathews,  50  id.  392;    Swearingen 
v.  Bassett,  65  Tex.  267;  Stewart  v. 
Brown,    37    N.   Y.   350;    Scott  v. 
Kenan,   94  N.    C.    296;    Evans  v. 
Bryan,  95  N.  C.  174 ;  McCoy  v.  Bren- 
nan,  28  N.  W.  Rep.  129.     See,  also, 
Stout  v.  McNeill,  3  S.  East.  Rep. 
(N.  C.)  915. 

The  rule  laid  down  by  the  weight 
of  authority,  however,  is  that  part- 
nership property,  or  an  interest 
therein,  cannot  be  claimed  by  one 
partner  as  exempt  from  sale  on  ex- 
ecution for  a  partnership  debt. 
Spiro  v.  Paxton,  3  Lea,  75 ;  State  v. 
Emmons,  99  Ind.  452;  Gill  v.  Lat- 
timore,  9  Lea,  381 ;  Smith  v.  Har- 
ris, 76  Ind.  104 :  Giovanni  v.  Nat. 
Bank,  55  Ala.  305;  S.  C.  28  Am. 
Rep.  723;  Terrell  v.  Hurst,  76  id. 
588;  Levy  v.  WTilliams,  79  id.  171; 
Guptil  v.  McFee,  9  Kan.  30;  Bishop 
v.  Hubbard,  23  Cal.  514;  Kingsley 
v.  Kingsley,  39  id.  665;  Stauffer's 
Succession,  21  La.  Ann.  520 ;  Pros- 
ser  v.  Hartley,  35  id.  340;  Robert- 
shaw  v.  Hanway,  52  Miss.  713; 
Bonsall  v.  Comly,  44  Pa.  St.  442; 
State  v.  Spencer,  64  Mo.  355;  27 
Am.  Rep.  244;  Julian  v.  Wright- 
man,  73  id.  569;  Chalfant  v.  Grant, 
3  Lea,  118;  Gaylord  v.  Imhoff,  26 
Ohio  St.  317;  S.  C.  20  Am.  Rep. 
762 ;  Till's  Case,  3  Neb.  261 ;  Wise 
v.  Frey,  7  id.  134;  S.  C.  29  Am. 
Rep.  380;  Lininger  V.  Raymond,  9 
id.  40;  State  v.  Bowden,  18  Fla. 
17;  Terry  v.  Berry,  13  Mo.  514; 
Drake  v.  Moore,  66  Iowa,  58 ;  Hoy  t 
v.  Hoyt,  6i  id.  174 ;  Ex  parte  Hop- 
kins, 104  Ind.  157;  Richardson  v. 
Adler,  46  Ark.  43 ;  Trowbridge  v. 
45 


f358 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


Cross,  117  111.  109;  Pond  v.  Kim- 
ball, 101  Mass.  105 ;  Holmes  v.  Win- 
chester, 138  id.  542;  Re  Stewart, 
13  Bank.  Reg.  295;  Woolridge  v. 
Irving,  23  Fed.  R.  676 ;  Commercial, 
etc.  Bank  v.  Corbett,  5  Saw.  513; 
Re  Handlin,  3  Biss.  290 ;  S.  C.  12 
Bk.  Reg.  49;  Re  Hughes,  16  Bk. 
Reg.  464;  Re  Croft,  8  Biss.  188; 
S.  C.  17  Bk.  Reg.  324;  Re  Hughes, 
8  Biss.  107;  Baker  v.  Sheehan,  29 
Minn.  235 :  Short  v.  McGruder,  22 
Fed.  R.  (Va.)  46  (homestead);  Pros- 
ser  v.  Hartley,  35  Minn.  340. 

In  an  assignment  of  partnership 
property  by  the  firm,  a  reservation 
of  such  property  as  is  exempt 
from  levy  and  sale  under  execution 
is  inoperative  because  the  firm,  as 
such,  is  not  entitled  to  any  exemp- 
tions, and  such  reservation  does 
not,  therefore,  render  the  assign- 
ment void  for  uncertainty.  McNair 
v.  Rewey,  62  Wis.  167. 

When  one  partner  sells  out  his 
interest  or  part  of  the  partnership 
property  to  the  other,  without  res- 
ervation, the  effects  become  the 
exclusive  property  of  the  pur- 
chaser, discharged  from  any  lien 
on  account  of  partnership  debts, 
and  he  may  claim  an  exemption  in 
them  as  against  the  partnership 
creditors,  if  the  sale  was  bona  fide. 
Levy  v.  Williams,  79  Ala.  171; 
State  v.  Thomas,  7  Mo.  App.  205; 
Burton  v.  Baum,  32  Kan.  641. 

Where,  however,  a  retiring  part- 
ner invests  assets  withdrawn  by 
him  in  a  homestead,  if  the  fund 
remaining  is  insufficient  for  the 
payment  of  firm  debts  the  court 
of  equity  will  compel  its  surrender 
for  the  benefit  of  the  creditors, 
even  where  no  fraud  is  intended. 
In  re  Sauthoff ,  8  Biss.  35. 

A  waiver  of  exemption  of  per- 


sonalty contained  in  a  note  signed 
by  one  partner  in  the  partnership 
name,  without  the  authority  of  his 
copartner,  is  effectual  only  against 
him  and  his  individual  property. 
Terrell  v.  Hurst,  76  Ala.  588. 

As  to  when  the  widow's  right  to 
claim  an  exemption  in  the  partner- 
ship estate  is  waived  or  lost,  see 
Little  v.  McPherson,  76  Ala.  552. 

Where  there  is  a  surviving  part- 
ner an  allowance  will  not  be  made 
for  the  support  of  the  family  of 
deceased  out  of  the  funds  which 
are,  or  which  are  claimed  to  be, 
partnership  property.  Burroughs 
v.  Knutton,  5  N.  Eng.  Rep.  (R.  I.) 
875. 

The  creditors  of  a  firm  have  the 
right  to  follow  the  firm  assets  into 
land  bought  with  the  purchase 
money  of  other  land  in  which  the 
assets  were  first  invested,  and  the 
partner  making  the  investment 
cannot  claim  a  homestead  exemp- 
tion in  such  land  as  against  firm 
creditors.  Chalfant  v.  Grant,  3  B. 
J.  Lea,  118. 

A  judgment  against  a  partner 
individually  is  a  lien  upon  real 
estate  held  by  the  firm;  subject, 
however,  to  the  payment  of  the 
firm  debts  and  the  equities  of  his 
copartners.  Johnson  v.  Rogers,  15 
Bankr.  Reg.  1. 

Land  was  bought  and  held  by  a 
firm  for  partnership  purposes ;  and 
W.,  one  of  the  partners,  gave  his 
individual  judgment  to  the  vendors 
for  his  proportionate  share  of  the 
purchase  money.  He  afterwards 
sold  and  conveyed  his  interest  to 
the  other  partners,  and  they  sold 
and  conveyed  the  whole  to  a  third 
party.  Subsequently,  within  five 
years  from  the  date  of  its  entry,  a 
scire  facias  was  issued  to  continue 


846 


CH.  V,  SEC.  IV.]  SHAKES    IN    PARTNERSHIPS. 


*358 


the  lieu  of  the  judgment  against 
W.,  and  the  purchasers  from  the 
firm  were  summoned  as  terre  ten- 
ants. Held,  that  the  individual 
interest  of  W.  was  real  estate,  and 
hence  bound  in  the  hands  of  the 
terre  tenants  by  the  lien  of  the 
judgment  against  him,  subject  to 
the  superior  equitable  lien  of  the 
partnership  debts.  Mead  v.  With- 
erow,  8  Phil.  517. 

A  joint-stock  company,  consti- 
tuted for  the  purpose  of  trading  in 
land,  is  a  partnership;  and  land 
owned  by  the  company  is  not 
subject  to  judgment  and  execution 
in  behalf  of  a  separate  creditor  of 
a  member  of  the  company.  Kra- 
mer v.  Arthurs,  7  Pa.  St.  165. 

The  levy  of  an  execution  against 
one  partner  on  a  piece  of  land  be- 
longing to  the  firm  gives  the  ex- 
ecution purchaser  no  title,  legal  or 
equitable,  to  the  land ;  the  levy 
should  be  on  the  partner's  interest 
in  the  joint  stock;  and  a  sale 
thereof  would  give  the  purchaser 
a  right  to  an  account  and  division. 
Clagett  v.  Kilbourne,  1  Black,  346. 

Where  an  execution  against  the 
individuals  composing  a  mercan- 
tile firm  is  levied  on  certain  lots 
as  the  property  of  the  firm,  and 
the  sheriff's  deed  conveys  to  the 
purchaser  all  the  estate,  right,  title 
and  interest  in  the  firm,  the  inter- 
est in  the  firm  being  that  which  is 
sold,  the  interest  of  the  individual 
partners  will  not  pass  by  the  sale. 
Rogers  v.  Bradford,  56  Tex.  630. 

Where  a  partnership  creditor  ob- 
tains judgment  against  one  of  the 
firm,  and  partnership  land  is  sold 
under  execution  on  such  judgment, 
though  the  sheriff's  deed  should 
cover  the  whole  property,  the  pur- 
chaser acquires  only  the  interest  of 


the  partner  who  was  defendant  in 
the  execution.  Price  v.  Hunt,  11 
Ired.  L.  42. 

A  purchaser  under  an  execution 
against  one  partner  in  his  separate 
capacity  becomes  a  tenant  in  com- 
mon with  the  other  partners  in  an 
undivided  share  of  the  land  which 
he  purchases,  and  holds  it  subject 
to  all  the  rights  of  the  other  part- 
ners, and  can  have  no  claim  but 
upon  the  separate  interest  of  the 
individual  partner  in  the  residue 
which  may  remain  after  the  part- 
nership debts  are  paid.  Gilmorev. 
North  American  Land  Co.,  Pet.  C. 
Ct.  460. 

A  partner  who  permits  the  sepa- 
rate creditor  of  his  copartner  to 
set  off  lands  on  execution  to  sat- 
isfy such  copartner's  debt,  and  to 
recover  judgment  in  ejectment  for 
his  possession,  without  asking,  be- 
fore the  levy,  for  an  account  of  the 
partnership  effects,  cannot  after- 
wards disturb  the  levy  on  the 
ground  that  the  land  was  partner- 
ship property.  Clark  v.  Lyman,  8 
Vt.  290. 

The  fact  that  the  partnership 
real  estate  stands  in  the  name  of 
one  of  the  partners  does  not  pre- 
vent a  separate  creditor  of  another 
partner  from  attaching  his  interest 
therein.  Hill  v.  Beach,  12  N.  J. 
Eq.  31. 

Real  estate  purchased  and  used 
for  partnership  purposes,  but  held 
in  the  names  of  the  partners  indi- 
vidually, may  be  subjected  in 
equity  to  the  payment  of  partner- 
ship debts,  but  cannot  be  sold  un- 
der execution  at  law  against  the 
surviving  partner,  as  such.  The 
sheriff's  deed  to  the  purchaser  at 
execution  sale  against  such  surviv- 
ing partner  conveys  only  his  undi- 


84'i 


*358 


EIGHTS   AND    OBLIGATIONS. 


[boos  III. 


Sale  of  execution  debtor's  share.—  The  sheriff,  having 
seized  the  property  of  the  firm,  proceeds  to  sell  the  interest 
of  the  judgment  debtor  in  the  chattels  seized  and  to  assign 
the  same  to  the  purchaser,  (?■)  Formerly  the  sale  had  to 
be  by  auction,  but  now  it  may  be  made  by  private  con- 
tract. (6') 

Rights  of  the  other  partners. —  It  is  to  be  observed  that 
the  sheriff  seizes,  sells  and  assigns;  but  he  has  no  business 
to  take  the  goods  of  the  firm  out  of  the  possession  of  the 
solvent  partners;  (t)1  and  if  the  sheriff  sells,  not  the  share 

Cald 


vided  interest  in  the  lands, 
well  v.  Parmer,  56  Ala.  405. 

Individual  interests  in  real  estate 
conveyed  to  a  firni  are  subjected 
by  attachments  to  the  payments  of 
individual  liabilities,  although  such 
real  estate  be  conveyed  to,  and 
held  in,  the  firm  name,  if  it  is 
not  made  to  appear  that  it  was 
purchased  for  partnership  purposes, 
and  appropriated  to  these  purposes, 
and  paid  for  by  partnership  funds. 


In  a  proceeding  to  levy  upon  and 
sell  under  execution  against  a 
member  of  a  firm,  for  his  private 
debt,  his  interest  in  the  firm,  the 
directions  of  the  act  of  April  8, 
1878,  must  be  conformed  to. 
Kaine's  Appeal,  92  Pa.  St.  273; 
Hare  v.  Commonwealth,  92  Pa.  St. 
141 ;  S.  C.  8  Weekly  Not.  Cas.  121 ; 
30  Leg.  Int.  5. 

In  Iowa,  where  a  separate  cred- 
itor of  the  partner  levied  upon  and 


Bank  of  Louisville  v.  Hall,  8  Bush,  sold  firm  property  without  suing 
672.  to  determine  the  partner's  interest, 
Where  real  estate  was  originally  as  provided  by  section  3054  of  the 
purchased  by  one  of  two  partners,  code,  the  sale  was  held  invalid  as 
and  paid  for  out  of  his  individual  against  a  creditor  of  the  firm  sub- 
funds,  and  the  only  interest  of  the  sequently  levying  upon  the  same 
partnership  in  the  premises  was  on  property.     Aultman  v.   Fuller,  53 


account  of  improvements  made 
thereon  with  the  funds  of  the  part- 
nership, the  actual  interest  in  the 
premises  of  the  partner  advancing 


the  purchase  money  —  at  least  his    De  G.  &  Sm.  121. 


Iowa,  60. 

As  to  attachment  and  garnish- 
ment, see  post. 

(r)  See  Habershon  v.  Blurton,  1 


individual  interest  therein  —  is  lia- 
ble to  be  sold  on  an  execution 
against  him.  Averill  v.  Loucks,  6 
Barb.  19. 

As  to  the  procedure  under  the 
act  of  June  2,  1874,  on  the  sale  on 
execution  of  the  interests  of  one 
member  in  a  partnership  associa- 


(s)  See  Ex  parte  Villars,  9  Ch. 
432. 

(t)  See  per  Patteson,  J.,  in  Bur- 
ned v.  Hunt,  5  Jur.  650,  Q.  B. 

1  Garvin  v.  Paul,  47  N.  H.  158 
Gibson  v.  Stevens,  7  N.  H.  352 
Morrison  v.  Blodgett,  8  N.  H.  238 
Newman  v.    Bean,   21   N.   H.    93 


tion,  limited,  see  Moore  v.  Peerless    Hill  v.  Wiggin,  31  N.  H.  292.    See, 
Manufg.  Co.  18  Weekly  Not.  Cas.  24.     however,    Andrews  v.    Keith,    34 


CH.  V,  SFC.  IV.]  SHARES    IN   PARTNERSHIPS. 


*358 


of  the  execution  debtor,  but  the  goods  themselves,  he  is  ac- 
countable to  the  solvent  partners  for  so  much  of  the  pro- 
ceeds of  the  sale  as  is  proportional  to  their  share  in  the 
partnership,  (u) l 


Ala.  722.  See,  also,  Phillips  v. 
Cook,  24  Wend.  389,  where  it  is 
said  that  the  sheriff  may  deliver 
possession  of  the  property  sold  to 
the  purchaser. 

See,  also,  Carillon  v.  Thomas,  6 
Mo.  App.  574;  ante,  358,  note  1. 

After  the  levy  and  previous  to 
the  sale  of  the  interest  of  a  mem- 
ber of  a  firm  in  the  copartnership 
goods,  the  sheriff  may  hold  joint 
possession  with  the  other  members 
of  the  firm.  Bnrrall  V.  Acker,  23 
Wend.  606;  21  id.  605. 

The  power  of  the  sheriff,  for  the 
purpose  of  rendering  the  levy  upon 
the  interest  of  one  partner  in  the 
copartnership  property  effectual, 
to  take  possession  of  the  whole 
property,  is  merely  incidental  to 
the  right  to  reach  the  debtor's  in- 
terest, and  is  to  be  exercised,  as  far 
as  possible,  in  harmony  with,  not 
in  hostility  to,  the  rights  of  the 
other  partners.  Atkins  v.  Saxton, 
77  N.  Y.  195. 

Complainant,  in  an  action 
against  a  sheriff,  alleged  that 
plaintiff  was  the  owner,  and  enti- 
tled to  the  possession,  of  a  certain 
undivided  interest  in  certain  per- 
sonal property,  possession  of  which 
had  been  unlawfully  taken,  and 
was  unlawfully  detained  by  the 
defendant,  etc.  Held,  sufficient, 
but  that  proof  of  seizure  by  the 
defendant  of  the  undivided  inter- 
est of  plaintiff's  co-owner  would 
not  sustain  the  action.  Schenck  v. 
Long,  67  Ind.  579. 

A  purchaser  at  the  sale  upon  an 


execution  against  one  partner,  lev- 
ied upon  his  interest  in  partnership 
property,  does  not  acquire  any  title 
to  the  property  entitling  him  to 
delivery  of  it,  nor,  if  it  be  a  debt, 
entitling  him  to  collect  it.  The 
title  to  the  property  or  the  debt 
still  remains  in  the  partnership, 
and  the  purchaser  acquires  only  a 
right  to  call  the  partnership  to  an 
accounting.  Barrett  v.  McKenzie, 
24  Minn.  20;  Lothropv.  Wightman, 
41  Pa.  St.  297 ;  Deal  v.  Bogue,  20 
id.  228 ;  Reinheimer  v.  Hemingway, 
35  id.  432 ;  Smith  v.  Emerson,  43 
id.  456;  Wilson  v.  Strobach,  59 
Ala.  488:  note  1,  supra.  See, 
however,  Phillips  v.  Cook,  and 
Carillon  v.  Thomas,  supra. 

As  to  the  measure  of  damages  in 
an  action  by  the  purchaser  upon 
an  execution  sale  of  the  interest  of 
one  member  of  the  partnership  in 
partnership  property  against  an- 
other member  of  the  firm,  see 
Carter  v.  Roland,  53  Tex.  540. 

(u)  Mayhew  v.  Herrick,  7  C.  B. 
229. 

i  In  Walsh  v.  Adams,  3  Den.  125, 
it  was  held  that-  where  a  sheriff 
sells  the  property  of  a  partnership 
as  the  individual  property  of  one 
partner,  on  an  execution  against 
such  partner  individually,  he  is 
liable  in  trover  to  another  partner 
thereof;  and  the  plaintiff  is  en- 
titled to  recover  his  individual 
share  in  the  property  so  sold  with- 
out regard  to  the  state  of  the  part- 
nership accounts.  See,  also,  At- 
kins v.  Saxton,  infra. 


Vol.  1  —  54 


849 


*358 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


2.  Of  the  position  of  the  purchaser  from  the  sheriff. 

2.  Of  the  purchaser  from  the  sheriff.—  If  the  purchaser 
is  a  stranger  unconnected  with  the  firm,  he  acquires  for  his 
own  benefit  all  the  judgment  debtor's  interest  in  the  prop- 


So,  in  Spalding  v.  Black,  22  Kan. 
55,  it  was  held  that  where  an  officer 
with  an  execution  against  one 
member  of  any  partnership,  gen- 
eral or  limited,  levies  upon  the 
partnership  property,  and  sells  the 
■whole  property  instead  of  the  exe- 
cution debtor's  interest  therein,  the 
remaining  partners  may  treat  him 
as  a  trespasser  ab  initio,  and  bring 
their  action  against  him  therefor, 
and  to  such  action  the  execution 
debtor  is  not  a  necessary  party. 

See,  however,  White  v.  Wood- 
ward, 8  B.  Mon.  484,  where  it  is 
said  that  the  only  remedy  for  the 
other  partner  is  in  equity. 

Where  a  partnership  had  failed, 
and  was  in  a  condition  necessarily 
to  be  immediately  wound  up, 
which  the  defendant  must  have 
known,  but  nevertheless  attached 
the  goods  of  the  partnership,  sold 
them,  and  applied  them  to  his  own 
debt  against  one  of  the  partners 
individually,  held,  that  the  de- 
fendant was  bound,  under  the  ch-- 
cumstances  disclosed,  to  take 
notice  of  the  rights  of  a  partner 
who  was  a  creditor  living  in 
another  town,  and  that  he  would 
be  held  to  account  for  the  value  of 
the  goods,  notwithstanding  the 
partner  did  not  interfere  and  pre- 
vent the  sale.  Miner  v.  Pierce,  38 
Vt.  610. 

It  seems  that  a  seizure  and  levy 
by  a  sheriff  under  an  attachment 
or  execution  against  one  person 
upon  the  entire  property  of  a  firm 
as  the  sole  property  of  the  debtor 


is  not  justified  by  showing  that 
the  debtor  has  an  interest  in  the 
property  as  a  copartner.  Atkins  v. 
Saxton,  77  N.  Y.  195. 

In  an  action  against  a  sheriff  to 
recover  the  possession  of  certain 
property,  defendant  justified  under 
two  attachments  against  B.  The 
property  formerly  belonged  to  a 
firm  composed  of  plaintiff  and  B. 
Plaintiff's  evidence  was  to  the 
effect  that  prior  to  the  seizure 
the  firm  was  dissolved  and 
the  personal  rn-operty  divided  be- 
tween tne  partners;  that  B.  sold 
his  portion  to  third  persons,  and  all 
had  been  removed  save  a  small 
portion  left  by  one  of  the  purchas- 
ers in  plaintiff's  care.  Defendant 
seized  all  the  goods  of  the  late  firm 
in  plaintiff's  possession  as  the  sole 
property  of  B.  Defendant  con- 
ceded the  partnership,  but  contro- 
verted the  dissolution  and  division. 
The  court  charged  that  if  the  jury 
believed  there  was  a  nominal  as- 
signment by  B.  of  his  interest  in 
the  property  seized  to  plaintiff, 
with  intent  to  defraud  B.'s  cred- 
itors, and  with  knowledge  on  plaint- 
iff's part,  then  the  property  was 
liable  to  the  attachments.  Held, 
error.  Even  if  a  fraud  is  perpe- 
trated the  whole  property  does 
not  become  liable  to  seizure  upon 
attachments  at  the  suit  of  an  in- 
dividual creditor;  nothing  more 
than  the  debtor's  interest  in  the 
property  can  in  any  event  be  liable. 
When,  therefore,  the  sheriff  ex- 
ceeds   this  limit,   and,  instead    of 


850 


CH.  V,  SEC.  IV.]  SHARES    IX    PARTNERSHIPS. 


^359 


erty  comprised  in  the  bill  of  sale,  and  becomes,  as  regards 
such  property,  tenant  in  common  with  the  judgment  debtor's 
copartners,  (x) l  The  next  step,  therefore,  is  to  adjust  the 
conflicting  rights  of  the  purchaser  and  these  partners.  !Now 
it  is  clear  from  the  nature  of  the  lien  which  each  partner 
has  on  the  partnership  property  that  a  partner  holds  a  part- 
nership chattel  with  his  copartner,  subject  to  all 
*the  equities  which  that  copartner  has  upon  it,  (y)  [*359] 
and  subject,  therefore,  to  his  right  to  have  all  the 
creditors  of  the  firm  paid  out  of  the  assets  of  the  firm,  and 
consequently,  pro  tanto,  out  of  the  chattels  seized  by  the 
sheriff,  (z)  It  is  equally  clear  that  in  this  respect  the  pur- 
chaser from  the  sheriff  is  in  no  better  position  than  the 
partner  whose  undivided  share  has  been  sold,  (a) 2  Before 
the  Judicature  Acts,  therefore,  a  suit  in  equity  became  neces- 
sary, in  order  that  the  partnership  accounts  might  be  taken, 
and  the  partnership  property  duly  applied,  (h) 3 


levying  upon  the  debtor's  interest, 
levies  upon  and  seizes  the  property 
as  the  sole  property  of  the  debtor, 
he  is  a  trespasser.  Atkins  v.  Sax- 
ton,  supra. 

(x)  See  Helmore  v.  Smith,  35  Ch. 
D.  436. 

1  Latham  v.  Simmons,  3  Jones'  L. 
27;  United  States  v.  Williams,  4 
McLean,  236;  Gilmore  v.  N.  A. 
Land  Co.  Pet.  C.  C.  460,  where  the 
thing  sold  was  an  undivided  share 
in  land ;  Williams  v.  Gage,  49  Miss. 
777;  Knight  v.  Ogden,  2  Tenn.  Ch. 
473. 

If  such  purchaser  sells  the  goods 
entire,  he  is  liable  in  assumpsit  to 
a  subsequent  trustee  of  the  firm 
for  a  moiety  of  the  goods  so  sold. 
Latham  v.  Simmons,  3  Jones'  L.  27. 

(y)  Barker  v.  Goodair,  11  Ves.  85. 

(z)  See  the  next  note. 

(a)  Skipp  v.  Harvvood,  2  Swanst. 
586;  Taylor  v.   Fields,  4  Ves.  396; 


Young  v.  Keighly,  15  Ves.  557; 
Dutton  v.  Morrison,  17  Ves.  205-6; 
Ex  parte  Hamper,  id.  404-5 ;  Re 
Wait,  1  J.  &  W.  608. 

2  See  Renton  v.  Chaplain,  9  N.  J. 
Eq.  62 ;  Tredwell  v.  Roscoe,  3  Dev. 
L.  50;  Menagh  v.  Whitwell,  52 
N.  Y.  146 ;  People's  Bank  v.  Shry- 
ock,  48  Md.  427. 

(&)  See  Parker  v.  Pistor,  3  Bos.  & 
Pul.  288. 

3  Under  the  common  law  a  cred- 
itor may  seize  his  debtor's  interest 
in  the  partnership  property,  sub- 
ject to  the  prior  rights  of  the  other 
partners  and  partnership  creditors ; 
and  may,  after  the  seizure  and  be- 
fore the  sale,  sue  the  other  part- 
ners to  ascertain  the  amount  of 
the  interest  seized ;  or  may  sell  and 
leave  it  to  the  purchaser  to  ascer- 
tain it.  Broadnax  v.  Thomason, 
1  La.  Ann.  384.  See,  also,  Knight 
v.  Ogden,  2  Tenn.  Ch.  473. 


851 


*359 


EIGHTS   AND   OBLIGATIONS. 


[BOOK   III. 


Injunction.— The  right  of  the  partners  of  the  judgment 
debtor  being  of  the  nature  described,  and  it  being  incom- 
patible with  that  right  that  the  partnership  property  seized 
bv  the  sheriff  should  be  removed  or  sold  by  him,  the  court 
of  chancery  would,  before  the  Judicature  Acts,  on  a  bill 
filed  by  the  judgment  debtor's  copartners  against  the  judg- 
ment debtor  and  his  creditor  and  the  sheriff,  direct  the 
partnership  accounts  to  be  taken,  and  restrain  the  sheriff 
from  selling  the  property  and  appoint  a  receiver,  (c) l 


The  judgment  debtor  may  elect 
to  have  an  account  taken  before 
the  sale,  by  applying  to  a  court  of 
equity  therefor.  Hacker  v.  John- 
son, 66  Me.  21. 

If  a  sale  of  partnership  property, 
under  a  separate  execution 
against  one  partner,  be  fraud- 
ulent, and  there  be  collusion  be- 
tween the  purchaser  and  the 
insolvent  partner  in  order  to  de- 
prive the  other  partner  of  his  rights 
under  articles  of  copartnership, 
the  court  will  lend  no  aid  to  the 
purchaser.  Renton  v.  Chaplain,  9 
N.  J.  Eq.  62. 

When  the  entire  interest  of  a 
partner  in  the  partnership  assets  is 
levied  upon  and  sold,  the  purchaser 
at  the  sheriff's  sale,  on  a  bill  for  an 
account,  will  be  entitled  to  a  de- 
cree for  one-half  of  the  proceeds 
of  the  entire  partnership  property ; 
but  when  a  partner's  interest  in 
certain  specified  articles  of  personal 
property  is  sold  under  execution, 
it  will  be  error  to  decree  him  the 
entire  interest  of  the  debtor  part- 
ner. Gerard  v.  Bates,  Sup.  Ct.  111. 
March  28,  1888. 

(c)  See  Bevan  v.  Lewis,  1  Sim. 
376.  As  to  an  injunction  against 
the  sheriff,  compare  Newell  v. 
Townsend,  6  Sim.  419,  with  Garstin 
v.  Asplin,  1  Madd.  150,  and  Jack- 


son v.  Stanhope,  10  Jur.  676.  And 
see  Story  on  Partn.  §  264.  And  as 
to  making  the  sheriff  a  party,  see 
Lord  Eldon's  observation  in  Frank- 
lyn  v.  Thomas,  3  Mer.  235,  and 
Hawkshaw  v.  Parkins,  2  Swanst. 
549. 

1  See  Place  v.  Sweetzer,  16  Ohio, 
142. 

If  one  of  several  partners  has  an 
interest  in  the  assets  of  the  part- 
nership over  and  above  the  claims 
of  his  copartners  and  those  of  the 
creditors  of  the  partnership,  there 
is  no  reason  for  the  court  to  inter- 
fere by  injunction  to  restrain  a  sale 
of  his  interest  in  the  partnership 
property  upon  execution  on  a  judg- 
ment against  such  partner  individ- 
ually. Mowbray  v.  Lawrence,  13 
Abb.  Pr.  317 ;  22  How.  Pr.  107.  See, 
also,  Hardy  v.  Donellan,  33  Ind. 
501. 

It  has  been  held  that  an  action 
will  lie  by  a  partner  to  enjoin  an 
individual  judgment  creditor  of 
the  copartner  of  the  plaintiff  from 
selling  upon  execution  the  interest 
of  the  copartner  in  the  partnership 
assets,  where  it  is  made  to  appear 
by  the  complaint  that  the  copart- 
ner whose  interest  has  been  seized 
has  in  fact  no  interest  in  the  assets, 
and  the  plaintiff  offers  to  submit 
to  an  accounting  to  show  this  to  be 


852 


CH.  V,  SEC.  IV.]  SHAKES    IN    PARTNERSHIPS. 


*359 


3.  Of  the  position  of  the  execution  debtor. 

3.  Of  the  execution  debtor.—  With  respect  to  the  execu- 
tion debtor,  it  is  to  be  observed  that,  in  the  first  place,  the 


the  case.     Turner  v.  Smith,  1  Abb. 
Pr.  (N.  S.)  304. 

In  Massachusetts  a  court  of 
equity  will  not,  on  a  bill  of  the  mem- 
bers of  a  partnership,  decree  the 
return  of  partnership  property  at- 
tached in  a  suit  of  a  creditor  of 
one  of  the  partners  against  him, 
and  enjoin  the  attaching  officer 
from  further  interferi.Bg  with  the 
property,  unless  it  appears  that  it  is 
needed  to  satisfy  the  claims  of  the 
partnership  creditors,  or  that  the 
partner  sued  has  not  an  interest  in 
the  surplus  which  may  remain 
after  payment  of  the  partnership 
debts.  A  bill  which  does  not  show 
this  is  bad  upon  demurrer.  Peek 
v.  Schultze,  1  Holmes,  28. 

It  is  held,  however,  in  Minnesota, 
that  where  an  execution  in  favor 
of  an  individual  creditor  of  one  of 
the  members  of  any  insolvent  part- 
nership is  levied  upon  his  interest 
in  certain  goods  belonging  to  the 
firm,  by  taking  possession  of  such 
goods,  and  threatening  to  sell  such 
interest,  an  action  will  not  lie  at 
the  suit  of  the  other  partner  or 
partners  for  a  perpetual  injunction 
restraining  any  further  proceedings 
under  the  levy,  even  though  the 
officer  making  the  levy  and  the 
creditor  directing  it  have  notice  of 
such  insolvency.  Wickham  v.  Da- 
vis, 24  Minn.  167. 

In  Brewster  v.  Hammett,  4  Conn. 
540,  A.  and  B. ,  being  partners,  C. 
brought  an  action  against  A.  for  a 
debt  due  from  him  individually, 
and  attached  an  undivided  moiety 
of  the  partnership  stock,  A.  hav- 


ing no  interest  therein  except  as  a 
partner.  At  this  time  A.  was  in- 
solvent; the  partnership  also  was 
insolvent.  A.  and  B.,  claiming  that 
the  creditors  of  the  partnership  had 
a  priority  of  right  to  the  partner- 
ship funds,  and  that  they  ought  not 
to  be  taken  for  the  payment  of  A.'s 
individual  debt,  then  brought  a  bill 
in  chancery  to  restrain  proceedings 
in  the  action  brought  by  C.  and  for 
a  restoration  of  the  property  at- 
tached. Held,  that  the  plaintiffs 
were  not  entitled  to  the  relief 
sought,  as  they  were  not  invested 
with  the  rights  of  the  partnership 
creditors,  and  as  the  effect  of  a 
decree  in  their  favor  would  be  to 
leave  the  partnership  funds  so  pro- 
tected from  the  claims  of  the  at- 
taching creditors,  subject  to  the 
disposition  of  the  insolvent  part- 
ner —  a  result  from  which  the  cred- 
itors of  the  partnership  would  de- 
rive no  benefit. 

And  in  Sitler  v.  Walker,  1  Freem. 
Ch.  (Miss.)  77,  it  was  held  that 
equity  would  not  restrain  the  sale 
of  the  interest  of  one  partner  on 
execution  for  his  separate  debt 
until  the  partnership  accounts  were 
taken. 

Partnership  creditors,  whose  de- 
mands are  not  due,  have  no  equity 
to  enjoin  separate  and  individual 
creditors  of  a  partner  from  attach- 
ing his  individual  property.  Hen- 
derson v.  Haddon,  12  Rich.  Eq.  393. 

As  to  who  should  be  made  party 
to  a  bill  filed  by  one  member  of  a 
firm  against  another  member  of 
the  firm  for  an  injunction  against 


853 


^360 


EIGHTS   AND    OBLIGATIONS. 


[book  III. 


execution  generally  (d)  operates  as  a  dissolution  of  the  part- 
nership, (e) l  In  the  next  place,  the  assignment  by  the 
[*360]  sheriff  to  the  purchaser  transfers  to  the  purchaser 
whatever  the  sheriff  had  power  to  assign,  and  did 
assign,  but  no  more;  and  as,  under  &fi.fa.,  the  sheriff  may 
not  have  power  to  sell  everything  which,  as  between  the 
partners,  is  to  be  considered  partnership  property,  it  by  no 
means  follows  that  the  assignment  has  transferred  to  the 
creditor  all  the  judgment  debtor's  share  and  interest  in  the 
partnership,  (f)  In  a  case,  therefore,  where  a  stranger 
purchased  from  the  sheriff  the  execution  debtor's  interest, 
and  then  assigned  it  to  the  other  partners,  it  was  held  that 
the  execution  debtor  was  still  entitled  to  an  account  from 
them,  the  sale  by  the  sheriff  not  having  divested  him  of  all 
his  interest  in  the  concern,  (g) 

the  collection  of  a  judgment  on  a    a  receiver  with  power  to  liquidate 


partnership  debt,  see  Davidson  v. 
Wilson,  3  Del.  Ch.  307. 

(d)  Not  necessarily  in  all  cases. 
See  Helmore  v.  Smith,  35  Ch.  D. 
436,  where  the  solvent  partner  (in 
effect)  paid  out  the  sheriff  with 
partnership  moneys. 

(e)  Aspinall  v.  The  London  &  N. 
W.  Rail.  Co.  11  Ha.  325;  Haber- 
6hon  v.  Blur  ton,  1  De  G.  &  Sm. 
121 ;  Skipp  v.  Harwood,  2  Swanst. 
587. 

*A  levy  of  an  execution  upon 
the  interest  of  an  insolvent  partner 
and  a  sale  thereunder  operate  as  a 
dissolution.  Renton  v.  Chapman, 
9  N.  J.  Eq.  62;  Carter  v.  Roland, 
53  Tex.  540.  See  Choppin  v.  Wil- 
son, 27  La.  Ann.  444. 

A  mere  attachment  or  mesne 
process  does  not,  however,  dissolve 
the  partnership.  Arnold  v.  Brown, 
24  Pick.  38. 

The  mere  levy  of  an  execution 
neither  dissolves  the  partnership 
nor  authorizes  the  appointment  of 


the  partnership  affairs.  A  creditor 
of  an  individual  partner  is  not  en- 
titled to  wind  up  the  firm  to  reach 
the  interest  of  such  partner  with- 
out first  fixing  a  lien  by  process. 
Lincoln  Savings  Bank  v.  Gray,  12 
Lea  (Tenn.),  459;  Choppin  v.  Wil- 
son, 27  La.  Ann.  444. 

Execution  sale  of  the  interest  of 
one  member  of  a  firm  in  the  part- 
nership property  makes  the  pur- 
chaser a  tenant  in  common  with 
remaining  members.  Carter  v. 
Roland,  53  Tex.  540;  Wright  v. 
Ward,  65  Cal.  525. 

A  purchaser  of  partnership  prop- 
erty in  execution  sale  cannot  be 
made  liable  for  a  loss  in  conduct- 
ing the  business  after  sale,  and  is 
not  entitled  to  share  in  the  profits. 
Carter  v.  Roland,  53  Tex.  540. 

(/)  See  Helmore  v.  Smith,  35  Ch. 
D.  436. 

(g)  Habershon  v.  Blurton,  1  De  G. 
&  Sm.  121. 


854 


CH.  V,  SEC.  IV.]  SHAEES    IX    PARTNERSHIPS.  *361 

Purchase  of  his  interest  by  his  copartners. —  Upon  a 
sale  by  the  sheriff  of  the  interest  of  one  partner  in  the 
property  seized  there  is  nothing  to  prevent  a  purchase  of 
that  interest  by  his  copartners.  But  the  copartners  pur- 
chasing of  the  sheriff  must  act  with  perfect  fairness.  If 
they  do  anything  to  conceal  the  true  value  of  the  share,  so 
as  to  enable  themselves  to  buy  it  for  less  than  it  would' 
otherwise  have  fetched,  the  sale  will  not  be  allowed  to 
stand.  In  Perens  v.  Johnson,  (k)  the  share  of  a  partner  in 
a  leasehold  collier}7  was  sold  by  the  sheriff  under  a  fi.  fa. 
The  sale  was  by  auction.  The  other  partners  bought  the 
share;  the  execution  creditor  was  paid  off;  and  a  balance 
was  handed  over  by  the  sheriff  to  the  execution  debtor.  It 
appeared,  however,  that  before  the  sale  took  place  it  was 
expected  that  a  valuable  seam  of  coal  would  be  reached ; 
that  the  solvent  partners  had  removed  the  gear  so  as  to 
prevent  any  one  going  down  the  mine;  that  they  had  also 
removed  some  ironstone  recently  raised,  so  as  to  lead  per- 
sons visiting  the  mine  to  believe  that  coal  was  not  so  nearly 
within  reach  as  it  was;  and  that  a  few  days  after  the  sale, 
and  after  only  one  day's  working,  a  rich  seam  of  coal  was 
actually  discovered.  The  execution  debtor  thereupon  filed 
a  bill  against  his  late  copartners,  praying  that  the  sale 
might  be  set  aside  on  the  ground  that  the  purchase  from 
the  sheriff  was  contrary  to  that  good  faith  which  should  be 
observed  by  one  partner  towards  another;  and  a 
decree  was  made  in  his  *favor  setting  the  sale  aside  [*361] 
upon  repayment  of  the  purchase  money,  with  inter- 
est at  51.  per  cent. 

Purchase  with  partnership  moneys. —  Again,  if  the  solv- 
ent partners  buy  the  execution  debtor's  share  in  the  goods 
seized,  and  pay  for  it  out  of  the  partnership  moneys,  they 
cannot  hold  the  share  for  their  own  benefit  and  treat  the 

(h)  Perens  v.  Johnson,  and  John-    Ch.  412,  V.-C.  W.,  where  a  sale  by 
son  v.  Perens,  3  Sm.  &  G.  419.  See,     the  sheriff  was  also  set  aside, 
also,  Smith  v    Hai'rison,  26  L.  J. 

855 


#362  EIGHTS   AND   OBLIGATIONS.  [BOOK    III. 

execution  debtor  as  no  longer  a  partner  or  interested  in  the 
share  purchased,  (i) 

Right  of  the  execution  creditor. —  The  execution  cred- 
itor has  no  title  to  goods  seized  under  a  fi.  fa.  issued  by  him 
unless  he  purchases  them  from  the  sheriff.  Consequently, 
where,  under  a  fi.  fa.  issued  against  one  partner  for  a  pri- 
l  vate  debt,  the  sheriff  seized  the  goods  of  the  firm,  which 
afterwards  became  bankrupt,  and  the  assignees  sold  the 
goods  seized,  it  was  held  that  an  action  by  the  execution 
creditor  against  the  assignees  for  money  had  and  received 
to  his  use  would  not  lie;  first,  because  he  had  no  title  to  the 
goods;  and  secondly,  because  if  he  had,  his  interest  in  them 
could  not  be  ascertained  without  taking  the  accounts  of  the 
partnership,  (k) 

4.  Modifications  introduced  by  the  Judicature  Acts. 

The  Judicature  Acts  and  rules  promulgated  under  them 
do  not,  unfortunately,  contain  any  directions  applicable  to 
the  subject  now  under  consideration.  Nor  has  the  new 
practice  under  them  yet  been  reduced  to  shape.  The  writer 
can  only,  therefore,  offer  the  following  suggestions  with 
reference  to  their  combined  effect: 

1.  The  practice  must  be  the  same  in  all  divisions  of  the 
high  court. 

2.  The  old  practice  must  be  adhered  to  so  far  as  it  is  con- 
sistent with  the  modern  procedure. 

3.  Some  form  of  procedure  must  be  adopted  which  shall 
have  the  effect  of  a  suit  for  an  account  and  an  injunction 
and  a  receiver. 

4.  There  appears  to  be  no  reason  why  the  sheriff  should 
not  proceed  to  seize  the  partnership  goods,  and  sell  the  exe- 
cution debtor's  share  as  before;  and  there  is  in  strict- 

[*362]  ness  no  more  *necessity  for  him  to  interplead  now 
than  before;  (I)  and  yet,  as  no  order  for  his  with- 

(t)  Helmore  v.  Smith,  35  Ch.  D.        (7c)  Garbett  v.  Veale,  5  Q.  B.  408. 
436,  where  the  assignment  by  the        (I)  See  ace.  W.  N.  1875,  p.  204. 
sheriff  was  set  aside. 


CH.  V,  SEC.  IV.]  SHAKES    IN    PARTNERSHIPS.  *362 

drawal  can  be  made  in  his  absence,  a  proceeding  by  him  in 
the  nature  of  an  interpleader  summons,  bringing  all  parties 
interested  before  the  court,  would  probably  be  the  most 
convenient  course  to  adopt. 

5.  Upon  a  seizure  by  the  sheriff  the  partners  of  the  exe- 
cution debtor  should  obtain  an  order  dissolving  the  partner- 
ship, directing  the  sheriff  to  withdraw,  and  directing  the 
accounts  of  the  partnership  to  be  taken,  and  the  value  of 
the  execution  debtor's  interest  in  the  property  seized  by  the 
sheriff  to  be  ascertained,  and  appointing  a  receiver. 

6.  After  the  accounts  have  been  taken  and  the  above 
value  ascertained,  the  receiver  should  be  directed  to  pay  the 
amount  of  such  value  to  the  purchaser  from  the  sheriff,  if 
any,  and  the  rest  of  the  share  of  the  execution  debtor  in  the 
assets  of  the  partnership  to  him.  If  the  share  has  not  been 
sold  the  execution  creditor  must  be  paid  out  of  or  to  the 
extent  of  the  above  value.  The  receiver  can  then  be  dis- 
charged. 

7.  Whether  all  this  can  be  done  without  a  transfer  to  the 
chancery  division  is  not  clear;  but  probably  it  very  often 
may  be  done;  and  practically  a  sale  by  the  sheriff  will 
probably  be  frequently  dispensed  with.  A  sale  usually 
produces  great  hardship,  as  the  value  of  the  share  sold  is 
unknown;  and  its  sale  seldom  answers  any  useful  purpose 
except  that  of  getting  rid  of  the  sheriff,  (m) 

Suggested  alteration  of  the  law. —  The  truth,  however, 
is  that  the  whole  of  this  branch  of  the  laws  is  in  a  most 
unsatisfactory  condition,  and  requires  to  be  put  on  an  en- 
tirely new  footing.  The  statutory  enactments  relating  to 
charging  orders  should  be  extended  to  all  cases  in  which 
the  share  of  a  partner  is  sought  to  be  taken  in  execution 
for  a  separate  debt  of  his  own.1 

(to)  See  a  suggested  form  of  order  against  the  property  of  partner- 
in  Seton  on  Decrees,  1214,  n.  (ed.  4),  ships  may  be  considered  in  this 
referred  to  in  Whetham  v.  Davey,  connection.  In  order  to  warrant 
30  Ch.  D.  579.  the    issuance    of    an     attachment 

1  The    subject    of    attachments    against  a    firm,  grounds  therefor 

857 


*363 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


[*363]  ^Section  V. —  Of  the  Transfer  of  Shares. 

Transfer  of  shares. —  When  persons  enter  into  a  con- 
tract of  partnership  their  intention  ordinarily  is  that  a  part- 
nership shall  exist  btween  themselves  and  themselves  alone. 
The  mutual  confidence  reposed  by  each  in  the  other  is  one 
of  the  main  elements  in  the  contract,  and  it  is  obvious  that 


must,  according  to  the  better  opin- 
ion, be  shown  against  every  mem- 
ber thereof.  Leach  v.  Cook,  10  Vt. 
239;  Wiley  v.  Sledge,  8  Ga.  532; 
Curtis  v.  Hollingsher.il,  14  N.  J.  L. 
402;  Faulkner  v.  Whitaker,  15  id. 
438 ;  Boorum  v.  Ray,  72  Ind.  151 ; 
Edwards  v.  Hughes,  20  Mich.  289; 
Cowdin  v.  Hurford,  4  Ohio,  132; 
Taylor  v.  McDonald,  4  id.  149; 
Williams  v.  Mutherspaugh,  29 
Kan.  730;  Starr  v.  Mayer,  60  Ga. 
546;  Hanson  v.  Watson,  12  Weekly 
Not.  Cas.  368;  Bogart  v.  Dart,  25 
Hun,  395.  See,  also,  Fielding  v. 
Lucas,  22  Hun,  22;  Wilson-0"13ear 
Grocery  Co.  v.  Cole,  26  Mo.  App.  5. 
See,  however,  contra,  Re  Chipman, 
14  John.  217;  S.  C.  16  id.  102; 
Scruggs  v.  Blair,  44  Miss.  406. 
See,  also,  Adams  v.  Hauter,  42  Leg. 
Int.  205;  Still  v.  Focke,  66  Tex.  715. 

An  attachment  against  a  part- 
nership by  its  firm  name,  without 
mention  of  the  names  of  the  indi- 
vidual partners,  can  only  be  levied 
on  firm  property.  Watts  v.  Rice, 
75  Ala.  289;  Mason  v.  Rice,  66 
Iowa,  174. 

But  if  levied  upon  the  individual 
property  of  one  partner  the  partner 
whose  property  is  seized  cannot 
maintain  an  action  on  an  attach- 
ment bond  running  to  the  firm 
alone.    Mason  v.  Rice,  66  la.  174. 

An  unsettled  partnership  account 
cannot  be  attached.  Laughlin  v. 
Maybin,    15   Phila.    68.     See,  also, 


Bertwhistle  v.  Woodward,  17  Mo. 
App.  277. 

No  valid  attachment  is  created 
against  partnership  property  by  a 
trustee  writ  sued  against  only  one 
member  of  the  firm.  Peabody  v. 
Maguire,  12  Atl.  Rep.  (Me.)  630. 

In  some  jurisdictions,  where  it 
is  sought  to  subject  a  debtor's 
sbare  in  partnership  property  to 
the  payment  of  his  individual  debts, 
the  better  course  is  said  to  be  to 
proceed  by  trustee  process  or  gar- 
nishment. Snell  v.  Crowe,  3  Utah, 
26 ;  Morrison  v.  Blodgett,  8  N.  H. 
238;  Dow  v.  Say  ward,  12  N.  H.  277; 
Lyndon  v.  Gorham,  1  Gall.  370. 

The  question  in  any  proceeding 
by  way  of  garnishment  of  the  in- 
terest of  the  debtor  in  the  firm 
garnished  is  for  the  jury.  Armand 
v.  Burrum,  69  Ga.  758. 

If  a  partner  of  an  insolvent  firm 
appropriates  firm  moneys  to  pay- 
ment of  his  individual  debts,  this 
is  a  fraud  upon  the  firm  creditors 
and  ground  for  an  attachment. 
Keith  v.  Armstrong,  65  Wis.  225. 

As  to  what  is  necessary  to  show 
to  sustain  a  foreign  attachment  by 
the  executrix  of  one  partner  against 
the  other  partner,  see  Davis  v. 
Tingley,  9  Atl.  R.  32 ;  S.  C.  7  Cent. 
Rep.  889. 

As  to  attachment  against  one 
partner  on  a  partnership  account 
under  section  3276  of  the  code,  see 
Connon  v.  Dunlap,  64  Ga.  680. 


858 


CH.  V,  SEC.  T.]  SHARES    IN    PARTNERSHIPS. 


*363 


persons  may  be  willing  enough  to  trust  each  other,  and  yet 
be  unwilling  to  place  the  same  trust  in  any  one  else.  Hence 
it  is  one  of  the  fundamental  principles  of  partnership  law 
that  no  person  can  be  introduced  as  a  partner  without  the 
consent  of  all  those  who,  for  the  time  being,  are  members 
of  the  firm.1     If,  therefore,  a  partner  dies,  his  executors  or 


As  to  the  liability  of  a  firm  to  at- 
tachment where  one  partner  gives 
the  check  on  a  bank  without  funds 
to  meet  it,  see  Easton  Nat.  B'k  v. 
Wilson,  12  Weekly  Not.  Cas.  336. 

What  is  due  a  partnership  cannot 
be  subject  to  garnishment  as  a 
credit  due  one  partner.  In  an  ac- 
tion against  one  partner  a  debtor  to 
the  firm  cannot  be  made  a  gar- 
nishee. Trickett  v.  Moore,  34  Kan. 
755;  Seaton  v.  Brooking,  1  Tex. 
App.  (Civ.)  585;  Ripley  v.  Savings 
B'k,  18  Bradw.  430;  People's  Bank 
v.  Shryock,  48  Md.  427;  Crescent 
Ins.  Co.  v.  Baer,  1  So.  Rep.  318; 
Lyndon  v.  Gorham,  1  Gall.  367; 
Bulfinch  v,  Winchenbach,  3  Allen, 
161 ;  Foot  v.  Hawkins,  14  Allen,  15 ; 
Sweet  v.  Reed,  12  R.  I.  121;  Win- 
ston v.  Ewing,  1  Ala.  129 ;  Branch 
v.  Adams,  51  Ga.  113 ;  Thomas  v. 
Lusk,  13  La.  Ann.  277.  See,  also, 
Brande  v.  Bond,  63  Wis.  140;  Fen- 
ton  v.  Black,  10  Mo.  App.  536. 

A  debtor  of  the  firm  "  F.  &  Co." 
cannot  be  garnished  upon  a  claim 
due  from  him  to  the  firm  fiF.  L. 
&  Co. ; "  but  if  all  the  members  of 
the  firm  to  whom  the  garnishee  is 
indebted  are  before  the  court,  the 
mistake  in  giving  the  name  of  the 
firm  will  not  prevent  the  plaintiff 
from  obtaining  judgment  against 
the  garnishee.  Field  v.  Malone, 
102  Ind.  251. 

A  justice  of  the  peace  in  gar- 
nishee proceedings,  issued  upon  a 
judgment  against  one  partner,  has 


no  right  to  settle  the  equities  be- 
tween the  partners;  but  having 
jurisdiction,  and  no  appeal  being 
taken,  such  judgment  is  conclu- 
sive and  canuot  be  attacked  collat- 
erally. Howard  v.  McLaughlin,  98 
Pa.  St.  440. 

In  Kentucky,  where  a  partner  in 
a  dissolved  firm  takes  the  note  of  a 
debtor  to  the  firm  to  himself  alone 
for  the  amouut  which  he  claims  is 
due  him,  ignoring  his  partner's 
right,  and  sues  out  an  attachment 
thereon  and  attaches  all  the  debt, 
or's  property,  his  copartner  may 
come  in  as  a  party  to  the  suit  and 
ascertain  his  interest  to  such  note. 
Snow  v.  Burnett,  1  So.  West.  Rep. 
634. 

A  partner  who  has  elected,  under 
the  wrongful  acts  of  defendant,  to 
dissolve  the  partnership,  has  a  right 
as  a  creditor  to  collect  the  amount 
due  him  from  his  copartner,  and, 
having  issued  attachment,  is  enti- 
tled, as  against  parties  who  had 
sold  goods  to  the  firm  without  the 
knowledge  that  plaintiff  was  a  co- 
partner, to  the  priority  of  his  supe- 
rior diligence.  Strong  v.  Stapp,  15 
Pac.  Rep.  (Cal.)  835. 

1  A  partner  cannot  introduce  a 
new  member  into  the  firm  without 
the  consent  of  the  other  members, 
nor  make  them  members  of  an- 
other firm.  When  made  acquainted 
with  the  facts,  the  members  should 
dissent  or  they  will  be  bound. 
Mason  v.  Connell,   1  Whart.  381 ; 


859 


-363 


RIGHTS    AND    OBLIGATIONS. 


[BOOK  III. 


devisees  have  no  right  to  insist  on  being  admitted  into  part- 
nership with  the  surviving  partners,  unless  some  agreement 
to  that  effect  has  been  entered  into  by  them,  (m) l 

Effect  of  transfer  —  Effect  of  assignment.—  Still  less 
can  a  partner  by  assigning  his  share  entitle  his  assignee  to 
take  his  place  in  the  partnership  against  the  will  of  the 
other  members,  (n)2     The  assignment,  however,  is  by  no 


Murray  v.  Bogart,  14  Johns.  318; 
Freligh  v.  Miller,  16  La.  Ann.  418; 
Channel  r.  Fassitt,  16  Ohio,  166; 
Freeman  v.  Bloomfield,  43  Mo.  391 ; 
Bennett  v.  Snyder,  76  N.  Y.  344; 
Love  v.  Payne,  73  Ind.  80 ;  McHale 
v.  Oertel,  15  Mo.  App.  583. 

The  assent  of  each  member  of  a 
copartnership  is  necessary  to  bind 
him  as  a  member  of  a  new  firm, 
but  his  express  assent  need  not  be 
proved  to  bind  him ;  it  may  be  in- 
ferred from  circumstances;  it  is 
sufficient  to  show  that  he  knew  of 
such  new  arrangement  and  made 
no  objection  thereto.  Tabb  v.  Gist, 
1  Brock.  33;  Rosentiel  v.  Gray,  112 
111.  282. 

Where  a  partner  assigned  a  por- 
tion of  his  interest,  constituting  his 
vendee  by  assignment  a  "partner 
in  the  firm  "  to  the  amount  of  one- 
eighth  of  all  its  profits  and  losses 
from  the  time  the  firm  began  busi- 
ness, the  assignee  was  received  as 
a  partner,  but  there  was  no  change 
in  the  firm  or  its  books,  nor  any- 
thing indicative  of  the  purpose  of 
distinguishing  the  business  of  one 
firm  from  that  of  the  other,  it  was 
held  that  the  assignee  was  liable  as 
a  partner  upon  a  firm  note,  given 
after  the  admission  of  the  new 
partner,  in  renewal  of  the  former 
note,  consideration  of  which  was 
services  rendered  the  old  firm. 
Earon  v.  Mackey,  106  Pa.  St.  452 ; 


S.  C.  16  Weekly  Not.  Cas.  10 ;  42 
Leg.  Intel.  110. 

Where  one  buys  a  stranded  ves- 
sel, and  agrees  to  give  another  an 
interest  therein,  the  latter  has  no 
interest  he  can  transfer  without 
the  former's  consent.  It  is  an 
agreement  to  take  in  a  partner,  and 
gives  the  second  party  no  right  to 
impose  an  unknown  partner  on 
the  first.  Taylor  v.  Penny,  5  La. 
Ann.  7. 

(m)Pearce  v.  Chamberlain,  2Ves. 
Sr.  33;  Crawford  v.  Hamilton,  3 
Madd.  354 :  Bray  v.  Fromont,  6  id. 
5;  Crawshay  v.  Maule,  1  Swanst. 
495;  Tatam  v.  Williams,  3  Ha.  347. 

1  Chittenden  v.  Witbeck,  50  Mich. 
401. 

(n)  See  Jeff erys  v.  Smith,  3  Russ. 
158. 

2  Merrick  v.  Brain ard,  38  Barb. 
574.     See  cases  cited  supra. 

An  assignment  by  copartners,  for 
the  benefit  of  their  creditors,  of 
the  entire  firm  assets,  except  prop- 
erty exempt  from  execution,  dis- 
solves the  firm  ;  and  the  subsequent 
delivery  by  the  assignees  to  their 
assignors  of  such  portions  of  the 
exempt  property  as  were  respect- 
ively owned  by  them  and  used  in 
the  business  of  the  firm  does  not 
revive  or  continue  the  partnership. 
Wells  v.  Ellis,  68  Cal.  243. 

The  purchaser  of  an  interest  of 
one  of  several  partners  has  no  right 


860 


OH.  V,  SEC.  V.]  SHARES    IN    PARTNERSHIPS.  *361 

means  inoperative;  on  the  contrary,  it  involves  several  im- 
portant consequences,  more  especially  as  regards  the  dis- 
solution of  the  firm  and  the  right  of  the  assignee  to  an 
account,  (o) 

1.  As  regards  dissolution. —  As  regards  dissolution  it  is 
remarkable  that  there  should  be  so  little  authority  to  be 
found.  It  is  generally  stated  that  if  a  member  of  an  ordi- 
nary partnership  transfers  his  share  he  thereby  dissolves 
the  partnership;  but  this  proposition  requires  qualification. 
The  true  doctrine,  it  is  submitted,  is  that,  if  the  partnership 
is  at  will,  the  assignment  dissolves  it;  (p)  and  if  the  part- 
nership is  not  at  will,  the  other  members  are  entitled  to 
treat  the  assignment  as  a  cause  of  dissolution.  It  can 
hardly  be  that  a  partner  who  has  himself  no  right  to  dis- 
solve or  to  introduce  a  new  partner  can,  by  assigning  his 
share,  confer  on  the  assignee  a  right  to  have  the 
accounts  of  the  firm  *taken,  and  the  affairs  thereof  [*36i] 
wound  up,  in  order  that  he  may  obtain  the  benefit 

of  his  assignment. 

2.  As  regards  account. —  Although  a  partner  cannot  by 
transferring  his  share  force  a  new  partner  on  the  other 
members  of  the  firm  without  their  consent,  there  is  nothing 
to  prevent  a  partner  from  assigning  or  mortgaging  his 
share  without  consulting  his  copartners;1  and  if  a  partner 

to  interfere  personall}'  in  the  affairs  entitled  to  upon  a  settlement  of 
of  the  partnership,  and  a  refusal  the  pai-tnership  accounts;  and, 
of  the  remaining  partners  to  per-  until  the  affairs  of  the  partnership 
mit  him  to  do  so  will  not  entitle  him  are  thus  wound  up,  the  partner 
to  the  interference  of  a  court  of  who  did  not  sell  is  entitled  to  the 
equity  by  injunction,  or  the  ap-  possession  of  the  property.  Miller 
pointment  of  a  receiver.  McGlen-  v.  Brigham,  50  Cal.  615. 
sey  v.  Cox,  5  Pa.  Law  J.  Rep.  203.  (o)  In  Marshall  v.  Maclure,  10 
Where  one  of  two  partners  sells  App.  Ca.  325,  a  surrender  of  a  part- 
to  a  third  person  his  interest  in  the  ner's  share  in  property  mortgaged 
goods  owned  by  the  partnership  was  held,  under  special  circum- 
the  purchaser  cannot  maintain  an  stances,  to  include  the  firm's  share, 
action  to  recover  his  interest  in  the  (p)  See  Heath  v.  Sansom,  4  B,  & 
goods,   but  must  sue  for  an    ac-  Ad.  172. 

counting,  and  will  recover  what-  J  The  sale  by  a  partner  of  his  in- 

ever  his  assignor  would  have  been  terest  is  not  a  wrong  to  his  partner, 

861 


*364 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


does    assign  or  mortgage   his   share,  he    thereby   confers 
upon  the  assignee  or  mortgagee  a  right  to  payment  of  what, 


and  if  the  damage  results  to  his 
partner  by  such  sale  it  is  damnum 
sine  injuria.  Mitchell  v.  Gormley, 
9  Ont.  139;  S.  C.  5  Can.  L.  T.  283; 
21  Can.  L.  J.  220. 

As  to  the  assignment  by  one 
partner  of  his  interest  in  a  firm 
not  in  existence  at  the  date  of  the 
assignment,  see  Hulse's  Estate,  39 
Leg.  Intel.  129. 

One  partner  may  sell  his  interest 
in  the  partnership  property  to  his 
copartner,  and  if  the  sale  be  fair 
he  will  take  the  exclusive  title 
thereto.  Reese  v.  Bradford,  13  Ala. 
837. 

One  partner  may  purchase,  on 
his  own  account,  at  a  public 
sale,  the  interest  of  his  copartner 
in  real  estate,  and  will  hold  the 
purchased  property  as  a  stranger 
might.  Bradbury  v.  Barnes,  19 
Cal.  120. 

When  a  firm  is  insolvent  a  sale 
by  one  partner  to  another  of  his 
interest  for  a  valuable  considera- 
tion does  not  of  itself  constitute  a 
fraud.  Russell  v.  McCord,  2  Flip. 
139. 

It  seems  that  to  sustain  a  sale  of 
partnership  property  by  one  part- 
ner to  another,  as  against  the  cred- 
itors of  the  firm,  it  must  appear 
that  the  firm  was  insolvent  at  the 
time  of  such  sale.  David  v.  Birch- 
ard,  53  Wis.  492. 

A  sale  by  one  partner  to  his  co- 
partner, and  a  mortgage  back  of 
the  seller's  share  of  the  partnership 
property,  upon  which  there  is  a 
policy  of  insurance  against  loss  by 
fire,  issued  to  the  firm,  do  not  con- 
stitute a  breach  of  the  condition  of 
the  policy  that  it  should  be  void  if 


the  property  shall  be  sold  without 
the  written  assent  of  the  insurers. 
Powers  v.  Guardian  Insurance  Co. 
136  Mass.  108. 

A  bona  fide  mortgage,  given  by 
a  member  of  a  firm  to  the  firm,  is 
valid,  and  in  no  sense  a  mortgage 
to  the  grantor  himself.  Galway 
v.  Fullerton,  17  N.  J.  Eq.  389. 

As  to  necessary  allegations  of  a 
bill  to  foreclose  a  mortgage  given 
by  one  partner  upon  the  sale  of 
his  interest  to  the  other,  see  Clay- 
ton v.  May,  67  Ga.  769. 

A  mortgage  by  one  partner  upon 
his  individual  interests  in  a  firm 
creates  no  actual  lien  upon  the 
firm  property.  Such  mortgage  by 
a  partner  of  his  interest  in  real  es- 
tate is  not  a  mortgage  of  the  prop- 
erty itself  nor  an  undivided  inter- 
est therein,  but  of  his  interest  in 
the  copartnership  after  its  affairs 
are  settled.  Tarbell  v.  Bradley,  7 
Abb.  N.  C.  273. 

So  a  mortgage  by  one  partner  of 
his  interest  in  firm  real  property 
cannot  prevent  the  copartners  from 
disposing  of  the  real  estate  for  the 
legitimate  purposes  of  the  copart- 
nership; and  the  title  given  by 
them  will  be  unaffected  by  the 
mortgage.  Tarbell  v.  Bradley,  7 
Abb.  N.  C.  273. 

As  to  the  equities  between  mort- 
gagee of  the  undivided  interest  of 
partners  in  an  executory  contract, 
and  the  subsequent  mortgagee  of 
the  legal  estate,  see  Edwards  v. 
McKernan,  55  Mich.  520. 

A  mortgage  by  one  member  of 
a  firm  of  his  interest  in  partner- 
ship real  estate  is  subject  to  all 
the  equities    of    the    partnership, 


862 


CH.  V,  SEC.  V.]  SHAKES    IN    PAKTNEKSHIPS. 


*3G4 


upon  taking  the  accounts  of  the  partnership,  may  be  due 
to  the  assignor  or   mortgagor,  (q) x     But  the  assignee  or 


whether  existing  at  the  time  of 
the  mortgage  or  arising  subse- 
quently thereto;  and  the  mort- 
gagee will  only  be  entitled  to  the 
mortgagor's  interest  after  all  these 
equities  are  fully  adjusted,  which 
can  only  be  determined  upon  a  full 
partnership  account.  Churchill  v. 
Proctor,  31  Minn.  129. 

A  mortgage  by  one  partner  of  a 
specific  number  of  bales  of  cotton, 
out  of  partnership  crop,  for  the 
payment  of  his  individual  debt, 
gives  the  mortgagee,  who  has  no- 
tice of  the  partnership,  no  right  to 
the  specific  property,  but  only  a 
right  to  the  ultimate  interest  of 
the  mortgagor  in  the  partnership 
effects  after  all  his  debts  are  paid  — 
to  the  value  of  the  cotton  at  the 
time  of  the  mortgage.  Nichol  v. 
Stewart,  36  Ark.  612. 

In  the  case  of  a  pledge  by  a  part- 
ner of  his  interest  in  the  firm,  to 
secure  a  loan  of  money  put  into 
the  firm  as  part  of  such  partner's 
capital,  the  pledgor  may,  by  agree- 
ment, retain  possession.  In  such 
case  the  pledgee's  right  is  superior 
to  the  claims  of  general  creditors, 
and  all  others  claiming  under  the 
pledgor,  except  purchasers  for 
•value  without  notice.  Wallace's 
Appeal,  104  Pa,  St.  559;  S.  C.  14 
Weekly  Not.  Cas.  164. 

When  a  partner  sells  his  interest 
in  the  firm  it  is  presumed  that  he 
sells  only  his  legal  interest ;  and  it 
cannot  be  assumed,  in  the  absence 
of  any  stipulation  to  that  effect, 
that  he  sold  or  intended  to  sell  his 
indebtedness  to  the  firm.  Over  v. 
Hetherington,  66  Ind.  365. 
A  partner's  sale  of  his  interest 


and  assets  of  the  firm  does  not,  it 
seems,  assign  his  personal  indebt- 
edness thereto,  unless  the  instru- 
ment of  transfer  expressly  includes 
it.     Gardiner  v.  Fargo,  58  Mich.  72. 

As  to  what  passes  under  a  special 
agreement  for  the  sale  of  the  inter- 
est in  partnership  business,  see  Al- 
bright v.  Voorhies,  36  Hun,  436. 

The  sale  by  one  of  two  partners 
of  his  interest  to  one,  who  becomes 
his  successor  in  the  firm,  does  not 
destroy  the  priority  of  the  right  of 
a  creditor  of  the  original  firm  to 
payment  of  his  debt  out  of  the 
partnership  property  of  the  orig- 
inal firm  to  the  extent  of  the  other 
original  partner's  interest  in  such 
property.  Spurr  v.  Russell,  59  N. 
H.  338. 

An  assignment  by  a  member  of 
a  firm  of  all  his  property  to  an  as- 
signee, for  the  benefit  of  his  credit- 
ors, will  convey  not  only  all  his  in- 
dividual property,  but  his  interest 
in  the  company  property.  Fellows 
v.  Greenleaf,  43  N.  H.  421. 

(q)  Whetham  v.  Davey,  30  Ch.  D. 
574;  Glyn  v.  Hood,  1  Giff.  328, 
and  1  De  G.  F.  &  J.  334.  See,  also, 
Cassels  v.  Stewart,  6  App.  Ca.  73. 

*See  Rodriguez  v.  Heffernan,  5 
John.  Ch.  417;  Nicholl  v.  Mum- 
ford,  4  id.  522;  Miller  v.  Brigham, 
50  Cal.  615 ;  Menagh  v.  Whitwell, 
52  N.  Y.  146 ;  Still  v.  Focke,  2  So. 
West.  Rep.  59;  Wallace's  Appeal, 
104  Pa.  St.  559:  S.  C.  14  Weekly 
Not.  Cas.  164;  Rosentiel  v.  Gray, 
112  111.  282. 

A  purchaser  of  the  interest  Of  a 
partner  acquires  only  a  right  to  an 
account,  save  in  the  case  of  a  bona 
fide  purchaser  for  value,  without 


863 


*36J: 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


mortgagee  acquires  no  other  r 
subject  to  the  rights  of  the 

notice  of  partnership  land,  the 
legal  title  to  which  is  either  in  the 
grantor  alone,  or  in  him  and 
others  apparently  as  tenants  in 
common.  Tarbell  v.  West,  86  N.  Y. 
280. 

The  assignee  of  an  individual 
cannot  sue  to  ascertain  whether 
one  is  not  liable  with  his  assignor 
as  partner ;  he  is  not  the  assignee 
of  a  partnership,  and  it  is  not  part 
of  his  duty  to  maintain  sucli  suit. 
Grant  v.  Crowed,  9  Atl.  R.  201. 

Four  persons  entered  into  co- 
partnership in  1832,  in  the  business 
of  manufacturing  cotton  cloths, 
for  the  term  of  five  years,  and  in 
1833  the  partnership  was  dissolved, 
and  afterwards  by  their  deed  they 
assigned  to  A.  "  all  their  right  and 
title  to  all  and  singular  the  rights, 
privileges  and  interest  secured  "  to 
them  by  the  articles  of  copartner- 
ship.    A  part  of  the  property  taken 


ight  than  this,  (r)  and  he  takes 
other  partners,1  and  will  be 

was  the  property  of  the  partners, 
and  a  part  of  the  partnership  stock 
when  the  partnership  was  formed, 
and  the  residue  was  afterwards 
purchased  by  the  partners  with 
the  general  partnership  funds. 
Held,  that  all  the  property  passed, 
wdiich  at  the  time  of  the  transfer 
was  partnership  property,  to  be 
held  and  used  by  A.  for  the  residue 
of  the  five  years,  and  that  the 
operation  of  the  assignment  was 
not  effected  by  the  dissolution,  it 
not  being  made  by  all.  Caswell  v. 
Howard,  16  Pick.  562. 

By  the  terms  of  a  contract  dis- 
solving a  partnership  between  A. 
and  B.  in  a  certain  store,  the  for- 
mer sold  the  latter  "  all  the  right, 
title  and  interest  of  said  A."  in  said 
store,  with  all  the  notes  and  ac- 
counts due,  the  latter  assuming 
the  payment  of  all  debts  and 
claims    against    said  firm.     Held, 


(r)  Smith  v.  Parkes,  16  Beav.  115. 

1  Where  the  interest  of  one  part- 
ner in  the  partnership  property 
passes  to  another  person  it  is  im- 
material whether  that  transfer  be 
effected  by  a  sale  by  the  partner 
himself  for  a  valuable  considera- 
tion, by  a  sale  of  his  interest  on 
execution,  by  his  death  and  the 
succession  of  his  executor  or 
administrator,  or  by  assignment 
under  the  bankrupt  or  insolvent 
laws.  In  all  these  cases  the  party 
coming  into  the  right  of  the  part- 
ner comes  into  nothing  more  than 
an  interest  in  the  partnership, 
which  cannot  be  tangible,  made 
available,  or  delivered,  except 
under    an    account    between    the 


partner  and  the  partnership;  and 
it  is  an  item  in  the  account  that 
enough  must  be  left  for  the  part- 
nership debts.  Baker's  Appeal,  21 
Pa.  St.  76;  Fourth  National  Bank 
v.  Carrollton  Railroad,  11  Wall.  624 ; 
Mords  v.  Gleason,  64  N.  Y.  204; 
Miller  v.  Brigham,  50  Cal.  615. 

Where  real  estate  held  by  the 
members  of  a  partnership  as  part- 
nership property  is  mortgaged  by 
one  of  the  partners  to  secure  his 
individual  debt,  the  mortgagee 
only  acquires  a  lien  upon  what 
may  be  the  share  of  the  mortgagor 
after  settlement  of  the  partner- 
ship accounts  and  the  payment  of 
all  partnership  debts.  Conant  v. 
Frary,  49  Ind.  530. 


864 


CH.  V,  SEC.  V.]  SHARES    IN   PARTNERSHIPS. 


5G4 


affected  by  equities  arising  between  the  assignor  and  his 
copartners  subsequently  to  the  assignment,  (s)     Even  if  the 


that  the  contract  raised  the  pre- 
sumption that  the  parties  intended 
a  complete  settlement  of  all  the 
partnership  affairs ;  that  a  balance 
standing  to  the  credit  of  the  firm 
in  a  bank  was  embraced  in  the 
"  accounts  due  the  firm,"  and  that 
there  was  no  latent  ambiguity  in 
the  contract.  Burress  v.  Blair,  61 
Mo.  133. 

W.  bought  all  the  interest  of  M. 
in  the  property  of  the  firm  of  R.  & 
M.,  and  then  formed  a  partnership 
with  R. ,  agreeing  to  put  in  all  the 
property  he  received  from  M. 
Held,  that  a  bank  deposit  in  the 
name  of  R.  &  M.,  of  which  both 
parties  were  ignorant  at  the  time, 
became  the  partnership  property 
of  the  new  firm,  W.  &  R.  Cram  v. 
Union  Bank,  1  Abb.  App.  Dec.  461. 
In  an  agreement  between  part- 
ners it  was  agreed  that  for  the 
purpose  of  disposing  of  the  joint 
stock  of  the  firm,  "  as  detailed  in  " 
a  prior  inventory  thereof,  all  the 
property  of  the  firm  excepting  cer- 
tain specified  items,  and  excepting 
"  the  book  accounts  and  receiv- 
ables," should  be  put  up  and  bid 
upon  by  the  partners:  this  was 
done,  and  plaintiff  became  the 
purchaser.  In  an  action  for  an 
accounting  it  appeared  that  after 
the  inventory  and  prior  to  the  bid- 
ding certain  chattels  of  the  firm 
had  been  sold.  Held,  that  the  sale 
did  not  include  said  chattels  or  the 
money  or  debts  obtained  therefor ; 


that  the  statement  as  to  the  inven- 
tory was  simply  by  way  of  refer- 
ence, and  in  the  nature  of  a  recital 
or  matter  of  inducement.  Deering 
v.  Metcalf,  74  N.  Y.  501. 

A  sale  by  a  partner  to  his  copart- 
ner of  all  his  interest  in  the  prop- 
erty, effects,  claims,  assets  and 
debts  of  a  firm  does  not  pass  to  the 
purchaser  an  account  standing 
upon  the  books  of  the  firm  against 
the  partner  making  the  sale,  nor, 
as  it  has  been  held,  the  seller's  in- 
terest in  the  capital  originally  con- 
tributed by  him  to  the  firm.  Cof- 
fing  v.  Taylor,  16  111.  457.  See, 
also,  Hasselman  v.  Douglass,  52 
Ind.  252;  Owen  v.  Hetherington, 
66  Ind.  365. 

In  Owen  v.  Hetherington,  supra, 
in  a  suit  upon  a  promissory  note, 
the  defendant  answered  that  him- 
self, B.  and  C.  were  partners;  that 
B.  and  defendant  bought  out  C.'s 
interest  in  the  concern,  each  to  pay 
one-half  the  amount  agreed  upon ; 
that  the  note  in  suit  was  executed 
by  defendant  to  C.  in  discharge  of 
his  half ;  that  when  C.  retired  from 
the  firm  he  was  indebted  to  it  in  a 
certain  sum  on  his  individual  ac- 
count, which  indebtedness  C.  had 
fraudulently  concealed  from  the 
defendant;  that  defendant  subse- 
quently bought  out  B.,  and  became 
thereby  the  owner  of  the  entire 
claim  against  C,  and  asked  that 
such  claim  be  allowed  as  a  set-off 
against  the  note.     Held,  that  such 


(s)See  Cavander  v.  Bulteel,  9 
Ch.  78 ;  Lindsay  v.  Gibbs,  3  De  G. 
&  J.  690 ;  Guion  v.  Trask,  1  De  G. 
F.  &  J.  379,  per  Turner,  L.  J.    See, 

Vol.  1  —  55  865 


also,  Re  Knapman,  18  Ch.  D.  300 ; 
Bergmann  v.  McMillan,  17  id.  423; 
Morris  v.  Livie,  1  Y.  &  C.  C.  380. 


'364 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


assignee  gives  notice  of  the  assignment  he  cannot  (if  the 
partnership  is  for  a  term)  acquire  a  right  to  the  assignor's 


claim  did  not  constitute  a  set-off. 
When  a  partner  sells  his  "  interest 
in  the  concern"  it  must  be  pre- 
sumed that  he  sells  only  his  legal 
interest  in  the  firm  ;  and  it  cannot 
he  assumed,  in  the  absence  of  any 
stipulation  to  that  effect,  that  such 
partner  sold  or  intended  to  sell  his 
indebtedness  to  the  firm.  Held, 
also,  that  it  would  be  assumed  that 
C.'s  indebtedness  to  the  firm  ap- 
peared upon  its  books,  and  that 
such  books  were  open  to  the  exam- 
ination of  the  defendant,  and  his 
alleged  ignorance  of  the  existence 
of  such  indebtedness  was  the  result 
of  his  own  inexcusable  negligence. 

But  where,  by  the  articles  of 
partnership,  it  was  provided  that 
the  accounts  of  each  partner  to  the 
firm  "  shall  stand  due  to  the  con- 
cern in  the  same  manner  as  any 
other  account  due  by  a  party  un- 
connected with  the  business,"  and 
upon  the  dissolution  of  the  firm, 
under  the  written  terms  thereof, 
one  of  the  partners  "  agreed  to 
purchase  all  right  and  interest  of 
the  other  partner  in  the  stock,  cash, 
notes,  book-accounts,  and  every- 
thing connected  with  the  firm," 
held,  that  the  account  of  the  firm 
against  the  partner  selling  out  was 
canceled  and  extinguished  in  the 
agreement  of  dissolution  and  pur- 
chase. Murdock  v.  Mehlhop,  26 
Iowa,  213. 

So,  where  one  partner,  having  a 
large  pecuniary  interest  in  the  firm, 
but  being  individually  a  debtor 
thereto  for  a  certain  amount,  as 
appeared  by  entries  on  their  books, 
sold  and  conveyed  to  the  other 
partner  "  all  his  right,  title  and  in- 


terest in  and  to  all  the  property 
and  estate,  real,  personal  and 
mixed,  belonging  to,  or  which  of 
right  ought  to  belong  to,  said  firm," 
held,  that  such  conveyance  trans- 
ferred to  the  other  partner  only  his 
interest  in  the  concern  which  re- 
mained after  deducting  such  in- 
debtedness, and  that  the  amount  so 
charged  to  him  individually  could 
not  thereafter  be  collected  of  him. 
Beckley  r.  Munson,  22  Conn.  299 : 
S.  P.  Finlay  v.  Fay,  17  Hun,  67. 

Where  one  of  two  partners  sold 
out  to  the  other,  the  purchaser 
taking  all  the  assets  and  assuming 
the  payment  of  all  the  liabilities; 
and  where,  in  proceedings  between 
the  two,  under  a  submission  to 
arbitrators,  the  arbitrators  found 
that  in  the  keeping  of  the  books  of 
the  firm  there  had  been  mistakes, 
and  that  the  vendor  had  received 
credits  and  cash  with  which  he  was 
not  charged,  amounting  to  the  sum 
of  $1,900  —  among  which  was  the 
following  item:  "For  credits  en- 
tered, which  he  is  not  entitled 
to,  $1,431.84" — which  sum  was 
awarded  to  the  vendee  of  the  part- 
nership interest;  and  where  it  was 
claimed  that  the  vendee  was  enti- 
tled to  recover  for  only  one-half  of 
the  said  sum  of  $1,431.84,  held, 
that  the  vendee  was  substituted  to 
all  the  rights  of  the  partnership, 
and  whatever  either  was  owing  to 
the  firm  belonged  to  him.  Tomlin- 
son  v.  Hammond,  8  Iowa,  40. 

A  partnership  was  dissolved  by 
articles  of  dissolution,  dated  9th  of 
February,  1839,  by  which  the  com- 
plainants were  to  become  possessed 
of  all  the  stock,  debts  and  assets  of 


866 


CH.  V,  SEC.  V.]  SHARES    IN    PARTNERSHIPS. 


*3G± 


share  as  it  stands  at  the  time  of  the  assignment  or  notice, 
discharged  from  subsequent!}7  arising  claims  of  the  other 


the  firm,  and  pay  to  defendant  a 
certain  sum,  and  these  conditions 
being  complied  with  the  parties 
wero  mutually  to  release  all  claims 
against  each  other.  An  account 
was  found  on  the  books  charging 
defendant  with  $2,100  for  various 
items,  balanced  by  an  entry  of 
credit  for  that  sum  "  for  expenses," 
dated  the  1st  of  February,  1839. 
Upon  a  bill  attacking  this  entry  as 
unauthorized  by  the  terms  of 
the  partnership,  and  fraudulently 
made  pending  the  negotiation  for 
a  dissolution,  held.  1.  If  the  de- 
fendant had  stood  charged  on  the 
books  with  the  $2,100  at  the  time 
the  terms  of  the  dissolution  were 
agreed  upon,  the  settlement  would 
have  released  the  indebtedness. 
2.  But  if  the  terms  of  dissolution 
were  settled  on  the  supposition 
that  defendant's  account  had  been 
properly  balanced,  when  in  fact 
the  credits  had  been  improperly 
and  fraudulently  entered,  the  com- 
plainants were  entitled  to  recover 
the  amount  of  the  debit  in  defend- 
ant's account.  3.  In  the  absence 
of  all  proof  on  the  subject  it  must 
be  assumed  that  complainants 
dealt  with  defendant  under  the 
belief  that  the  books  had  been 
fairly  and  correctly  kept,  and  the 
credit  being  proved  improper  they 
were  entitled  to  relief  against  it. 
Trump  v.  Baltzell,  3  Md.  295. 

Where  a  partner  sells  his  interest 
in  his  firm,  including  the  stock  and 
excepting  the  accounts  and  indebt- 
edness due  it,  to  his  copartners,  the 
sale  covers  amounts  which  the 
vendees  have  failed  to  pay  in  as 
partners  to  make  their  respective 


shares  of  the  capital  stock  equal  to 
the  capital  paid  in  by  him,  as  well 
as  their  liability  for  moneys  with- 
drawn from  the  firm  by  them. 
Flynn  v.  Fish,  7  Lans.  117. 

Where  certain  persons  by  a  writ- 
ing signed  by   them    formed    an 
association  for  publishing  a  daily 
and  weekly  newspaper,  and  therein 
and  thereby  agreed  that  said  news- 
paper, and  the  good-will  thereof, 
and  all  the  other  goods,  etc.,  of 
the  association,  "as  they  shall  from 
time  to  time  exist,  shall  be  divided 
into,  and  shall  always  consist  of, 
one  hundred  equal   shares,  to  be 
called  capital  stock ;  "  and  in  what 
proportions  such  stock  should  be- 
long to  them    in    severalty;  and 
thereby,  by  the  sixth  article  thereof, 
also  agreed  that  each  party  should 
have  the  right  to  sell  any  of  his 
said  stock,  but,  before    doing  so, 
should  offer  the  same  to  the  asso- 
ciation, and   give    it    the    refusal 
thereof  for  ten  days,  and  that  no 
"  purchaser   shall  acquire  any  in- 
terest whatever   in  the   profits  of 
said  papers  till  he  shall  receive  a 
certificate    or  scrip    for    his    said 
shares,  signed    by  all   the  parties 
hereto,  and   duly  registered    in  a 
book  to  be  kept  for  that  purpose," 
which  scrip  shall  certify  that  the 
holder  of  it  "  is  entitled  to  partici- 
pate, in  proportion  to  his  shares, 
only  in  that  portion  of  the  profits 
which  may  be  assigned  to  the  party 
selling  to  such  purchaser,  and  shall 
not    be    entitled    to   any  voice    or 
agency  whatever  in  the  conduct, 
control,  management  or  affairs  of 
said   company  or    of    said    news- 
papers."   Held,  1.  That  the  plaint- 
867 


:-3G4 


KIGIITS    AND    OBLIGATIONS. 


[BOOK    III. 


partners,  (t) 1     The  assignment  cannot  deprive  them  of  their 
rio-ht  to  continue  the  partnership,  and  consequently  to  bring 


iff,  who  purchased  thirty  shares  of 
the  stock  from  a  prior  and  regis- 
tered purchaser  thereof,  was,  as 
between  him  and  his  vendor,  the 
owner  thereof,  and  as  such  equi- 
tably entitled  to  any  dividends  of 
profits  ascertained  and  declared 
while  he  was  such  owner,  and 
credited  on  the  books  of  the  asso- 
ciation to  such  stock  as  its  just  pro- 
portion of  such  ascertained  profits, 
although  such  stock  was  so  pur- 
chased by  the  plaintiff  without  a 
previous  offer  of  it  by  his  vendor 
to  the  association  or  to  either  of 
his  associates. 

2.  A  sale  and  assignment  by  the 
plaintiff,  after  such  a  dividend  of 
profits,  of  tbe  said  "  thirty  shares 
of  capital  stock,"  "and  all  future 
benefits  and  dividends  thereof," 
with  full  authority,  as  the  attorney 
of  the  plaintiff  and  of  his  vendor, 
to  sell  for  them  "  all  or  any  part 
of  said  stock,"  did  not  pass  to  the 
plaintiff's  vendee  any  right  to  the 
dividend  so  previously  declared 
and  credited  to  the  said  thirty 
shares. 

3.  A  written  notice  signed  by  one 
of  the  associates,  and  served  (on  all 


persons  interested  in  the  capital 
stock)  after  such  a  dividend  of 
profits  had  been  made,  declaring 
the  association  dissolved ;  and  the 
institution  by  him  of  a  suit  to  ob- 
tain a  judgment  declaring  it  to  be 
dissolved,  etc.,  operated  as  a  disso- 
lution of  the  association,  and  made 
plaintiff's  legal  title  to  the  profits 
so  allotted  and  credited  to  his  thirty 
shares  perfect  and  absolute,  and 
completed  his  right  to  sue  the  asso- 
ciates and  recover  from  them  such 
ascertained  and  declared  profits, 
unembarrassed  by  any  of  the  con- 
ditions and  provisions  contained  in 
the  sixth  article  of  association. 

4.  But  there  would  be  deducted 
from  such  declared  profits  three- 
tenths  of  a  debt  owing  by  the  asso- 
ciation when  the  dividend  was  de- 
clared and  subsequently  paid  by  it, 
but  not  then  considered,  because  its 
amount  was  not  then  known  or 
capable  of  being  ascertained.  Har- 
per v.  Raymond,  3  Duer,  29. 

A.  and  B.,  partners  in  trade, 
made  a  written  agreement  whereby 
the  former,  in  consideration  of  a 
certain  sum  of  money  to  be  paid 
him,  and   of  a  certain  amount  of 


{t)See  Bergmann  v.  McMillan,  17 
Ch.  D.  423:  Cavander  v.  Bulteel,  9 
Oh.  78;  Kelly  v.  Hutton,  3  Ch.  703; 
Redmayne  v.  Forster,  2  Eq.  467. 

1  See,  however,  Mosely  v.  Garrett, 
1  J.  J.  Marsh.  212,  where  it  was 
held  that  if  a  partner  mortgage  his 
interest  in  partnership  property 
the  other  partner  cannot  apply  it 
in  discharge  of  the  firm  debt. 

"Where  the  interest  of  one  of  the 
partners  in  the  property  of  a  part- 


nership is  assigned  by  him  as  se- 
curity for  his  individual  debts,  and 
such  assignee  permits  the  business 
to  go  on  in  its  ordinary  course, 
such  security  becomes  subject  to 
the  fluctuations  of  the  business, 
and  upon  the  subsequent  dissolu- 
tion is  only  entitled  to  what  re- 
mains to  such  partner  after  the 
payment  of  the  debts  of  the  firm. 
Bank  v.  Fowle,  4  Jones,  Eq.  8. 


868 


Cn.  V,  SEC.  V.]  SHARES    IN    PARTNERSHIPS. 


*364' 


subsequent  dealings  and  transactions  into  account.  It  seems, 
however,  that  an  assignee  of  a  share  in  a  partnership  can 


goods  to  be  withdrawn  by  him 
from  the  stock  of  the  firm,  and  of 
the  assumption  by  the  latter  of  all 
contracts  and  debts  of  the  firm, 
sold  and  transferred  to  B.  all  the 
interest  of  A.  in  the  assets  of  the 
firm,  including  money  on  hand, 
notes,  accounts,  stock,  machinery 
and  material;  the  instrument  recit- 
ing that  the  object  and  purport  of 
the  contract  was  the  withdrawal  of 
A.  from  the  firm,  and  the  release 
of  A.  by  B.  "  from  any  and  all  lia- 
bilities on  account  thereof,"  and 
that  if  B.  should  fully  perform  the 
agreement  and  release  A.  in  ac- 
cordance with  the  provisions  of  the 
contract,  the  sale  should  be  valid 
in  law,  else  void  and  of  no  effect. 
Held,  in  an  action  by  A.  against  B. 
on  said  contract  to  recover  said 
sum  of  money  as  stipulated  therein, 
that  A.  was  released  from  all  lia- 
bility on  account  of  any  claim 
against  him  or  debt  due  from  him 
in  favor  of  said  firm,  as  well  as  re- 
leased from  and  secured  against 
any  liability  of  the  firm  to  any 
otlier  person.  Headley  v.  Shelton, 
51  Ind.  388. 

Where  one  partner  purchases  of 
his  copartner  his  interest  in  the 
partnership  property  under  a  mis- 
take as  to  the  true  condition  of  the 
partnership  accounts,  but  without 
fraud  in  the  partner  selling,  there 
is  no  legal  consideration  for  a  prom- 
ise of  the  latter  to  make  up  the 
amount  of  the  mistake.  Eakin  v. 
Fenton,  15  Ind.  59. 

One  partner  sold  to  his  copartner 
his  interest  in  the  partnership  ef- 
fects, and  afterwards  it  was  dis- 
covered that  the  inventory  and  es- 


timate of  the  effects  which  the  par- 
ties had  before  them  at  the  time  of 
the  sale  was  erroneous,  and  that 
the  effects  were  in  fact  less  than 
appeared  from  the  inventory.  The 
sum  paid  for  the  selling  partner's 
interest  was,  however,  considerably 
less  than  his  share  of  the  amount 
of  the  inventory.  Held,  that,  while 
the  sale  remained  in  force,  an  ac- 
tion could  not  be  maintained  to  re- 
cover the  difference  between  the 
actual  amount  of  the  effects  and 
the  amount  stated  in  the  inventory. 
Wood  v.  Johnson,  13  Vt.  191. 

One  of  two  copartners,  without 
the  knowledge  of  the  other,  mort- 
gaged an  undivided  half  of  part- 
nership property  to  secure  his  pri- 
vate debt.  A  third  party  bought 
the  property,  promising  to  pay  the 
mortgagee  one-half  its  value ;  but, 
being  garnished  by  a  firm  creditor, 
he  was  obliged  to  pay  over  the  en- 
tire value.  Held,  that  his  prom- 
ise to  pay  the  mortgagee  could  not 
be  enforced,  the  consideration  hav- 
ing failed.  Sauntry  v.  Dunlap,  12 
Wis.  364. 

A  bona  fide  transfer  of  an  inter- 
est in  a  partnership  may  be  made 
without  writings  or  vouchers.  Re 
Great  Western  Tel.  Co.  5  Biss.  363. 

A  notice  to  one  partner  in  pos- 
session of  the  partnership  property 
of  the  purchase  of  another  partner's 
interest  is  a  sufficient  delivery  to 
constitute  a  valid  sale.  Whigham's 
Appeal,  63  Pa.  St.  194. 

A  partner  sold  his  interest,  which 
was  one-half,  in  the  business  to  his 
copartners  for  a  given  sum;  pro- 
viding further  that,  when  the  in- 
debtedness of  the  firm  was  ascer- 


869 


f3G5 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    Mi 


compel  the  other  partners  to  come  to  an  account  with 
him;  (w)  but  the  analogy  furnished  by  sub-partnerships 
leads  to  the  inference  that  the  assignee  must,  to  use  Lord 
Elclon's  language,  be  satisfied  with  the  share  of  the  profits 
arising  and  given  to  the  assignor.  (%) 

Transfers  allowed  by  agreement. —  If  partners 
[*3G5]  choose  to  agree  that  any  of  them  shall  be  at  ^"lib- 
erty to  introduce  any  other  person  into  the  partner- 
ship, there  is  no  reason  why  they  should  not;  nor  whv, 
having  so  agreed,  the}''  should  not  be  bound  by  the  agree- 
ment, (y) l    Persons  who  enter  into  such  an  agreement  con- 


tained, if  it  did  not  amount  to  over 
#9,000,  they  were  to  execute  to 
him  their  note  for  $1,500,  or  if  the 
debts  of  said  firm  should  amount 
to  over  $9,000,  then  the  said  note  to 
be  proportionately  less  according 
to  the  increase  in  the  amount  of 
said  indebtedness.  It  being  ascer- 
tained that  the  indebtedness  was  in 
excess  of  $9,000,  held,  that  the  ex- 
cess should  reduce  the  amount  of 
the  note  in  the  one-half  amount  of 
such  excess.  Murchison  v.  Warren, 
50  Tex.  27. 

One  of  the  partners  in  the  busi- 
ness of  brewers  executed  an  agree- 
ment for  the  sale  of  "  his  whole  in- 
terest in  the  brewery  at,"  etc., 
"consisting  of  stock  on  hand,  per- 
sonal property,  real  estate,"  etc., 
describing  certain  town  lots,  "  for 
the  sum  of,"  etc.  Held,  that  this 
agreement,  taken  according  to  its 
terms,  did  not  dispose  of  moneys 
on  hand  or  on  deposit  belonging  to 
the  partnership,  or  of  bills  receiv- 
able or  accounts  in  favor  of  the 
firm.  Gamier  v.  Gebhard,  33  Ind. 
225. 

(»)Nee  Whetham  v.  Davey,  30 
Ch.  D.  574;  Glyn  v.  Hood  and 
Kelly  v.  Hutton,  ubi  supra.     But 


Kelly  v.  Hutton  appears  to  have 
been  a  case  of  co-ownership  in  the 
newspaper  and  a  partnership  in  its 
profits. 

(a?)  See  ante,  p.  48,  and  Brown  v. 
De  Tastet,  Jac.  284,  where  the  bill 
was  dismissed  against  the  other 
partners. 

(y)  Lovegrove  v.  Nelson,  3  M.  & 
K.  20. 

1  It  was  agreed  by  articles  of 
copartnership  that  any  partner 
might  transfer  his  share  by  a  writ- 
ten certificate,  which,  when  lodged 
with  the  clerk,  should  give  the  as- 
signee all  the  privileges,  and  sub- 
ject him  to  all  the  liabilities,  of  an 
original  partner.  Held,  that  such 
certificate  was  not  material  to  a 
sale.  Alvord  v.  Smith,  5  Pick.  232. 
The  members  of  a  partnership 
received  from  their  treasurer  cer- 
tificates of  stock,  containing  the 
provision  that  no  shares  should  be 
transferred  without  consent  of  the 
treasurer  and  directors.  A  share 
was  assigned  to  the  plaintiff  with- 
out such  consent,  and  he  brought  a 
bill  to  compel  the  company  to  ac- 
count, alleging  himself  to  be  a 
partner.  Held,  that  he  was  not  a 
partner,  and  that  the  bill  must  bo 


870 


CH.  V,  SEC.  V.]  SHARES    IN    PARTNERSHIPS. 


*365 


sent  prospectively  and  once  for  all  to  admit  into  partnership 
any  person  who  is  willing  to  take  advantage  of  their  agree- 
ment, and  to  observe  those  stipulations,  if  any,  which  may 
be  made  conditions  of  his  admission.  Such  an  agreement 
as  this  is  the  basis  of  every  partnership  the  shares  in  which 
aie  transferable  from  one  person  to  the  other.  Those  who 
form  such  partnerships,  and  those  who  join  them  after  they 
are  formed,  assent  to  become  partners  with  any  one  who  is 
willing  to  comply  with  certain  conditions,  (s) 

As  observed  in  Lovegrove  v.  Nelson,  (a)  "To  make  a  per- 
son a  partner  with  two  others  their  consent  must  clearly  be 
had,  but  there  is  no  particular  mode  or  time  required  for 
giving  that  consent;  and  if  three  enter  into  partnership  by 
a  contract  which  provides  that,  on  one  retiring,  one  of  the 
remaining  two,  or  even  a  fourth  person  who  is  no  partner 
at  all,  shall  name  the  successor  to  take  the  share  of  the  one 
retiring,  it  is  clear  that  this  would  be  a  valid  contract,  which. 

Kingman  v.  Spurr,   7 


dismissed 
Pick.  235. 

Relief  in  equity  may  be  had  by 
A.  against  B.  and  C.  for  non-per- 
formance of  an  agreement  in  writ- 
ing by  which  A.,  with  B.'s  consent, 
assigned  to  C.  all  A.'s  share  in  a 
partnership  between  A.  and  B., 
and  B.  and  C.  covenanted  to  as- 
sume the  debts  of  that  firm,  and 


liabilities.  Certain  partners  as- 
signed their  stock,  but  did  not 
transfer  it  in  the  manner  prescribed 
by  the  articles.  Their  assignees 
were,  however,  received  and 
treated  as  partners  by  the  other 
members,  who  ceased  to  regard  the 
assignors  as  partners.  In  an  ac- 
tion, more  than  four  years  later,  to 
compel  the  assignors  to  share    a 


A.  and  B.  agreed  with  C.  that  such    company  loss,  held,  that  they  were 


debts  should  not  exceed  a  certain 
amount.  Scovill  v.  Kinsley,  13 
Gray,  5. 

The  articles  of  a  joint-stock  com- 
pany provided  that  a  partner  wish- 
ing to  dispose  of  his  interest  should 
first  offer  his  stock  to  the  company, 
and  second,  pay  up  so  much  of  it 
as  should  have  been  called  for, 
after  which  he  might  absolutely 
transfer  the  stock  on  the  company 
books,  and  the  company  were 
bound  to  receive  his  assignee  and 
look    to    him    for    all   subsequent 

871 


not  liable,  and  that  the  stock  was 
assigned  so  as  to  discharge  the  as- 
signors from  liability  for  the  debts 
of  the  company,  although  the  mode 
prescribed  by  the  articles  was  not 
pursued,  the  company  having  rec- 
ognized the  assignees  as  partners, 
and'  having  ceased  to  regard  the 
assignors  as  such.  Wells  v.  Wilson, 
3  Ohio,  425. 

(z)  See  Fox  v.  Clifton,  9  Bing. 
119. 

(a)  3  M.  &  K.  1. 


"'306  EIGHTS   AND    OBLIGATIONS.  [BOOK    III. 

the  court  must  perform,  and  that  the  new  partner  would 
come  in  as  entirely  by  the  consent  of  the  other  two  as  if 
they  had  adopted  him  by  name." 

Effect  of  transfer  where  there  is  a  right  to  assign.— 
Where  a  partner  has  an  unconditional  right  to  transfer  his 
share  he  may  transfer  it  to  a  pauper,  and  thus  get  rid  of 
all  liability  as  between  himself  and  his  copartners  in  respect 
of  transactions  subsequent  to  the  transfer  and  notice  thereof 
given  to  them,  (b)  But  even  in  this  case  the  transfer  alone 
does  not  render  the  transferee  a  member  of  the  partnership, 
and  liable  as  between  himself  and  the  other  members  to 
any  of  the  debts  of  the  firm,  (c)  In  order  to  render  him  a 
partner  with  the  other  members  they  must  acknowledge 
him  to  be  a  partner  or  permit  him  to  act  as  such,  (d) 

Effect  on  continuity  of  firm. —  As  an  ordinary  partner- 
ship is  not  distinguishable  from  the  persons  compos- 
[*366]  ing  it,  and  as  every  change  amongst  those  *persons 
creates  a  new  partnership,  it  follows  that  every  time 
a  partner  transfers  his  share  to  a  non-partner  the  continuity 
of  the  firm  is  broken.1  In  this  respect  such  companies  as 
are  not  mere  partnerships  on  a  large  scale  differ  from  or- 
dinary firms,  their  continuance  not  being  interrupted  by 
changes  amongst  their  members,  (e) 

Mining  partnerships. —  An  apparent  exception  to  the 
rule  that  a  share  in  a  partnership  cannot  be  transferred 
without  the  consent  of  all  the  partners  exists  in  the  case  of 
mining  partnerships.  Mines  are  a  peculiar  species  of  prop- 
erty, and  are  in  some  respects  governed  by  the  doctrines  of 
real  property  law,  and  in  others  by  the  doctrines  which 
regulate  trading  concerns.  Regarding  them  as  real  prop- 
erty and  their  owners  as  joint  tenants  or  tenants  in  com- 

(b)  Jefferys  v.  Smith,  3  Russ.  158.  to  the  contrary,  that  as  between 

(c)  Ibid.  themselves    the    partnership    con- 

(d)  Ibid.  tinues  with  only  a  change  in  the 
1  Where  one  partner  sells  out  to  proportions  of  their  interests.  Fred- 

another,  and  the  remaining  ones     erick  v.  Cooper,  3  Iowa,  171. 
continue  the  business,  it  will  be        (e)  See  Mayhew's  Case,  5  De  G. 
presumed,  in  the  absence  of  proof    M.  &  G.  837. 

872 


CH.  V,  SEC.  V.]  SHARES    IN    PARTNERSHIPS.  *366 

mon,  each  partner  is  held  to  be  at  liberty  to  dispose  of  his 
interest  in  the  land  without  consulting  his  co-owners;  and 
a  transfer  of  this  interest  confers  upon  the  transferee  all 
the  rights  of  a  part  owner,  including  a  right  to  an  account 
against  the  other  owners,  (f)  But  even  here,  if  the  per- 
sons originally  interested  in  the  mine  are  not  only  part 
owTners,  but  also  partners,  a  transferee  of  the  share  of  one 
of  them,  although  he  would  become  a  part  owner  with  the 
others,  would  not  become  a  partner  with  them,  in  the  proper 
sense  of  the  word,  unless  by  agreement  express  or  tacit,  {g) 
Ships. —  Similar  observations  apply  to  transfers  of  shares 
in  ships. 

(/)  See  Bentley  v.  Bates,  4  Y.  &  (g)  As  in  Jefferys  v.  Smith,  3 
C.  Ex.  182;  Redmayne  v.  Forster,  Russ.  158;  Crawshay  v.  Maule,  1 
2  Eq.  467.  Swanst.  518. 

873 


[*367]  ^CHAPTER  VI. 

OF  CONTRIBUTION  AND  INDEMNITY*  WITH  REFERENCE  TO 
PARTNERSHIP. 

Subject  of  present  chapter. —  In  this  chapter  it  is  pro- 
posed to  consider  the  nature  of  those  expenses  and  losses 
which,  as  between  the  members  of  a  firm,  are  chargeable 
to  the  firm,  and  also  the  nature  of  those  which  are  properly 
chargeable  against  some  one  or  more  of  the  members  ex- 
clusively of  the  others.  In  other  words,  it  is  proposed  to 
investigate  the  principles  upon  which,  in  taking  the  accounts 
of  a  firm,  a  given  expense  or  loss  is  to  be  placed  to  the  debit 
of  the  firm,  or  to  the  debit  of  one  or  more  of  its  members 
separately. 

In  connection  with  this  subject  it  must  always  be  borne 
in  mind  that  every  member  of  an  ordinary  firm  is,  to  a  cer- 
tain extent,  both  a  principal  and  an  agent.  He  is  liable  as 
a  principal  to  the  debts  and  engagements  of  the  firm,  and 
in  respect  of  them  he  is  entitled  to  contribution  from  his 
copartners;  for  they  have  no  right  to  throw  on  him  alone 
the  burden  of  obligations  which,  ex  hypothesis  are  theirs  as 
much  as  his.  (a)  Again,  each  member,  as  an  agent  of  the 
firm,  is  entitled  to  be  indemnified  by  the  firm  against  losses 
and  expenses  hona  fide  incurred  by  him  for  the  benefit  of 
the  firm,  whilst  pursuing  the  authority  conferred  upon  him 
by  the  agreement  entered  into  between  himself  and  his 
copartners.  On  the  other  hand,  a  partner  has  no  right  to 
charge  the  firm  with  losses  or  expenses  incurred  by  his  own 
negligence  or  want  of  skill,  or  in  disregard  of  the  authority 
reposed  in  him.  ilj) 

(a)  See  Robinson's  Case,  6  De  G.        (b)  Thomas  v.   Atberton,    10  Ch. 
M.  &  G.  572;  Spottiswoode's  Case,     D.  185;  Bury  v.  Allen,  1  Coll.  604. 
id.  345;   Lefroy  v.   Gore,   1   Jo.  & 
Lat.  571. 

874 


OH.  VI,  SEC.  I.]      CONTRIBUTION   AND    INDEMNITY.  .         *368 

The  above  general  principles  are  the  basis  of  the  whole 
of  this  branch  of  partnership  law;  but,  in  order  to 
apply  them  ^correctly  to  the  infinite  variety  of  cir-  [*368] 
cumstances  which  occur  in  the  ordinary  course  of 
life,  it  will  be  convenient  to  notice- the  leading  doctrines  on 
the  subject  of  contribution  and  indemnity  generally,  and 
then  to  allude  more  particularly  to  the  rights  of  partners 
with  respect  to  compensation  for  trouble ;  outlays  and  ad- 
vances; debts,  liabilities,  and  losses  and  interest. 

Section  I. —  General  Observations. 

Foundation  of  the  right  to  contribution. 

The  right  of  contribution. —  Whether  a  person  who  has 
suffered  loss  is  entitled  to  be  indemnified  wholly  or  partly 
by  others  is  a  question  which  cannot  be  decided  in  the 
negative  merely  upon  the  ground  that  no  agreement  for 
contribution  or  indemnity  has  been  entered  into.  An  agree- 
ment may  undoubtedly  give  rise  to  a  right  to  indemnity  or 
contribution ;  but  the  absence  of  an  agreement  giving  rise 
to  such  a  right  is  by  no  means  fatal  to  its  existence.  The 
general  principle  which  prescribes  equality  of  burden  and 
of  benefit  is  amply  sufficient  to  create  a  right  of  contribu- 
tion in  many  cases  in  which  it  is  impossible  to  found  it  upon 
any  genuine  contract,  express  or  tacit.  The  common  feat- 
ure of  such  cases  is  that  one  person  has  sustained  some 
loss  which  wTould  have  fallen  upon  others  as  well  as  upon 
himself,  but  which  has  been  averted  from  them  at  bis  ex- 
pense ;  for  example,  where  one  tenant  in  common  repairs 
the  common  property,  and  so  saves  it  from  destruction ;  (c) 
where  one  of  several  sureties  pays  a  debt  for  which  all  are 
liable;  (d)  where  one  person  has  his  goods  thrown  overboard 
in  order  to  save  the  ship  and  the  rest  of  its  cargo,  (e)     In 

(c)  Ante,  p.  60.  (e)  Abbott  on  Shipping,  part  iv, 

(d)  Dering  v.  Winchelsea,  1  Cox,  ch.  10 ;  and  part  vi,  ch.  1,  ed.  12. 
318. 

875 


*369  EIGHTS   AND   OBLIGATIONS.  [BOOK    III. 

all  these  cases  a  right  of  contribution  arises,  not  by  virtue 
of  any  contract,  but  because  the  safety  of  some  cannot 
justly  be  purchased  at  the  expense  of  others;  and  all  must 

therefore  contribute  to  the  loss  sustained.  {/) 
[*369]       *  Again,  where  one  man's  goods  have  been  lawfully 

seized  for  the  debt  of  another,  the  owner  of  the 
goods  has  a  right  to  redeem  them  and  to  be  indemnified  by 
the  debtor,  (g) 

Exclusion  of  right  by  agreement. —  But  although  a 
right  to  contribution  may  exist  where  there  is  no  contract 
upon  which  it  can  be  founded,  it  cannot  exist  if  excluded 
by  agreement;  and  it  is  so  excluded  whenever  those  who 
would  otherwise  be  contributories  have  entered  into  any 
contract,  express  or  tacit,  amongst  themselves  which  is  in- 
consistent with  a  right  on  the  part  of  one  to  demand  con- 
tribution from  the  others.  (A)  This  is  too  obvious  to  require 
comment,  but  it  must  be  borne  in  mind  as  qualifying  the 
common  saying  that  the  right  to  contribution  is  independ- 
ent of  agreement. 

Exclusion  of  right  by  fraud. —  Again,  a  right  to  con- 
tribution may  be  excluded  by  fraud,  as  in  the  case  where  a 
person  induces  another  by  false  and  fraudulent  representa- 
tions to  join  him  in  partnership.  In  such  a  case  the  person 
defrauded  has  a  right  to  rescind  the  contract  of  partner- 
ship, and,  as  between  himself  and  copartner,  to  throw  all 
the  partnership  losses  upon  the  latter  alone,  (i) 

(/)  Lefroy  v.  Gore,  1  Jo.  &  Lat.  De  G.  &  S.  421 ;  Re  The  Worcester 

571 ;  Spottiswood's  Case,  6  De  G.  M.  Corn  Exchange  Co.  3  De  G.  M.  & 

&  G.  345 ;  Ashurst  v.  Mason,  20  Eq.  G.  180. 

225,    a  case  of  co-directors.     See,        (i)  See  Newbigging  v.  Adam,  34 

too,  the  cases  in  lEq.  Ca.  Ab.,  Con-  Ch.  D.   582;  Pillans  v.   Harkness, 

tribution  and  Average,  and  in  the  Colles,  442;  Rawlins  v.  Wickham, 

note  to  Averall  v.   Wade,    LI.  &  1  Giff.  355,  and  3  De  G.  &  J.  304* 

Gould  (temp.  Sug.)  264.  noticed  hereafter  under  the  head 

(g)  Edmunds  v.  Wallingford,  14  Rescission  of  Contract.     See,  too, 

Q.  B.  D.  811.  Carew's  Case,  7  De  G.  M.  &  G.  43] 

(h)  As  in  Gillan  v.  Morrison,    1 

876 


CH.  VI,  SEC.  I.]      CONTRIBUTION   AND    INDEMNITY. 


^369 


Of  the  rigid  of  agents,  trustees  [and partners']  to  indemnity 
from  their  principals,  cestuis  que  trustent  [and  the  firm 1]. 

A  gent's  right  to  indemnity. —  In  order  to  clear  the  way 
for  the  discussion  of  the  right  of  a  partner  to  be  inderani- 


1  See  the  general  subject  consid- 
ered and  the  cases  collected  in 
Ewell's  Evans  on  Agency,  *353 
et  seq.,  and  notes. 

Where  partners  retire  from  the 
firm,  their  successors  agreeing  to 
pay  the  firm  debts,  as  between 
themselves  the  remaining  partners 
are  primarily  liable  and  the  retir- 
ing partners  their  sureties.  Will- 
iams v.  Boyd,  75  Ind.  286;  Johnson 
v.  Young,  20  W.  Va.  614;  Chandler 
v.  Higgins,  109  111.  602;  Barber  v. 
Gillson,  18  Nev.  89;  Sizer  v.  Ray, 
87  N.  Y.  220. 

The  relation  of  surety  also  exists 
where  the  retiring  partner  is  liable, 
by  reason  of  non-notice  of  retire- 
ment, for  debts  contracted  after 
his  retirement;  and  upon  payment 
may  recover  from  his  principals 
the  amount  paid  in  assumpsit. 
Shamburg  v.  Abbott,  17  Weekly 
Not.  Cas.  298. 

It  follows  from  the  above  that  a 
retiring  partner  may  be  discharged 
by  giving  time  to  the  continuing 
partner.  Buckell  v.  McGuire,  17 
Can.  L.  J.  (N.  S.)  63. 

The  surety  may  protect  himself 
by  paying  the  indebtedness  for 
which  he  is  liable  at  any  time. 
Barber  v.  Gillson,  18  Nev.  89. 

In  such  case,  where  the  defend- 
ants, who  continued  the  business, 
gave  their  notes  to  the  plaintiff  for 
their  rent  in  arrears,  which  were 
accepted  on  the  express  stipulation 
that  the  liability  of  the  former 
partners  should  not  thereby  be  re- 


leased, and  with  the  reservation  of 
his  right  against  them,  held,  that 
this  was  not  such  an  extension  of 
time  as  discharged  the  retired  part- 
ners, even  if  they  were  considered 
sureties.  Palmer  v.  Purdy,  83  N. 
Y.  144. 

Plaintiff  leased  certain  premises 
to  a  firm.  Two  of  the  partners 
subsequently  retired,  the  partners 
remaining,  by  valid  contract,  as- 
suming payment  of  the  rent  sub- 
sequently accruing.  In  an  action 
brought  against  the  original  mem- 
bers of  the  firm  to  recover  the 
rent,  it  appeared  that  the  plaintiff 
was  informed  that  the  two  part- 
ners were  going  out  and  that  the 
others  were  to  remain  and  would 
pay  the  rent,  but  it  did  not  appear 
that  he  was  advised  of  any  agree- 
ment by  which  those  remaining 
were  bound  to  pay  the  rent,  or  by 
which  the  legal  relation  of  the  re- 
tiring members  of  the  firm  to  the 
common  liability  was  changed. 
Held,  that  the  evidence  failed  to 
establish  the  right  of  the  retiring 
partners  to  be  treated  as  sureties. 
Palmer  v.  Purdy,  83  N.  Y.  144. 

On  a  judgment  against  all,  the 
sureties  may  advance  the  money 
to  the  creditor  and  have  his  judg- 
ment assigned  to  a'third  party,  and 
thus  kept  alive  for  their  indemnity. 
Chandler  v.  Higgins,  109  HI.  602. 

As  to  what  amounts  to  a  request 
by  retiring  partner  to  a  creditor  to 
sue  the  continuing  partner,  see 
Mair  v.  Canavan,  8  Daly,  272. 


*3C9 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


fied  by  his  firm  it  is  necessary  to  avert  shortly  to  the  right 
of  agents  and  trustees  to  be  indemnified  by  their  principals 
and  cestuis  que  trustent 


"  Every  member  of  an  ordinary 
firm  is,  to  a  certain  extent,  both  a 
principal  and  an  agent.  He  is  lia- 
ble, as  a  principal,  to  the  debts 
and  engagements  of  the  firm,  and, 
in  respect  of  them,  he  is  entitled 
to  contribution  from  his  copart- 
ners, for  they  have  no  right  to 
throw  on  him  alone  the  burden  of 
obligations  which  are  theirs  as 
much  as  his."  See  Forbes  v.  Web- 
ster, 2  Vt-  58 ;  Kalbach's  Estate,  2 
Woodw.  Dec.  (Pa.)  415;  Scott  v. 
Bryan,  3  So.  East.  Rep.  (N.  C.)  235. 

After  the  dissolution  of  a  part- 
nership a  judgment  upon  a  part- 
nership debt  was  rendered  against 
the  partners,  and  execution  was 
levied  upon  lands  belonging  to 
them  severally.  Held,  that  a  part- 
ner who  redeemed  the  lands  from 
the  execution  was  entitled,  in 
equity,  to  contribution.  Downs  v. 
Jackson,  33  111.  464. 

Two  partners  had  been  engaged 
in  purchasing  cattle ;  most  of  them 
were  sold,  and  it  was  agreed  that 
the  residue  should  be  taken  by  one 
of  them  at  a  specified  price.  They 
settled  their  partnership  accounts 
and  divided  the  assets.  For  some 
of  the  cattle  sold  a  note  was  given 
to  the  firm,  which  was  received  by 
the  plaintiff,  who  indorsed  it  in 
the  name  of  the  firm,  had  it  dis- 
counted, and  applied  the  proceeds 
to  tbe  credit  of  the  firm.  The 
debtor  failed  to  pay  the  note.  The 
plaintiff  paid  it  and  brought  this 
action  against  the  other  partner  for 
contribution.  Held,  that  nothing 
short  of  an  agreement  mutually 
releasing  each  other  from  liability 


on  the  note  would  produce  such 
effect,  and  no  such  agreement  was 
proved.  Kelly  v.  Kauffman,  18 
Pa.  St.  351. 

Where  a  note  was  given  by  the 
defendant,  the  surviving  partner, 
to  the  decedent  for  advances  by 
the  latter  under  the  articles,  by  the 
terms  of  which  he  was  to  furnish 
the  capital  and  the  defendant  to 
devote  his  time  to  the  business, 
and,  after  allowing  the  former  for 
his  capital  invested,  with  interest 
on  a  certain  portion  of  it,  and  de- 
ducting expenses,  the  profits  were 
to  be  equally  divided,  held,  that  the 
debt  was  a  charge  on  the  partner- 
ship property  first,  and,  for  a  fail- 
ure of  assets  to  satisfy  the  whole 
debt,  the  defendant  should  then  be 
personally  liable  for  one-half  the 
balance.  Turner  v.  Turner,  5  So. 
West.  Rep.  (Ky.)  457. 

Where  a  partner  executed  a 
note  in  the  firm  name  to  raise  his 
share  of  the  capital  stock,  and  such 
note  was  executed  to  a  person  ig- 
norant of  that  fact,  the  firm  was 
held  responsible  for  the  note,  and 
the  other  partner  entitled  to  his 
bill  for  contribution.  His  bill  for 
contribution  could  be  defeated, 
however,  by  proof  under  appropri- 
ate pleadings  showing  that  the  de- 
fendant had  paid  his  proportion  of 
the  debts  of  the  firm.  Fletcher  v. 
Brown,  7  Humph.  385. 

Where,  after  division  of  the  as- 
sets of  a  late  firm,  one  partner 
is  compelled  to  pay  outstanding 
debts,  he  may  sue  for  contribution. 
Eskins  v.  Knox,  6  Rich.  14.  See, 
also,  Maginnis  v.    Crosby,  11   La. 


878 


CH.  VI,  SEC.  I.]      CONTRIBUTION   AND   INDEMNITY. 


'369 


"With  respect  to  agents  the  following  cases  have  to  be 
considered : 

1.  "When  the  agent  having  instructions  executes  them. 


Ann.  490;  Forbes  v.  Webster,  su- 
pra. 

Where  one  partner  contributes 
only  money,  and  the  other  time, 
labor  and  skill,  but  no  money,  each 
contribution  is  to  be  set  against  the 
other,  and,  in  case  of  failure,  each 
loss  is  to  be  borne  exclusively  by 
the  loser,  without  any  right  of  con- 
tribution from  the  other,  though 
the  member  contributing  money 
has  only  one-fourth  "  interest  in 
the  business,"  and  the  member 
contributing  time,  etc.,  has  three- 
fourths.  The  rule,  however,  is 
not  inflexible,  and  each  case  is  to 
be  decided  upon  its  own  circum- 
stances and  the  intent  of  the  par- 
ties to  be  deduced  therefrom.  Man- 
ley  v.  Taylor,  50  N.  Y.  Super.  Ct. 
26.  See,  also,  Morris  v.  Neil,  3  So. 
East.  Rep.  (Ga.)  643. 

Where  each  partner  agrees  to 
contribute  a  certain  sum  of  money 
as  capital,  and  the  enterprise 
proves  a  failure,  the  partner  who 
has  brought  in  nothing  must  make 
good  to  his  copartners  the  propor- 
tionate share  which  he  agreed  to  fur- 
nish. Sangston  v.  Hack,  52  Md.  173. 

One  partner  who  pays  the  debt 
of  a  firm  with  transferable  shares 
cannot  maintain  a  bill  in  equity 
for  contribution  against  the  other 
partners.  Phillips  v.  Blatchford, 
137  Mass.  510. 

Upon  the  dissolution  of  a  part- 
nership M.  took  all  the  assets  and 
assumed  all  the  debts.  There  ap- 
peared upon  the  books  certain  de- 
posits to  the  credit  of  E.,  and  also 
an  indebtedness  by  E.,  the  balance 
in   his   favor  being  $700,  which  it 


was  understood  by  the  three  part- 
ners was  the  real  indebtedness  of 
the  firm  to  E.  These  deposits  by 
E.  being  trust  funds,  judgment 
was  recovered  against  the  three 
partners  for  the  full  amount 
thereof.  In  an  action  by  M. 
against  the  other  partners  for  con- 
tribution, E.  being  insolvent,  held, 
that  M.  was  liable  for  $700  of  this 
judgment,  and  the  three  partners 
jointly  for  the  balance.  McLucas 
v.  Durham,  20  S.  C.  302. 

The  act  of  April  22, 1856,  provid- 
ing for  contribution  and  subro- 
gation to  protect  equities  of  par- 
ties, does  not  apply  to  the  case 
of  a  judgment  against  copartners, 
where  the  firm  accounts  are  un- 
settled and  the  liabilities  of  the 
respective  parties  unascertained. 
Fulton's  Appeal,  95  Pa.  St.  323. 

Where  the  dealings  between  two 
partners  embrace  but  few  items, 
anfl  there  are  no  such  transactions 
as  to  make  a  settlement  difficult, 
and  all  the  partnership  affairs  are 
settled  except  only  an  accounting 
between  them,  the  claim  of  one 
partner  against  the  other  for 
money  is  such  a  one  that  a  remedy 
at  law  for  contribution  is  admissi- 
ble.    Clark  v.  Mills,  13  Pac.  R.  569. 

A  partner  in  the  location  of  land 
warrants,  on  adjusting  a  demand 
occasioned  by  the  personal  default 
of  his  copartner,  is  entitled 
against  him  to  contribution.  Noel 
v.  Bowman,  2  Litt.  46. 

To  entitle  one  partner  to  recover 
at  law  of  another  partner  contri- 
bution for  his  proportion  of  the 
debts  of  the  firm  paid  since  disso- 


879 


*370 


RIGHTS    AND    OBLIGATIONS. 


[BOOK  III. 


[*370]     *2.  When  the  agent  having  instructions  does  not 
follow  them. 
3.  When  the  agent  having  no  instructions  acts  neverthe- 
less for  his  principal. 


lution  by  the  former,  it  must  ap- 
pear that  the  latter  was  notified  of 
such  payment  before  suit.  Dakin 
v.  Graves,  48  N.  H.  45. 

In  an  action  by  one  partner 
against  his  copartnership  for  con- 
tribution for  a  partnership  debt 
paid  by  the  plaintiff  more  than  six 
years  after  the  general  assignment 
of  the  partnership  effects  for  the 
benefit  of  their  creditors,  the  pre- 
sumption is  that  the  partnership 
accounts  are  settled,  and  the  bur- 
den is  upon  the  defendant  to  show 
the  contrary.  Brown  v.  Agnew, 
6  Watts  &  S.  235. 

Where  a  surviving  partner,  after 
exhausting  the  partnership  assets, 
is  compelled  to  pay  the  residue  of 
the  partnership  debts  out  of  his 
own  means,  he  is  entitled  to  re- 
cover from  the  estate  of  the  de- 
ceased partner  a  moiety  of  "the 
amount  thus  paid.  Olleman  v. 
Reagan,  28  Ind.  109.  See,  also, 
Wheeler  v.  Arnold,  30  Mich.  304. 

Where  a  suit  is  brought  by  a 
surviving  partner,  as  such,  if  he 
fails,  the  estate  of  the  deceased 
partner  is  liable  to  contribute  to 
the  costs.  Allen  v.  Blanchard,  9 
Cow.  631. 

The  representatives  of  a  deceased 
partner  who  had  paid  the  whole  of 
a  partnership  debt  will  be  substi- 
tuted in  the  place  of  the  creditor 
in  order  to  recover  a  contribution 
from  the  surviving  partner  or  his 
estate.  Sells  v.  Hubbell,  2  Johns. 
Ch.  394. 

There  is  no  principle  on  which, 


after  the  satisfaction  of  a  judg- 
ment for  a  partnership  debt  by  one 
of  the  partners  sued,  equity  ought 
to  extend  or  preserve  the  vitality 
of  the  legal  security  under  the 
guise  of  an  assignment  so  as  to 
charge  the  bail  of  the  other  part- 
ner. Hinton  v.  Odenheimer,  4 
Jones'  Eq.  406. 

Where  several  judgments  are 
recovered  for  the  same  debt 
against  the  surviving  partners  and 
the  administratrix  of  a  deceased 
partner,  she  cannot,  by  paying  the 
judgment  against  her  and  taking 
an  assignment  of  the  other,  have 
execution  thereon  in  the  name  of 
the  plaintiff  in  order  to  her  reim- 
bursement. Bartlett  v.  M'Rea,  4 
Ala.  688. 

Pending  an  action  against  A.  for 
breach  of  a  contract,  which  was  in 
fact  the  contract  of  the  firm  of  A. 
and  B.,  the  partners  had  a  settle- 
ment of  all  the  partnership  deal- 
ings, except  the  sum  to  be  paid  by 
B.  to  A.  upon  the  determination  of 
such  action.  At  the  time  of  the 
settlement  the  firm  owned  certain 
lots  of  land,  of  which  the  title  was 
in  A. ,  and  A.  testified  that  B.  pro- 
posed a  division  of  the  lands  into 
two  parcels  and  the  execution  of  a 
deed  by  A.  to  him  of  one  parcel,  to 
be  determined  by  lot ;  that  A.  ob- 
jected on  the  ground  that  said  ac- 
tion was  not  yet  settled;  that  B. 
asked  in  reply,  "  Am  I  not  man 
enough  for  that  suit?  "  that  a  third 
person  interposed  the  remark  that 
B.  was   "good    enough    for    that 


880 


OH.  VI,  SEC.  I.]      CONTRIBUTION   AND    INDEMNITY. 


*370 


1.  When  he  obeys  his  instructions. —  With  respect  to 
the  first  of  these  three  classes  of  cases  nothing  is  clearer 
than  that  an  agent  who  has  instructions  to  act  in  a  certain 
manner  is  entitled  to  be  reimbursed  by  his  principal  for  all 


amount,  and  there  was  no  need  of 
any  writing  between  them  in  re- 
gard to  it ; "  and  that  A.  thereupon 
assented  to  what  was  said  and  exe- 
cuted a  deed  of  B.'s  parcel  of  the 
lands.  Held,  that  the  evidence  sus- 
tained a  finding  that  B.  promised 
to  repay  to  A.  the  former's  share  of 
whatever  the  latter  might  be  com- 
pelled to  pay  in  said  action,  and 
that  A.  conveyed  the  land  to  B. 
upon  faith  of  such  promise.  Gauger 
v.  Pantz,  45  Wis.  449. 

An  award  required  the  partner 
taking  charge  of  the  assets  to  in- 
demnify his  copartner  against  the 
firm  liabilities.  Held,  that  even  if 
such  had  not  been  the  terms  of  the 
award,  a  court  of  equity  should 
have  required  such  indemnity ; 
and,  therefore,  whether  the  award 
was  correct  or  not,  it  was  proper 
not  to  dissolve  an  injunction  which 
had  been  granted  without  impos- 
ing such  indemnity  as  a  condition. 
Cook  v.  Jenkins,  35  Ga.  113. 

If  one  partner  pays  an  award 
against  the  firm  the  amount  of  the 
award  is  conclusive  upon  the  ques- 
tion of  contribution  by  the  others. 
Evans  v.  Clapp,  123  Mass.  165. 

Where  property  owned  by  two 
partners  is  subject  to  a  mortgage, 
and,  as  between  the  two,  it  is  the 
duty  of  one  to  discharge  it,  and  the 
other  pays  the  debt  on  condition 
that  the  mortgage  shall  inure  to  his 
benefit,  an  equity  arises  in  his  favor 
entitling  him  to  indemnity  through 
the  mortgage.  Laylin  v.  Know,  41 
Mich.  40. 


A  member  of  a  partnership  who 
has  sold  and  delivered  to  his  co- 
partners his  interest  in  the  partner- 
ship property  and  choses  in  action, 
in  consideration  of  their  payment 
to  him  of  a  stipulated  sum,  and 
their  agreement  to  pay  off  the  part- 
nership indebtedness,  may,  if  he  bt* 
compelled  to  pay  off  such  indebted- 
ness, recover  the  same  of  them. 
Vanness  v.  Dubois,  64  Ind.  338. 
See,  also,  Hinkle  v.  Reid,  43  Ind. 
390 ;  Myers  v.  Smith,  15  Iowa.  181. 
Such  an  agreement  is  not  within 
the  statute  of  frauds,  and  is  upon  a 
valuable  consideration.  Vanness  v. 
Dubois,  supra.  See,  also,  Gauger 
v.  Pantz,  45  Wis.  449. 

Members  of  a  copartnership  asso- 
ciation who  have  assigned  their  in- 
terest therein  to  other  solvent  par- 
ties with  the  assent  of  their  copart- 
ners, and  who  accept  such  assignees 
as  copartners  in  their  stead,  and  rec- 
ognize and  treat  them  as  such,  are 
not,  as  between  themselves,  liable 
for  the  debts  of  the  copartnership 
existing  at  the  time  of  such  assign- 
ment, and  they  cannot  be  required 
to  contribute  for  their  payment  to 
those  continuing  partners  who  have 
been  required  to  pay  the  same. 
Savage  v.  Putnam,  32  N.  Y.  501. 

Where  a  member  of  a  copartner- 
ship retires  by  consent  there  is  an 
implied  promise  on  the  part  of  the 
remaining  partners  to  pay  the  debts 
of  the  firm  and  save  the  retiring 
partner  harmless  to  the  extent  of 
the  assets  received,  but  no  further; 
if  the  assets  are  insufficient  to  in- 


Vol.  1  —  56 


881 


*370 


EIGHTS   AND    OBLIGATIONS. 


[BOOK  III. 


outlays  made  in  pursuance  of  these  instructions,  and  to  be 
indemnified  for  any  loss  sustained  by  executing  them,  (k) 
Even  if  what  the  agent  does  is  unlawful  he  is  entitled  to 
indemnity;  (I)  unless,  indeed,  the  act  be  one  which  the 
agent  must  have  known  his  principal  could  under  no  cir- 
cumstances justify;  for  then  the  maxim  in  pari  delicto 
melior  est  positio  defendentis  applies,  and  the  agent  can  ob- 
tain no  indemnity  from  a  court  of  justice,  (m) 


demnify  him.  he  is  entitled  to  con- 
tribution from  those  of  his  former 
copartners  who  are  solvent.  Hobbs 
v.  Wilson,  1  W.  Va.  50. 

H.,  who  was  of  the  firm  of  H.  & 
G.,  and  also  of  the  firm  of  H.  &  E., 
drew  in  the  name  of  H.  &  G.  in 
favor  of  H.  &  E.,  and,  after  accept- 
ance, indorsed  the  draft  in  the 
name  of  H.  &  E.  The  draft  was 
discounted,  and  H.  received  the 
proceeds.  The  acceptor  was  not  in- 
debted to  either  firm ;  the  draft  was 
not  for  the  benefit  of  either  firm, 
and  the  whole  transaction  was 
without  the  authority  or  knowl- 
edge of  any  of  his  partners.  The 
bank  which  discounted  the  draft 
recovered  the  amount  from  H.  & 
E.  Held,  in  a  suit  by  H.  &  E. 
against  H.  &  G.,  that  the  latter 
were  not  liable  for  contribution. 
Grubb  v.  Cottrell,  62  Pa.  St.  23. 

A  partner  who  goes  out  of  a  part- 
nership, and,  for  a  valuable  con- 
sideration, is  indemnified  by  his 
partners  against  all  debts  and  lia- 
bilities of  the  firm,  stands  in  the 
attitude  of  a  stranger  as  against  a 
creditor  of  one  of  the  partners  for 
vhis  individual  debt  where  judg- 
ment has  been  obtained  since  his 
outgoing,  and  is  entitled  to  subro- 
gation for  a  debt  of  the  firm  paid 
him,  for  which  he  was  not  liable  as 
between  himself  and  partners  at 


the  time  of  leaving  the  firm.  Scott's 
Appeal,  88  Pa.  St.  173. 

As  to  the  liability  of  one  partner 
to  another  to  indemnify  the  second 
against  loss  which  he  might  sustain 
by  reason  of  the  conduct  of  a  third 
party,  see  Pardee  v.  Markle,  111  Pa. 
St.  548;  S.  C.  17  Weekly  Not.  Cas. 
211. 

An  agreement  with  a  partner  by 
one  not  partner  to  indemnify  him 
against  firm  debts  cannot  be  en- 
forced by  the  firm  creditors.  Berry 
v.  Brown,  9  Cent.  Rep.  (N.  Y.)  896. 

(fc)  Story  on  Agency,  §  335  et  seq. ; 
Paley  on  Agency,  ch.  2;  Smith, 
Merc.  Law,  pp.  119,  120,  ed.  9; 
Curtis  v.  Barclay,  5  B.  &  C.  141. 
See,  also,  Ireland  v.  Livingstone, 
L.  R.  5  Ho.  Lo.  416,  as  to  ambigu- 
ous instructions.  As  to  costs  of 
actions  unsuccessfully  defended, 
see  Broom  v.  Hall,  7  C.  B.  N.  S. 
503. 

(I)  Adamson  v.  Jarvis,  4  Bing. 
66;  Betts  v.  Gibbins,  2  A.  &  E.  57; 
per  Tindal,  C.  J.,  in  Collins  v. 
Evans,  5  Q.  B.  830.  See,  as  to  con- 
forming to  an  illegal  custom  un- 
known to  the  principal,  Perry  v. 
Barnett,  15  Q.  B.  D.  388. 

(m)  See  Merry  weather  v.  Nixan, 
2  Sm.  L.  C. ;  Collins  v.  Blantern,  1 
id. ;  Josephs  v.  Pebrer,  3  B.  &  C, 
639 ;  Shackell  v.  Rosier,  2  Bing.  N. 
C.  634. 


882 


OH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  *371 

2.  When  he  disobeys  his  instructions. —  It  is  equally 
clear  that,  speaking  generally,  an  agent  who  acts  contrary 
to  his  instructions  is  not  entitled  to  any  indemnity  or  re- 
imbursement for  losses  or  expenses  incurred  whilst  so  act- 
ing, (n)  Even  although  the  instructions  may  have  been 
given  by  the  principal  under  a  misapprehension  of  facts, 
and  the  agent,  being  aware  that  such  was  the  case,  may 
have  acted  bona  fide  for  the  benefit  of  his  principal,  (o)  still 
the  agent  will  not  be  entitled  to  indemnity;  for  it  is  the 
duty  of  an  agent  to  obey  and  not  to  disregard  his  orders. 
But  if  the  principal  chooses  to  ratify  the  agent's  conduct, 
the  latter  acquires  a  right  to  be  considered  as  having  acted 
in  pursuance  of  instructions,  and  to  be  entitled  to 
reimbursement  and  indemnity  Accordingly,  for  the  [*371] 
principal  cannot,  whilst  ratifying  the  agent's  con- 
duct so  far  as  it  is  beneficial,  repudiate  it  so  far  as  it  is 
onerous,  (p) 

Effect  of  revocation  of  authority. —  The  position  of  an 
agent  who  has  already  acted  on  his  instructions,  and  has 
thereby  incurred  a  legal  obligation  to  third  parties,  is  dif- 
ferent. The  better  opinion  is  that  in  this  case  he  is  not 
bound  on  the  command  of  his  principal  to  stop  short  and 
refuse  to  perform  the  obligation  incurred.  There  is  no 
doubt  that,  as  between  himself  and  his  principal,  an  agent 
is  entitled  to  obey  the  counter-order,  and  to  obtain  a  full  in- 
demnity from  the  consequences  of  so  doing.  But  it  is  ap- 
prehended that  he  is  at  liberty  so  far  to  carry  out  the 
instructions  on  which  he  has  begun  to  act  as  may  be  neces- 
sary to  relieve  himself  from  all  the  legal  liabilities  incurred 
before  notice  of  the  countermand,  and,  having  done  so,  to 
insist  upon  indemnity  and  reimbursement  as  if  the  princi- 
pal had  not  changed  his  instructions.  Nemo  potest  mutare 
consilium  suum  in  alterius  injuriam  is  the  maxim  of  the 

(n)  See  Stokes  v.  Lewis,  1  T.  R.  (o)  Howard  v.  Tucker,  1 B.  &  Ad. 
20;  Galway  v.    Mathew,   10  East,     712. 

264;  Child"  v.  Morley,  8  T.  E.  610;        (p)  Story  on  Agency,  §  250. 
Warwick  v.  Slade,  3  Camp.  127. 

883 


*372  EIGHTS    AND    OBLIGATIONS.  [BOOK  III. 

civil  law,  and  expresses  the  correct  principle  for  the  decis- 
ion of  these  cases,  (q) 

3.  When  he  acts  without  instructions. —  There  remains 
the  third  class  of  cases,  viz.,  where  the  agent,  having  no  in- 
structions to  guide  him,  acts  for  his  principal  and  then 
seeks  to  be  indemnified  by  him.  Now  here,  as  in  the  last 
class  of  cases,  ratification  by  the  principal  removes  all  dif- 
ficulty and  may  be  excluded  from  consideration.  Again, 
an  agent,  having  no  specific  instructions,  may  yet  have  an 
implied  authority  to  act  in  a  given  way  for  his  principal; 
and,  in  the  absence  of  orders  to  the  contrary,  an  agent 
always  has  an  implied  authority  to  act  in  the  manner  in 
which  he  has  been  accustomed  to  act  with  the  approval  of 
his  principal,  and  to  act  with  respect  to  any  matter  as  other 
persons  situate  like  himself  usually  act  with  respect  to  sim- 
ilar matters,  and  to  take  all  those  steps  which  are 
[*3T2J  usual  and  necessary  to  enable  *him  duly  to  execu  te 
his  instructions,  (r)  It  may  therefore  well  happen 
that  an  agent  who  has  no  positive  instructions  may,  never- 
theless, act  within  the  limits  of  his  real  authority;  and  so 
long  as  he  keeps  within  those  limits  he  is  entitled  to  reim- 
bursement and  indemnity,  (s)  The  principle  applicable  to 
the  first  class  of  cases  applies  here;  but  if  the  agent  claims 
an  indemnity  against  loss  sustained  by  the  commission  by 
him  of  an  illegal  act  he  must  be  prepared  with  very  strong 
evidence  to  show  that  such  acts  fell  within  the  limits  of  his 

(g)  See  Bead  v.  Anderson,  13  Q.  Camp.    127,   the    agent   was   only 

B.  D.  779;  Seymour  v.  Bridge,  14  bound  in  honor, 

id.  460 ;  Loring  v.  Davis,  32  Ch.  D.  (r)  Story  on  Agency,  ch.  6. 

625.     The  position   in   the  text  is  (s)  Curtis  v.  Barclay,  5   B.  &  C. 

supported  by  Bothier,  Mandat.  No.  141 ;  Sutton  v.  Tatham,  10  A.  &  E. 

121,  and  Story,  Agency,  §  465.  etc.,  27.    See,  too,  1  Wms.  Saund.  2646; 

and  by  Balsh  v.  Hyham,  2  B.  W,  Bettman    v.    Keble,    15    Jur.    38; 

453;  Sutton  v.  Tatham,  10  A.  &  E.  Wolfe  v.  Horncastle,  1  Bos.  &  B. 

27,  and  the  cases  already  cited.  On  323,  per  Buller,  J.     This  was  also 

the  other  hand,  see  2  Kent,  Com.  the  principle   applied  in  B.  v.  Es- 

644.     In  Child  v.  Morley,  8  T.  R.  sex,  4  T.  R.  591,  and  referred  to  by 

610,    and    Warwick    v.    Slade,    3  Lord  Cottenham  in  A.-G.  v.   The 

Mayor  of  Norwich,  2  M.  &  Cr.  424. 
884 


CH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  *373 

authority.  (t)     In  a  case  of  doubt  no  authority  to  commit 
an  unlawful  act  can  be  inferred. 
Rights  of  a  person  who,  unasked,  acts  for  another. — 

The  greatest  difficulty  arises  when  an  agent  acts  without 
any  authority,  express  or  tacit,  but  honafide  for  the  benefit 
of  his  principal.  There  is  a  leaning  in  many  minds  in  favor 
of  the  agent  in  such  cases,  and  it  cannot  be  denied  that  cir- 
cumstances may  occur  which  render  officious  conduct  justi- 
fiable and  even  benevolent.  On  the  other  hand,  culpa  est 
immiscere  se,  rei  ad  se  non  pertinently  (u)  and,  by  the  law  of 
England,  a  person  who  chooses,  unasked,  to  incur  expense 
for  another  must,  speaking  generally,  trust  rather  to  grati- 
tude than  to  judicial  aid  for  reimbursement,  (x)  The  only 
established  exceptions  to  this  rule  seem  to  be  —  1,  where 
one  person  alone  sustains  a  loss  or  incurs  expense  for  the 
relief  of  himself  and  others  from  some  risk  or  obligation 
common  to  all;  and  2,  where  one  person  does  for  another 
that  which  the  latter  is  legally  bound  to  do,  but  either  can- 
not or  will  not  do  himself.  The  first  class  of  exceptions  has 
been  already  alluded  to.  The  second  may  be  illustrated  by 
those  cases  in  which  executors  and  husbands  are  held  liable 
for  the  expenses  of  funerals,  although  they  gave 
*no  orders  for  them,  and  took  no  part  in  them;  (y)  [*373] 
and  by  cases  in  which  one  man's  goods  have  been 
lawfully  seized  for  another  man's  debt,  (s) 

General  rule. —  The  general  rule,  certainly,  is  that  the 
officious  conduct  of  one  person  imposes  no  obligation  on 
another  to  compensate  him  for,  or  indemnify  him  from,  the 
consequences  of  his  own  spontaneous  act ;  and  even  although 

{t )  See,  as  to  unreasonable  or  il-  tiorum  gestor  of  the  Roman  law, 

legal  customs  not    known  to  the  Dig.  Ill,  tit.  5,    De  Negot.  Gest., 

principal,  Perry  v.  Barnett,  15  Q.  Thibaut's  System  des  Pand.  Recht, 

B.  D.  388.  §  558,  ed.  9. 

(u)  Dig.  L.  tit.  17,  De  Reg.  Jur.        {y)  See  Ambrose  v.  Kerrison,  10 

L.  36.  C.  B.  776 ;  Rogers  v.  Price,  3  Y.  & 

(x)  See  Falcke  v.  Scottish  Imp.  J.  28 ;  Jenkins  v.  Tucker,  1  H.  Bl.  91. 
Ins.  Co.  34  Oh.  D.  248 ;  Re  Leslie,        (z)  Edmunds  v.  Wallingford,  14 

23  Ch.  D.  552.    See  as  to  the  nego-  Q.  B.  D.  811. 

885 


*374  EIGHTS    AND    OBLIGATIONS.  '  [BOOK    III. 

the  other  may  be  benefited,  he  cannot  on  that  ground  alone 
be  compelled  to  pay  for  what  he  never  sought  to  obtain,  (a) 
A  very  strong  illustration  of  this  is  afforded  by  the  case 
of  Edmiston  v.  Wright,  (b)  There  the  defendant  was  the 
owner  of  some  estates  in  Georgia,  and  of  some  negroes  in 
Jamaica.  The  plaintiff's  partner  was  the  defendant's  agent 
and  the  general  manager  of  his  West  Indian  estates.  The 
negroes  in  Jamaica  were  shipped  for  Georgia,  and  seized 
by  custom-house  officers  in  consequence  of  the  captain  of 
the  ship  having  neglected  to  procure  some  necessary  docu- 
ments. The  plaintiff,  for  the  purpose  of  redeeming  the 
negroes  from  the  authorities  who  had  seized  them,  paid  the 
sum  of  1,200Z.,  and  the  negroes  were  then  allowed  to  pro- 
ceed to  the  defendant's  estate  in  Georgia.  The  plaintiff 
sued  the  defendant  for  the  sum  of  1,200^  as  money  paid  to 
his  use,  but  Lord  Ellenborough  held  that  it  was  a  voluntary 
payment  made  by  the  plaintiff,  and  one  which  he  could  not 
recover  from  the  defendant. 

Right  of  trustees  to  indemnity. —  The  right  of  a  trustee 
to  indemnity  from  his  cestui  que  trust  very  closely  resem- 
bles the  right  of  ah  agent  to  indemnity  from  his  principal. 

1.  A  trustee  is  clearly  entitled  to  be  indemnified  out  of 
the  trust  property  against  all  costs,  charges  and  expenses 
properly  incurred,  and  against  all  losses  sustained  by  him 
in  the  execution  of  his  trust;  (c)  and  if  the  trust  property 
is  not  sufficient  for  the  purpose  of  indemnifying  him 
[*374]  in  respect  of  such  matters,  *his  cestui  que  trust,  if 
under  no  disability,  is  personally  liable  to  indemnify 

(a)  1  Wins.  Saund.  264a;  6  B.  &  losses  which  may  never  arise, 
C.  444,  per  Bayley,  J. ;  Stokes  v.  Hughes-Hallett  v.  Indian  Mam- 
Lewis,  1  T.  E.  20;  Child  v.  Morley,  moth  Gold  Mines  Co.  22  Ch.  D. 
8  T.  R.  610.  561 ;  Hobbs  v.   Wayet,    36  Ch.  D. 

(b)  1  Camp.  88.  256 ;  and  as  to  the  right  of  indem- 

(c)  Be  Bleckley,  35  Beav.  449,  nity  where  trustees  hold  two  funds 
where  this  rule  was  applied  in  favor  for  different  sets  of  people,  but 
of  a  trustee  for  a  company  against  under  the  same  instrument,  Fraser 
its  debenture-holders.     See,  as  to  v.  Murdoch,  6  App.  Ca.  855. 


<CH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  374: 

him,  {d)  unless  such  liability  is  excluded  by  some  special 
circumstance,  (e) 

2.  On  the  other  hand,  a  trustee  who  commits  a  breach 
of  trust  is  entitled  to  no  indemnity  in  respect  thereof,  ex- 
cept from  those  cestuis  que  trustent,  if  any,  at  whose  request 
he  wrongfully  acted,  or  who  have  sanctioned  and  benefited 
by  his  improper  conduct,  (f) 

3.  Every  act  of  a  trustee  respecting  the  trust  property 
must  necessarily  either  be  warranted  by  the  trust  reposed 
in  him  or  amount  to  a  breach  of  trust,  and  must  therefore 
be  governed  by  one  or  other  of  the  two  foregoing  princi- 
ples. But  as  with  agents  so  with  trustees;  their  acts  may 
be  proper  although  not  expressly  authorized ;  and  what- 
ever is  necessary  in  order  duly  to  execute  an  express  trust 
is  warranted  by  that  trust,  and  entitles  the  trustee  to  in- 
demnity accordingly.  But  even  this  principle  will  not 
entitle  a  trustee  to  indemnity  in  respect  of  everything  he 
may  do  bona  fide  for  the  benefit  of  his  cestui  que  trust;  re- 
gard must  be  had  to  the  nature  of  the  trusts  to  be  executed. 

Of  some  former  differences  between  contribution  at  law  and 

in  equity} 

1.  As  to  indemnity  before  loss  has  been  sustained. — 

Before  the  passing  of  the  Judicature  Acts  a  right  to  con- 
tribution or  indemnity,  arising  otherwise  than  by  special 
agreement,  was  only  enforceable  at  law  by  a  person  who 
could  prove  that  he  had  already  sustained  a  loss,  {g)     But 

(d)  See  Oriental  and  Commercial        (/)  See  Lewin  on  Trusts,  pp.  643 
Bank,  3  Ch.  791 ;  Balsh  v.  Hyham,     and  910,  ed.  8. 

2  P.  W.  453;  Phene  v.   Gillan,  5  *  As  to  whether  contribution  is 

Ha.  1 ;  and  Ex  parte  Chippendale,  to  be  compelled  by  action  at  law 

4  De  G.  M.  &  G.  52.  or  bill  in  equity,  see  post. 

(e)  If  there  is  an  express  covenant  (g)  See  Maxwell  v.  Jameson,  2  B.  • 
to  indemnify  the   obligation  will  &  A.  51.    Compare  Spark  v.  Heslop, 
be  limited  by  the  covenant.     See  1  E.  &  E.  563,  and  the  judgment 
Selwyn  v.  Harrison,  2  J.  &  H.  334;  of    Crompton,    J.,   in  Randall    v. 
Gillan  v.  Morrison,  1  De  G.  &  Sm.  Raper,  E.  B.  &  E.  84/ 

421. 

887 


#375  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

in  equity  it  was  very  reasonably  held  that,  even  in 
[*375]  the  absence  of  any  ^special  agreement,  a  person  who 

■was  entitled  to  contribution  or  indemnity  from  an- 
other could  enforce  his  right  before  he  had  sustained  actual 
loss,  (A)1  provided  loss  was  imminent;  (i)  and  this  principle 
will  now  prevail  in  all  divisions  of  the  high  court,  (k)  There- 
fore, a  person  who  is  entitled  to  be  thus  indemnified  against 
loss  is  not  obliged  to  wait  until  he  has  suffered,  and  perhaps 
been  ruined,  before  having  recourse  to  judicial  aid.  Thus, 
in  the  ordinary  case  of  principal  and  surety,  as  soon  as  the 
creditor  has  acquired  a  right  to  immediate  payment  from 
the  surety  the  latter  is  entitled  to  call  upon  the  principal 
debtor  to  pay  the  amount  of  the  debt  guarantied,  so  as  to 
relieve  the  surety  from  his  obligation ;  (I)  and  where  one 
person  has  covenanted  to  indemnify  another,  an  action  for 
specific  performance  may  be  sustained  before  the  plaintiff 
has  actually  been  damnified;  (m)  and  the  limit  of  the  de- 
fendant's liability  to  the  plaintiff  is  the  full  amount  for  which 
he  is  liable;  or,  if  he  is  dead  or  insolvent,  the  full  amount 
provable  against  his  estate,  and  not  only  the  amount  of 
dividend  which  such  estate  can  pay.  (n)  In  strict  con- 
formity with  these  principles,  partners  and  directors  who 
are  individually  liable  to  be  sued  on  bonds  and  notes,  which 
as  between  them  and  their  copartners  are  to  be  regarded  as 

(h)  See  Hobbs  v.  Wayet,  36  Cb.  Vern.  190.    See  Lloyd  v.  Dimmack, 

D.  256;  Lacey  v.  Hill,  18  Eq.  182.  7  Ch.  D.  398,  where  Eanelagh  v. 

!See  Hodson  v.  Baldwin,  65  111.  Hayes   was  disapproved,  and  the 

532.  court  declined  to  decree   specific 

(i)  Id. ;  Hughes-Hallett  v.  Indian  performance  of  a  covenant  to  in- 
Mammoth  Gold  Mines  Co.  22  Ch.  demnify  with  liberty  to  apply  in 
D.  561.  the  event  of  future  breaches  which 

(k)  See  Jud.  Act,  1873,  §§  24  and  might  or  might  not  occur.     Lloyd 

25.  v.  Dimmack  is,  however,  not  op- 

(l)  Wooldridge  v.  Norris,  6  Eq.  posed  to  the  statements  in  the  text 

410 ;  Nesbit  v.  Smith,  2  Bro.  C.  C.  nor  to  the  cases  cited  in  page  375, 

582.     As  to  the  right  of  one  surety  notes  (h),  (i)  and  (Z).     See  the  last 

to  contribution  from  another,  see  direction  in  the  order,  7  Ch.  D.  402. 
Ex  parte  Snowdon,  17  Ch.  D.  44.  (n)  Cruse  v.  Paine,  6  Eq.  641,  and 

(m)  See    Ranelagh    v.  Hayes,    1  4  Ch.  441. 


CH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  *376 

the  bonds  and  notes  of  the  firm  or  company,  are  entitled  to 
call  for  contribution  before  these  bonds  or  notes  have  been 
actually  paid,  (o)  So  a  trustee  of  shares  liable  to  calls  is 
entitled  to  be  indemnified  by  his  cestui  que  trust  against 
them  before  they  are  paid,  (p) 

*2.  As  to  the  amount  payable  by  each  contrib-  [*376] 
utory. —  Another  difference  between  law  and  equity 
which  formerly  prevailed,  and  to  which  it  is  necessary  to 
advert,  affects  the  mode  in  which  the  amount  to  be  paid  by 
each  of  several  contributories  was  ascertained. 

Rule  at  law  —  Rule  in  equity. —  At  law,  before  the  Judi- 
cature Acts,  if  several  persons  had  to  contribute  a  certain 
sum,  the  share  which  each  had  to  pay  was  the  total  amount 
divided  by  the  number  of  contributors;  and  no  allowance 
was  made  in  the  event  of  the  inability  of  some  of  them  to 
pay  their  shares,  (q)  But  in  equity,  in  the  absence  of  agree- 
ment to  the  contrary,  (r)  those  who  could  pay  were  com- 
pellable not  only  to  contribute  their  own  shares,  ascer- 
tained as  above,  but  also  to  make  good  the  shares  of  those 
who  were  unable  to  furnish  their  contributions.1     This  rule 

(o)  See,  for  example,  The  Norwich  The  agreement,  if  any,  determines 

Yarn  Co.'s  Case,  22  Beav.  143.    The  the  extent  of  the  right, 

money  borrowed  by  the  directors  l  See  post. 

in  that  case  was  secured  by  their  One  partner  can  maintain  a  bill 

own  notes,  but  these  notes  had  not  in  equity  against  all  the  others, 

been  actually  paid  when  the  call  within  the  jurisdiction  of  the  court, 

on    the    shareholders    was    made,  to  compel  them  to  contribute  to 

This  does  not  appear  very  clearly  sums  paid  by  him,  although  not  at 

from  the  report  referred  to,  but  the  their  request,  for  the  use  of  the  as- 

writer  has  been  informed  by  per-  sociation;  and  the  amount  of  the 

sons  conversant  with  the  case  that  defendants'  liability  is  to  be  deter- 

the  above  statement  is  correct.  mined  by  an  apportionment  among 

(p)  Oriental  Commercial  Bank,  3  them  of  the  amount  paid,  without 

Ch.  791 ;  Cruse  v.  Paine,  6  Eq.  641,  regard  to  subscribers  out  of  the 

and  4  Ch.  441.     See,  also,  Hobbs  v.  jurisdiction.     Whitman  v.  Porter, 

Wayet,  36  Ch.   D.  256,  where  the  107  Mass.  522. 

calls  were  not  yet  made.  A  court  of  equity  will  entertain 

(q)  See  Cowell  v.  Edwards,  2  Bos.  a  bill  by  a  part  of  the  members  of 

&  P.  268 ;  Batard  v.  Hawes,  2  E.  &  an  insolvent  voluntary  association 

B.  287.  (making  all  the  solvent  members 

(r)  McKewan's  Case,  6  Ch.  D.  447.  parties)  whose  assets  have  all  beea 


*377  EIGHTS   AND   OBLIGATIONS.  [BOOK    III. 

also  now  prevails  in  all  divisions  of  the  high  court.  (*)  For 
example,  if  A.,  B.,  C.  and  D.  are  liable  to  a  debt,  A.  can 
compel  B.  and  C.  to  contribute  one-third  each  if  D.  can 
contribute  nothing;  and  this,  as  between  A.,  B.  and  C,  is 
evidently  only  fair  and  just,  (t) 

In  Wadeson  v.  Richardson,  (u)  one  of  four  partners  as- 
signed property  to  trustees  upon  trust,  inter  alia,  to  pay  his 
proportion  or  share  of  all  such  debts  as  were  or  should  be 
owing  by  him  and  his  three  copartners.  He  and  they  after- 
wards became  bankrupt;  and  it  was  held  that  the  share  and 
proportion  of  debts  which  the  trustees  were  to  pay  was  not 
the  share  and  proportion  which,  as  between  the  assignor 
and  his  copartners,  he  ought  to  contribute  to  the  funds  of 
the  firm,  but  the  share  and  proportion  which,  as  between 
him  and  the  creditors  of  the  firm,  it  was  necessary  for  him 
to  pay  in  order  that  they  might  receive  twenty  shillings  in 
the  pound.  The  creditors  were  therefore  held  entitled  to 
come  in  under  the  deed  for  so  much  as  they  were  not  paid 
out  of  the  partnership  funds  and  as  they  could  not  recover 
from  the  estates  of  the  other  partners. 

Rule  applies  where  one  partner  ought  to  indemnify  the 
rest;  and  to  the  winding  up  of  companies. —  So,  where 
a  loss  has  been  incurred  under  circumstances  which 
[*3Y7]  *render  it  wholly  chargeable  to  the  account  of  the 
partner  who  caused  it,  yet,  so  far  as  he  is  unable  to 
make  it  good,  it  must  be  borne  ratably  by  the  other  part- 
ners, {x)  Upon  the  same  principle,  when  a  company  is 
being  wound  up,  the  solvent  shareholders  must,  if  their  lia- 

disposed  of,  for  an  account,  and  to  (s)  Tud.  Act,  1873,  §§  24  and  25. 

compel   each    solvent  member  to  (t)  Pering  v.  Winchelsea,  1  Cox, 

pay  his  pro  rata  share  of  the  in-  318;  Hole  v.  Harrison,  1   Ch.  Ca. 

debtedness.      The    defendants    in  246;  P^ts?*  v.  Rich,  Rep.  in  Ch.  19. 

such  case  have  no  right  to  require  (u)  1  V  <&  B.  103. 

that  the  complainants  shall  first  (x)  See  Oldaker  v.   Lavender,  6 

pay  the  debts  and  take  their  risk  Sim.  239 ;  OuiksUoak  v.  McViear, 

of  making  the  defendants  contrib-  8  Beav.  117,  H& 

ute.    Hodgson  v.  Baldwin,  65  111. 

532. 

890 


CH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  *378 

bility  to  creditors  is  not  limited,  contribute  whatever  ma}r 
be  necessary  to  pay  all  the  creditors  in  full;  and  must  make 
up  ratably  amongst  themselves  what  ought  to  have  been 
contributed  by  those  shareholders  who  are  insolvent;  (y) 
and  this  holds  even  where  the  creditors  are  themselves 
shareholders,  and  where  the  liability  of  the  shareholders  is 
as  between  themselves  proportionate  to  their  shares,  (z) 

Of  contribution  between  wrong-doers. 

Of  contribution  amongst  wrong-doers. —  There  is  a  say- 
ing that  there  is  no  contribution  amongst  wrong-doers;  (a) l 
but  this  doctrine  is  certainly  inapplicable  to  partners  in  the 
general  form  in  which  it  is  enunciated.  It  is  true  that  if  a 
partnership  is  itself  illegal,  no  member  of  it  can,  in  respect 
of  any  transaction  tainted  with  the  illegality  which  infects 
the  firm,  obtain  relief  against  any  other  member;  but  there 
is  no  authority  for  sa}7ing  that  if  one  of  the  members  of  a 
firm  sustains  a  loss  owing  to  some  illegal  act  not  attribu- 
table to  him,  but  nevertheless  imputable  to  the  firm,  such 
loss  must  be  borne  entirely  by  him,  and  that  he  is  not  entitled 
to  contribution  in  respect  thereof  from  the  other  partners,  (b) 

Application  of  doctrine  to  partners. —  The  claim  of  a 
partner  to  contribution  from  his  copartners  in  respect  of  a 
partnership  transaction  cannot  be  defeated  on  the  ground 
of  illegality  unless  the  partnership  is  itself  an  illegal  part- 
nership; (c)  or  unless  the  act  relied  on  as  the  basis 
of  the  *claim  is  not  only  illegal,  but  has  been  com-  [*378] 
mitted  b}'  the  partner  seeking  contribution,  when  he 

(y)  Robinson's  Ex.  Caso.  6  De  G.  tion  to  partnerships  considered  in 
M.  &  G.  572.  Cooley  on  Torts,  144-150. 

(z)  Professional  Life  Ass.  Co.  3  (b)  See,  at  law,  Betts  v.  Gibbins,  2 
Eq.  6GS,  and  3  Ch.  167.  A.  &  E.  57;  Adamson  v.  Jarvis,  4 

(a)  Merry  weather  v.  Nixan,  8  T.  Bing.  66.  And  see  in  equity,  Rams- 
R.  186,  and  2  Sm.  L.  C. ;  Colburn  kill  v.  Edwards,  31  Ch.  D.  100;  Lin- 
v.  Patmore,  1  Cr.  M.  &  R.  73;  gard  v.  Bromley,  1  V.  &  B.  114; 
A.-G.  v.  Wilson,  Cr.  &  Ph.  1.  Baynard  v.  Woolley,  20  Beav.  583; 

1  See  this  subject  and  its  applica-    Ashurst  v.  Mason,  20  Eq.  225. 

(c)  As  to  which,  see  ante,  p.  91. 
891 


*37S  RIGHTS    AND    OBLIGATIONS.  [BOOK    HI. 

knew,  or  ought  to  have  known,  of  its  illegality,  (d)  In  any 
of  these  cases  he  can  obtain  no  assistance  against  his  co- 
partners, and  must  abide  the  consequences  of  his  own  wil- 
ful breach  of  the  law.1  Upon  this  ground  it  was  often  held 
(before  it  became  lawful  for  partners  to  carry  on  the  busi- 
ness of  marine  insurance)  that  if  one  of  a  firm  of  marine 
insurers  paid  money  in  respect  of  a  loss  insured  against  by 
the  firm  he  could  not  recover  any  part  of  the  payment  from 
his  copartners,  (e) 

But  if  the  partnership  is  not  itself  illegal,  and  if  the  part- 
ner claiming  contribution  has  not  himself  been  personally 
guilty  of  a  breach  of  the  law,  his  claim  will  prevail,  although 
the  loss  in  respect  of  which  it  is  made  may  have  arisen  from 
an  unlawful  act.  This  appears  from  Campbell  v.  Camp- 
bell, {/)  where  a  firm  of  distillers  had  incurred  a  penalty  in 
consequence  of  a  purchase  of  illicit  whisky.  The  purchase 
was  made  by  the  managing  partners;  and  one  of  the  mem- 
bers of  the  firm,  who  took  no  part  in  its  business,  was  en- 
tirely ignorant  and  innocent  of  what  had  been  froine"  on. 
The  firm  was  convicted  for  the  full  amount  of  the  penalties 
claimed;  but  the  crown,  on  being  memorialized  by  the  inno- 
cent partner  and  the  principal  of  the  acting  partners,  re- 
mitted the  penalties  except  to  the  amount  of  3,000£.  This 
sum  was  levied  partly  on  the  property  of  the  firm  and 
partly  on  that  of  the  innocent  partner  only.  He  then 
claimed  to  have  the  whole  of  what  he  had  been  compelled 
to  pay  made  good  to  him  by  his  copartners  on  the  ground 

(d)  See  Thomas  v.  Atherton,  10  ship,    whether  for  profits,   losses, 

Ch.  D.  185;  Adamson  v.  Jarvis,  4  expenses,    contribution    or    reim- 

Bing.  66 ;  Betts  v.  Gibbins,  2  A.  &  bursement.     Watson  v.  Fletcher,  7 

E.  57.  Grat.  1. 

1 A  court  of  equity  will  not  lend  (e)  Aubert  v.  Maze,  2  Bos.  &  P. 

its  aid  for  the  settlement  and  ad-  371. 

justment  of  the  transactions  of  a  (/)  7  CI.  &  Fin.  166.     See,  too, 

partnership    for    gambling.      Nor  Thomas  v.  Atherton,  10  Ch.  D.  185; 

will  it  give  relief  to  either  partner  Woolley  v.  Batte,  2  Car.  &  P.  417 ; 

against  the  other  founded  on  trans-  Pearson  v.  Skelton,  1  M.  &  W.  504. 
actions  arising  out  of  such  partner- 


CH.  VI,  SEC.  I.]      CONTRIBUTION    AND    INDEMNITY.  *379 

that  they  alone  had  been  guilty  of  the  illegal  purchases. 
The  innocent  partner  obtained  a  verdict  for  the  whole 
amount  claimed,  with  interest;  and  his  copartners  were  ad- 
judged liable,  jointly  and  severally,  to  indemnify  him.  A 
motion  for  a  new  trial  was  refused.  An  appeal  to  the  lords 
was  dismissed,  with  costs,  for  technical  reasons,  to  which  it 
is  not  necessary  to  allude ;  but  the  lord  chancellor, 
in  giving  the  judgment  of  *the  house,  expressed  a  [*379] 
strong  opinion  that  the  defense  of  illegality  which 
was  set  up  could  not  be  supported.  His  lordship  said,  "If 
this  objection  could  prevail,  that  because  these  parties  were 
all  guilty  of  a  common  offense  therefore  out  of  such  a 
transaction  no  contribution  could  arise,  it  would  be  an  an- 
swer to  him  (i.  <?.,  the  innocent  partner)  if  he  had  paid  the 
whole,  and  demanded  contribution  only  against  the  other 
parties." 

Again,  where  a  company  had  illegally  commenced  busi- 
ness before  the  amount  of  capital  required  by  statute  to  be 
paid  up  had  been  paid  up,  it  was  held  that  the  sharehold- 
ers were  nevertheless  liable  amongst  themselves  to  contrib- 
ute to  the  discharge  of  the  debts  of  the  company,  (g) 

Where  all  are  in  pari  delicto. —  The  case  which  presents 
most  difficulty  is  one  in  which  an  unlawful  act  has  been 
knowingly  performed  by  all  the  partners,  so  that  all  are 
in  pari  delicto.  There  is  a  dictum  of  Lord  Cottenham  to 
the  effect  that  in  such  a  case  each  partner  must  bear  all  the 
loss  he  may  happen  to  sustain,  and  that  he  cannot  require 
his  copartners  to  share  that  loss;  (h)  but,  on  the  other  hand, 
there  is  a  decision  which  goes  far  to  show  that  the  loss 
ought  to  be  apportioned  between  all  the  partners,  unless 
the  illegal  act  in  question  is  a  pure  tort,  (/)  or  a  direct  vio- 
lation of  some  statute,  or  unless  the  contract  of  partnership 

{g)  Ex  parte  Longworth's  Exec-  (i)  See  Baynard  v.  Woolley,  20 
utors,  Johns.  465,  and  on  appeal,  1  Beav.  583.  But  see  as  to  trespasses 
De  G.  F.  &  J.  17.  by  mining,  Thomas  v.  Atherton,  10 

(70  See  A.-G.   v.  Wilson,  Cr.  &    Ch.  D.  185. 
Ph.  1. 

893 


*380 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


is  itself  void  on  the  ground  of  illegality.  It  is  apprehended 
that  if  all  the  members  of  a  firm  were  equally  guilty  of  a 
breach  of  trust,  and  one  of  the  firm  alone  had  made  it  good 
out  of  his  own  moneys,  he  would  be  allowed,  in  taking  the 
partnership  accounts,  to  charge  his  copartners,  ratably  with 
himself,  with  the  amount  paid  by  him.  (k) 


[*380]  *Section  II. —  Of  Compensation  for  Trouble. 

Partner  not  entitled  to  charge  firm  for  his  services. — 

Under  ordinary  circumstances  the  contract  of  partnership 
excludes  any  implied  contract  for  payment  for  services  ren- 
dered for  the  firm  by  any  of  its  members.  (I)  Consequently, 
under  ordinary  circumstances,  and  in  the  absence  of  an 
agreement  to  that  effect,  one  partner  cannot  charge  his  co- 
partners with  any  sum  for  compensation,  whether  in  the 
shape  of  salary,  commission  or  otherwise,  on  account  of  his 
own  trouble  in  conducting  the  partnership  business;  (m) l 


(fc)  See  Ashurst  v.  Mason,  20  Eq. 
225.  See,  further,  as  to  contribu- 
tion between  wrong-doers,  Pollock, 
Law  of  Torts,  170. 

(T)  Thompson  v.  Williamson,  7 
Bli.  N.  S.  430,  per  Lord  Wynford ; 
Holmes  v.  Higgins,  1  B.  &  C.  74. 

(wi)  As  to  a  charge  of  commis- 
eion  by  a  ship's  husband,  see  Miller 
v.  Mackay,  31  Beav.  77,  and  34 
Beav.  295.  As  to  the  managing 
owner  of  a  ship,  see  The  Meredith, 
10  P.  D.  69. 

1  See  post. 

A  partner,  even  if  he  is  the  man- 
aging partner,  is  not  entitled  to 
charge  the  firm  for  his  services  in 
the  partnership  business,  either 
during  its  continuance  or  after  its 
dissolution,  unless  there  is  a  special 
agreement  to  that  effect,  or  unless 
such  an  agi'eement  can  be  implied 
from  the  course  of  dealing  among 
the  partners,  or  from  the  nature  of 


the  service   performed.     Caldwell 
v.  Leiber,  7  Paige,  483;  Lewis  v. 
Moffet,    11    111.    392;    Phillips    v. 
Turner,   2  Dev.  &  Bat.    Eq.    123 
Cunliff  v.  Dyerville,  etc.  Co.  7  R.  I 
325;  Reybold  v.  Dodd,  1  Harr.  401 
Lyman    v.   Lyman,   2    Paine,    11 
Zimmerman  v.  Huber,  29  Ala.  379 
Levi    v.    Karrick,    13    Iowa,    344 
Bevans    v.   Sullivan,   4    Gill,  383 
Bennett  v.   Russell,    34    Mo.   524 
Bradford  v.  Kimberly,  3  Johns.  Ch 
431 ;  Dougherty  v.  Van  Nostrand 

1  Hoffm.  68;  Buford  v.  Neely,  2 
Dev.  Eq.  481 ;  Anderson  v.  Taylor, 

2  Ired.  Eq.  420 ;  Butler  v.  Lemley, 
5  Jones'  Eq.  148;  Drew  v.  Ferson, 
22  Wis.  651 ;  King  v.  Hamilton,  16 
111.  190;  Roach  v.  Perry,  id.  37; 
Coddington  v.  Idell,  29  N.  J.  Eq. 
504;  Board  man  v.  Close,  44  Iowa, 
428 ;  Farrer  v.  Farrer,  29  Gratt.  134 ; 
Lee  v.  Lashbrooke,  8  Dana,  214; 
Mills  v.  Fellows,  30  La.  Ann.  824 ; 


894 


CH.  VI,  SEC.  II.]      CONTRIBUTION   AND   INDEMNITY. 


*380 


and  in  this  respect  a  managing  partner  is  in  no  different 
position  from  any  other  partner.  (?;)     Upon  the  same  prin- 


Heath  v.  Waters.  40  Mich.  457; 
Franklin  v.  Robinson,  1  John.  Ch. 
165;  Bennett  v.  Russell,  34  Mo. 
524;  Cameron  v.  Francisco,  26 
Ohio  St.  190;  Coursen  v.  Hamlin, 
2  Duer,  513;  Gilhooly  v.  Hart,  8 
Daly,  176;  Kimball  v.  Lincoln,  5 
Bradw.  (111.)  316;  Shriver's  Appeal, 
12  Atl.  Rep.  (Pa.)  553;  S.  C.  10 
Cent.  Rep.  744 ;  Burgess  v.  Badger, 
12  West.  Rep.  (111.)  806;  S.  C.  14 
N.  E.  Rep.  850;  Glover  v.  Hern- 
bree,  82  Ala.  324;  Mann  v.  Flana- 
gan, 9  0reg.  425;  Sheltonv.  Knight, 
68  Ala.  598 ;  Gaston  v.  Kellogg,  91 
Mo.  104;  Scudder  v.  Ames,  89  Mo. 
496;  Ligare  v.  Peacock,  109  111.  94; 
Lee  v.  Davis,  70  Ind.  464;  Godfrey 
v.  White.  43  Mich.  171 ;  In  re 
People's  Union  Bank,  16  Weekly 
Not.  Cas.  127 ;  Roots  v.  Salt  Co.  27 
W.  Va.  484 ;  Stebbins  v.  Williard, 
53  Vt.  665;  Gerard  v.  Gateau,  15 
Bradw.  520;  Emerson  v.  Durand, 
64  Wis.  Ill;  Frazier  v.  Frazier.  77 
Va.,775 ;  Brown's  Appeal,  89  Pa.  St. 
139;  Askew  u.  Springer,  111  111. 
662;  McBridev.  Stradley.  103  Ind. 
465 ;  Pierce  v.  Scott,  37  Ark.  308 ; 
Stratton  v.  Tabb,  8  Bradw.  225; 
Lassiter  v.  Jackman,  88  Ind.  118; 
Cook  v.  Phillips,  16  Bradw.  446. 

The  rule  is  the  same  as  to  surviv- 
ing partners.  Mengel's  Estate,  1 
Woodw.  Dec.  (Pa.)  334;  Lennig  v. 
Lennig,  11  Weekly  Not.  Cas.  18; 
Terrell  v.  Rowland,  4  S.  West.  Rep. 
825;  Scudder  v.  Ames,  supra; 
Sangston  v.  Hack,  52  Md.  173; 
Starr  v.  Case,  59  Iowa,  491;  Greg- 


orys. Menefee,  83  Mo.  413;  Loomia 
v.  Armstrong,  49  Mich.  521;  Den- 
ver v.  Roane,  99  U.  S.  355. 

Where,  by  agreement,  one  part- 
ner is  to  receive  a  stated  compensa- 
tion for  his  undivided  attention  to 
the  management  of  the  business 
and  does  not  comply  with  his 
agreement,  but  it  appears  that  the 
other  partners  knew  of  his  manner 
of  conducting  the  business  and 
made  no  complaint,  on  an  account- 
ing he  is  entitled  to  the  stipulated 
compensation.  Weeks  v.  McClin- 
tock,  6  So.  West.  Rep.  (Ark.)  734. 

An  administrator  or  executor  is 
not  entitled  to  commission  for 
winding  up  a  partnership  if  he  is 
himself  a  copartner.  Pickens'  Es- 
tate, 14  Weekly  Not.  Cas.  407 ;  Ter- 
rell v.  Rowland,  4  S.  West.  Rep. 
825 ;  In  re  Harris,  4  Dem.  (N.  Y.) 
463. 

The  personal  representative  of  a 
surviving  partner  who  settles  up 
partnership  business  is  not,  how- 
ever, as  a  matter  of  law,  precluded 
from  receiving  compensation  out 
of  the  partnership  funds  for  his 
services  in  the  performance  of  this 
duty.  Dayton  v.  Bartlett,  38  Ohio 
St.  357. 

It  is  the  duty  of  a  surviving 
partner  to  wind  up  the  business  of 
the  firm ;  and  where  the  executors 
of  the  deceased  partner,  in  conse- 
quence of  the  incapacity  of  the 
surviving  partner,  perform  this 
duty,  their  compensation,  if  they 
are  entitled  to  any,  must  come  out 


(n)  Hutcheson  v.  Smith,  5  Ir.  Eq. 
117.  There  a  managing  partner 
was  disallowed  all  salary,  commis- 


sion and  compensation  for  treating 
customers.* 


895 


*380 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


ciple  it  has  been  held  that,  in  taking  the  accounts  of  three 
partnerships,  viz.,  of  the  firm  A.  and  B.,  of  its  successors,  A., 


of  the  partnership  assets;  they  can- 
not claim  credit  for  such  services 
against  the  separate  estate  of  the 
deceased  partner.  Miller's  Appeal, 
18  Weekly  Not.  Cas.,  485. 

A  pleading  alleging  that  services 
were  rendered  by  a  partner  at  the 
special  instance  and  request  of  the 
members  of  the  firm  is  bad  on  de- 
murrer. McBride  v.  Stradley,  103 
Ind.  465. 

Partners,  after  a  dissolution,  are 
entitled  to  charge  for  preserving 
the  property.  Stebbinsi>.  Williard, 
53  Vt.  665. 

A  partner  who  refuses  inimedi- 
a'ely  to  wind  up  a  partnership 
upon  its  dissolution,  as  provided  by 
the  articles,  has  no  claim  against 
the  firm  for  extra  compensation  for 
services  in  carrying  on  the  business 
after  the  death  of  the  other  part- 
ner.   O'Neill  v.  Duff,  11  Phila.  244. 

In  the  absence  of  agreement,  one 
partner  cannot  charge  his  copart- 
ner for  services  rendered  about  the 
copartnership  business,  even  when 
the  services  of  the  respective  part- 
ners have  been  very  unequal.  Cook 
v.  Phillips,  16  Bradw.  446. 

Failure  in  duty  as  a  partner  may 
be  ground  for  dissolving  the  part- 
nership, but  not  for  a  claim  by  dil- 
igent partners  for  compensation. 
Godfrey  v.  White,  43  Mich.  171. 

Survivor  winding  up  a  partner- 
ship business  between  attorneys 
after  dissolution  by  the  death  of 
one  of  the  firm  is  not  entitled  to 
any  allowance  for  such  labor  other 
than  his  share  of  the  fees  as  speci- 
fied by  agi-eement  between  the 
parties  before  dissolution.  Denver 
v.  Roane,  99  U.  S.  355. 


Attorneys  undertaking  jointly 
the  defense  of  an  action  become, 
as  to  their  case,  special  partners; 
in  the  absence  of  an  agreement  to 
the  contrary,  they  are  entitled  to 
share  equally  in  the  compensation, 
and  it  does  not  matter  that  one 
may  do  more  work  than  the  other ; 
this  will  not  entitle  him  to  charge 
as  for  extra  services,  nor  will  he 
have  any  remedy  against  the  other 
by  dissolution  of  the  partnership, 
or  otherwise,  for  failure  to  perform 
his  full  duty.  Henry  v.  Bassett, 
75  Mo.  89. 

Unless  the  surviving  partner  of 
a  firm  of  attorneys  makes  a  new 
contract  he  cannot  claim  addi- 
tional compensation  from  a  client 
for  conducting  to  a  conclusion  the 
defense  to  a  chancery  suit  which 
the  firm  began  before  the  death  of 
the  other  partner,  and  for  which  it 
was  paid  the  entire  fee  agreed 
upon.  Dowd  v.  Troup,  57  Miss. 
204. 

An  agreement  among  partners  to 
draw  no  more  money  for  their  per- 
sonal use  unless  as  should  be  abso- 
lutely necessary  for  the  support  of 
their  family,  not  to  exceed  $100 
per  month,  the  residue  of  the  prof- 
its to  be  applied  to  the  firm  busi- 
ness, is  not  an  agreement  for  the 
payment  of  compensation,  but  a 
limitation  upon  the  division  of 
profits.  Gerard  v.  Gateau,  15 
Bradw.  520. 

Where,  by  agreement,  the  part- 
ners allow  one  of  their  number 
compensation  for  services,  the 
agreement  cannoi  be  rescinded  by 
one  without  the  assent  of  all. 
Askew  v.  Springer,  111  111.  662. 


896 


CTI.  VI,  SEC.  II.]      CONTRIBUTION    AND    INDEMNITY. 


*380 


B.  and  C,  and  of  its  successors,  B.  and  C,  this  last  firm 
could  not  charge  a  commission  for  collecting  the  debts  due 


Wh"re  an  agreement  is  made  for 
compensation  of  one  partner,  the 
fact  that  no  claim  is  made  therefor 
during  continuance  of  the  firm 
will  not  preclude  him  from  claim- 
ing the  same  on  a  final  settlement 
of  the  partnership  account.  Askew 
v.  Springer,  111  111.  662. 

An  arrangement  by  which  one 
person  is  to  share  the  profits  of  the 
business  with  another  does  not 
make  him  a  general  partner  in 
such  sense  as  to  deprive  him  of  his 
right  to  certain  additional,  specific 
compensation  which  has  been 
agreed  upon.  Hamper's  Appeal, 
51  Mich.  71. 

"Where  a  partnership  is  dissolved 
and  the  managing  partners  con- 
tinue the  business  with  the  vendee 
of  the  other  partner,  who  permits 
the  business  to  continue  without 
interruption  or  any  new  agree- 
ment, upon  the  final  settlement  the 
active  partners  will  be  allowed 
compensation  for  their  services  ac- 
cording to  the  original  stipulation 
in  the  formation  of  partnership. 
Wilson  v.  Lineberger,  83  N.  C. 
524. 

Particular  agreement  for  com- 
pensation of  one  member  of  the 
}  artnership,  who  was  its  general 
manager,  construed  in  Brauns  Ap- 
peal, 105  Pa.  St.  414. 

A  partner  in  the  purchase  and 
permitting  of  lands,  who,  by  agree- 
ment, puts  his  personal  services 
against  the  furnishing  of  capital 
by  his  copartner,  has  the  right  to 
charge  against  the  partnership 
any  sums  necessarily  expended  by 
him  for  the  personal  services  of 
others  in  and  upon  the  common 
Vol.  1  —  57  39 


property.  Burleigh  v.  White,  70 
Me.  130;  S.  C.  64  id.  23. 

Thus  a  copartner  has  no  claim 
against  the  other  member  of  the 
firm  for  personal  services  in  pre- 
paring and  superintending  a  mill 
for  the  firm,  where  it  is  not  shown 
that  such  services  were  outside  of 
the  joint  dealings  of  the  firm ;  and 
it  does  not  affect  such  a  claim  that 
the  title  to  the  land  on  which  the 
mill  is  located  is  in  said  other 
member  of  the  firm.  Cunliff  v. 
Dyerville,  etc.  Co.  7  R.  I.  325. 

An  attorney  at  law,  who  is  also 
a  partner  of  a  mercantile  firm,  is 
not  entitled  to  charge  commissions 
for  collecting  the  notes  and  ac- 
counts of  that  firm  as  against  his 
copartner,  in  the  absence  of  any 
special  agreement  to  that  effect. 
The  legal  presumption  is  that  he 
was  to  collect  the  debts  due  the 
firm,  as  a  partner,  for  the  benefit 
of  the  concern.  Vanduzer  v.  Mc- 
Millan, 37  Ga.  299. 

In  an  action  for  the  liquidation 
of  the  affairs  of  a  partnership, 
when  one  partner,  the  plaintiff, 
sets  up  a  claim  under  express  con- 
tract for  compensation  for  extra 
services  or  labor,  testimony  is  in- 
admissible to  prove  the  value  of 
the  services  of  the  other  partner 
under  a  claim  by  reconvention  on 
a  quantum  valebant.  Hill  v. 
Matta,  12  La.  Ann.  179. 

In  an  agreement  of  copartnership 
between  two,  U.  and  W.,  "  U.  bar- 
gains and  agrees  to  give  the  said 
W.  $450  to  manage  the  business." 
Held,  that  this  salary  must  be  paid 
out  of  the  copartnership  funds. 
Weaver  v.  Upton,  7  Ired.  L.  458. 


*380 


EIGHTS    AND   OBLIGATIONS. 


[BOOK    IIT. 


to  the  two  preceding  firms,  (o)  So  a  partner  employed  to 
buy  or  sell  goods  for  the  firm  cannot  charge  it  with  any 
commission  for  so  doing,  (p) 


A  provision  in  a  partnership 
that  one  partner  shall  have  the 
sum  of  $5  per  day,  and,  in  addi- 
tion, one-fourth  of  the  net  profits 
of  the  firm,  construed  to  mean 
that  the  $5  per  day  shall  be 
charged  to  expense,  and  not  to  the 
other  partner  individually.  Cook 
v.  Phillips,  16  Bradw.  446. 

Where  a  person  entered  into  part- 
nership with  several  other  persons 
for  the  purpose  of  erecting  a  dam 
and  mill,  and,  after  having  spent 
some  money  and  several  months' 
work,  left  the  partnership  without 
reasonable  cause  for  dissatisfaction. 
Held,  that  this  was  a  dissolution 
of  the  partnership,  and  that  though 
he  could  claim  no  specific  interest 
in  the  mill,  which  had  been  fin- 
ished by  the  remaining  partners, 
he  might  recover  a  fair  compensa- 
tion for  the  money  he  had  advanced 
and  the  work  he  had  done.  Beaver 
v.  Lewis,  15  Ark.  138. 

By  one  of  the  articles  of  a  part- 
nership agreement  a  partner  bound 
himself  "not  to  take  out  of  the 
business  or  stock  in  trade  of  the 
partnership  more  than  $700  per 
annum  in  goods  or  money,  or 
both."  Held,  that  this  article  could 
not  be  construed  as  an  agreement 
that  this  partner  should  have  a 
salary  of  $700  per  annum  in  con- 
sideration of  his  giving  his  atten- 
tion to  the  business  of  the  firm. 
It  was  evidently  designed  to  pro- 
tect the  capital  from  diminution 
during  the  continuance  of  the  firm, 


and  the  authority  to  draw  annually 
a  sum  not  exceeding  $700  was  to 
be  regarded  as  a  restriction  on  the 
rights  of  the  partner  to  appropriate 
beyond  that  amount  his  proportion 
either  of  the  capital  or  profits  until 
the  partnership  should  expire. 
Trump  v.  Baltzell,  3  Md.  295 ;  S.  C. 
1  Md.  Ch.  517. 

Where  the  articles  of  partnership 
provided  that  the  active  partner 
should  be  entitled  to  one-fourth  of 
the  net  profits,  and,  if  his  share 
did  not  amount  to  $3,000  at  the  end 
of  any  one  year,  that  the  other 
partner  should  pay  him  whatever 
sum  might  be  necessary  to  make 
up  that  amount ;  that  each  partner 
might  invest  in  the  partnership,  as 
capital,  an  amount  not  exceeding 
$10,C00,  but  should  not  draw  out 
during  the  year,  without  the  con- 
sent of  his  copartner,  any  portion 
of  the  capital  thus  invested ;  that 
each  might  from  time  to  time  draw 
out  of  the  money  of  the  partner- 
ship, for  his  private  use,  a  specified 
sum  per  month,  and  that  the  books 
should  be  balanced  and  a  balance- 
sheet  made  out  at  the  end  of  each 
year, —  held,  that  the  resident  part- 
ner was  entitled  to  receive  $3,000 
at  the  end  of  each  year,  although 
the  business  of  the  year  resulted  in 
a  loss  to  the  firm;  and  that  although 
he  allowed  his  share  of  the  profits 
at  the  end  of  the  first  year  to  re- 
main to  his  credit  on  the  books  of 
the  firm,  it  was  not  thereby  in- 
vested in  the  partnership,  but  re- 


(o)   Whittle     v. 
Knapp,  311. 


McFarlane, 


1        (p)  See    Bentley    v.    Craven,  18 
Beav.  75. 


CH.  VI,  SEC.  II.]     CONTRIBUTION   AND    INDEMNITY. 


:380 


Rule  applies  though  the  partners  may  have  worked 
unequally. —  Even  where  the  amount  of  the  services  ren- 
dered by  the  partners  is  exceedingly  unequal,  still,  if  there 


mained  his  private  property,  and 
might  be  used  or  withdrawn  by 
him  at  any  time.  Dumont  v.  Ruep- 
precht,  38  Ala.  175. 

A.  made  a  written  agreement, 
dated  February  1,  1869,  with  B. 
and  C,  partners,  to  work  for  the 
firm  during  the  ensuing  year  for  a 
salary  of  $1,800,  and,  in  addition, 
one-fourth  of  the  net  profits  of  the 
business,  and  that  in  computing 
these  profits  no  deduction  should 
be  made  for  bad  debts,  but  interest 
on  the  capital,  which  was  wholly 
furnished  by  B.  and  C,  should  be 
deducted.  In  an  action  by  A. 
against  them  to  recover  his  one- 
fourth,  they  offered  evidence  to 
show  that  he  had  worked  for  them 
during  the  year  preceding  Febru- 
ary 1,  1869,  under  a  written  agree- 
ment for  a  salary  of  $1,800,  and,  in 
addition,  one-fourth  of  the  net 
profits;  that  for  said  year  they  re- 
ceived for  their  own  salaries  from 
the  net  profits  the  sum  of  $3,300; 
and  that  articles  of  partnership, 
dated  February  1,  1869,  were  en- 
tered into  between  them,  contain- 
ing a  provision  which  was  known 
to  him,  that  for  the  ensuing  year 
B.  should  have  a  salary  of  $1,800 
and  C.  a  salary  of  $1,500,  before 
determining  the  profits  to  be  di- 
vided between  them.  Held,  that 
the  evidence  was  admissible,  and, 
being  uncontrolled,  showed  that 
the  salaries  of  A.,  B.  and  C.  were 
to  be  deducted  from  the  gross 
profits,  in  order  to  determine  the 
net  profits  in  which  A.  was  to 
share.  Fuller  v.  Miller,  105  Mass. 
103. 


In  March,  1876,  the  plaintiff  and 
defendant,  having  been  doing  busi- 
ness as  a  partnership  for  several 
years,  agreed  in  writing  to  extend 
the  partnership  business  another 
year,  the  plaintiff  to  receive  $1,500 
salary,  and  "the  profits  of  the  busi- 
ness after  that  payment  to  be  di- 
vided equally."  Subsequently  the 
plaintiff,  by  written  indenture,  as- 
signed to  defendant  all  interest, 
claim  and  demand  to  the  goods 
belonging  to  the  firm,  "all  and 
singular  the  debts  and  sums  of 
money  owing  to  the  plaintiff  sever- 
ally or  jointly  with  the  defend- 
ant;" "  also  all  and  singular  bills, 
bonds,  specialties  and  writings 
whatsoever  for  and  concerning 
the  debts  of  the  late  copartner- 
ship ; "  and  in  consideration  thereof 
the  defendant  covenanted  to  save 
the  plaintiff  harmless  from  all 
debts  and  liabilities  of  the  firm; 
and  thereupon  the  parties  stipu- 
lated that  the  partnership  be  dis- 
solved and  the  agreement  of  March, 
1876,  be  canceled.  Held,  that  the 
plaintiff  could  not  maintain  an  ac- 
tion at  common  law  to  recover  for 
his  services  under  the  agreement 
of  March,  1876,  that  having  been 
canceled,  and  that  whatever  rem- 
edy the  plaintiff  had  was  upon  the 
covenants  of  the  latter  indenture. 
Wright  v.  Troop,  70  Me.  346. 

If,  by  the  terms  of  a  partnership 
agreement,  each  partner  is  to  de- 
vote his  whole  time  and  labor  to 
the  business  of  the  firm,  pay  his 
own  personal  expenses  and  receive 
an  equal  share  of  the  profits,  a 
partner  who,  previously  to  the  for- 


*3S0 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


is  no  agreement  that  their  services  shall  be  remunerated,  no 
charge  in  respect  of  them  can  be  allowed  in  taking  the  part- 
nership accounts.     In  such  a  case  the  remuneration  to  be 

mation  of  the  partnership,  has  en-        Defendant,    a    skilled   culturist, 


tered  into  contracts  and  performed 
service  in  regard  to  them,  which 
contracts  became  the  property  of 
the  firm  on  its  formation,  is  not 
entitled  to  compensation  for  such 
services ;  nor  is  he  entitled  to  com- 
pensation for  his  services  in  closing 
up  the  affairs  of  the  firm,  after  the 
purpose  for  which  it  was  formed 
has  been  accomplished.  Dunlap  v. 
Watson,  124  Mass.  305. 

The  sickness  of  a  partner  is  one 
of  the  risks  incidental  to  partner- 
ship business,  and  does  not  give 
another  partner  any  claim  for  per- 
sonal services  in  conducting  the 
entire  business,  if  the  partnership 
articles  do  not  provide  for  any ; 
where,  therefore,  a  surviving  part- 
ner procured  from  the  executrix 
of  the  deceased  the  transference 
to  him  of  a  certain  partnership 
claim  in  compensation  for  his  serv- 
ices in  conducting  the  entire  busi- 
ness during  decedent's  illness,  and 
suppressed  this  claim  from  the  in- 
ventory of  the  partnership  estate, 
held,  that  this  transaction  operated 
as  a  fraud  in  law.  Heath  v.  Waters, 
40  Mich.  457. 

Whether  a  partner  is  entitled  to 
remuneration  for  services  rendered 
the  firm  depends  upon  the  inten- 
tion of  the  parties  —  an  express 
agreement  is  not  necessary;  and  in 
order  to  ascertain  whether  such 
compensation  should  be  allowed, 
the  circumstances  which  sur- 
rounded the  parties,  and  their  rel- 
ative situations  towards  each  other, 
should  be  considered.  Cramer  v. 
Bachman,  68  Mo.  301. 


entered  into  partnership  with 
plaintiff  for  the  growing  of  grapes 
and  the  manufacture  of  wine. 
Plaintiff  purchased  a  tract  of  land 
for  such  purpose,  an  undivided 
one-half  of  which  was  to  be  deeded 
to  defendant,  the  amount  paid  for 
same  by  plaintiff  being  refunded 
to  him  out  of  profits  realized. 
Nothing  further  was  agreed  upon 
at  the  time  of  the  formation  of  the 
partnership.  Defendant  built  a 
dwelling-house  and  wine-cellar, 
expended  labor  and  capital  of  his 
own,  and  made  a  fruitful  vineyard 
and  extensive  orchard  on  the  tract. 
Plaintiff  was  engaged  almost  ex- 
clusively in  an  independent  busi- 
ness of  his  own.  Subsequently, 
defendant,  dissatisfied  with  the 
failure  of  plaintiff  to  convey  to 
him  the  undivided  half  of  the 
premises,  sent  the  key  of  the  wine- 
cellar  to  the  plaintiff,  and  made 
preparations  to  return  to  St.  Louis, 
from  whence  he,  at  plaintiff's  re- 
quest, had  come,  when  plaintiff 
made  the  deed  and  handed  defend- 
ant a  written  agreement,  signed  by 
himself  alone,  which  writing  gave 
recognition  to  the  idea  that  defend- 
ant was  entitled  to  remuneration 
for  both  prior  and  subsequent 
labors  in  the  interest  of  the  firm. 
This  writing  the  defendant  refused 
to  sign,  not  regarding  the  compen- 
sation therein  specified  as  suffi- 
cient, but  returned  again  to  his 
labors,  in  which  he  continued  until 
the  present  proceeding  resulted  in 
a  decree  for  dissolution.  A  referee' 
having  been  appointed,  took  an  ac- 


900 


CH.  VI,  SEC.  II.]      CONTRIBUTION    AND    INDEMNITY. 


*381 


paid  to  either  for  personal  labor  exceeding  that  contributed 
by  the  other  is  considered  as  left  to  the  honor  of  the  other; 
and  where  that  principle  is  wanting  a  court  of  justice  can- 
not supply  it.  (q) 

*WiIful  inattention  to  business. —  But  where,  as  [*381] 
is  usually  the  case,  it  is  the  duty  of  each  partner 
to  attend  to  the  partnership  business,  and  one  partner  in 
breach  of  his  duty  wilfully  leaves  the  others  to  carry  on  the 
partnership  business  unaided,  they  are,  it  would  seem,  en- 
titled to  compensation  for  their  services.1     In  Airey  v.  Bor- 


count  and  made  report,  which  was 
approved,  except  in  one  particular, 
which  was  the  allowance  to  defend- 
ant for  services  to  the  firm,  there 
being  no  articles  of  copartnership 
and  no  writing  or  express  agree- 
ment for  the  allowance  of  such 
compensation.  Held,  that  the  al- 
lowance was  properly  made. 
Cramer  v.  Bach  man,  68  Mo.  310. 

If  a  partner  is  appointed  agent 
of  the  firm  for  a  special  purpose 
he  has  been  held  to  be  entitled  to 
the  usual  compensation  therefor. 
Philip  v.  Turner,  2  Dev.  &  Bat. 
Eq.  123;  Bradford  v.  Kirnberly,  3 
John.  Ch.  431. 

Where  a  third  person  purchases 
half  the  share  of  a  partner  and  be- 
comes the  general  manager  of  the 
business,  inasmuch  as  he  is  not  in 
partnership  with  the  partner  who 
retains  the  original  interest  in  the 
firm,  he  may,  as  against  such  part- 
ner, claim  a  reasonable  compensa- 
tion for  his  services.  Newland  v. 
Tate,  3  Ired.  Eq.  226. 

A  partner  is  entitled  to  fair  com- 
pensation for  the  services  of  his  son 
or  daughter,  provided  he  or  she 
was  employed  about  the  business 
and  rendered  valuable  service;  but 
the  apprentices  must  be  regarded 
as  apprentices  of  the   firm;    and 


no  charge  can  rightfully  be  made 
save  for  their  board,  clothing  and 
other  necessary  expenses.  Zim- 
merman v.  Huber,  29  Ala.  379; 
Holloway  v.  Turner,  61  Md.  217. 
See,  also,  Galbraith's  Estate,  12 
Phila.  20. 

(q)  See  per  Wigram,  V.-C,  in 
Webster  v.  Bray,  7  Ha.  179.  In 
that  case  an  allowance  for  trouble 
was  made  to  the  defendant,  but  it 
was  offered  by  the  plaintiff.  In 
Robinson  v.  Anderson,  20  Beav.  98, 
which  was  a  similar  case,  no  allow- 
ance was  offered,  nor  was  any 
given  by  the  court. 

1  Where  an  attorney  at  law  re- 
fuses to  act  as  partner  or  to  per- 
form the  functions  of  such  in  the 
prosecution  of  a  cause  which  has 
been  intrusted  to  his  firm,  and  re- 
pudiates his  obligations,  he  is  not 
entitled  to  any  part  of  the  fees  sub- 
sequently earned  by  his  partners  in 
the  cause.  Denver  v.  Roane,  99 
U.  S.  355. 

On  a  settlement  of  the  firm  ac- 
counts a  partner  is  chargeable  with 
the  value  of  personal  services  with- 
held, although  the  promise  to  ren- 
der them  was  only  a  verbal  one, 
and  the  partnership  articles  were 
in  writing.  Marsh's  Appeal,  69  Pa. 
St.  30. 


901 


*381 


EIGHTS   AND    OBLIGATIONS. 


[BOOK    III. 


ham,  (r)  two  partners  had  agreed  to  devote  their  whole 
time  to  the  partnership  business;  they  quarreled,  and  one 
of  them  only  afterwards  attended  to  it;  the  partnership 
was  ultimately  dissolved,  and  an  inquiry  was  directed  for 
the  purpose  of  ascertaining  what  allowance  ought  to  be 
made  to  him  for  having  carried  on  the  business  alone. 

Rule  as  to  services  rendered  after  a  dissolution. —  The 
rule,  moreover,  which  precludes  a  partner  from  charging 
his  copartners  with  payment  for  his  services  does  not  apply 
to  services  rendered  in  carrying  on  the  business  of  the  firm 
after  its  dissolution;1  and  it  has  been  held  that  a  surviving 
partner  who  carries  on  the  business  of  the  firm  for  the 
benefit  thereof  is  entitled  to  remuneration  for  his  trouble  in 
so  doing,  (s)  unless  there  be  some  special  reason  to  the  con- 
trary,2 as  where  he  is  the  executor  of  his  deceased  partner,  (t) 3 


(r)  Airey  v.  Borham,  29  Beav. 
620. 

1See,  however,  Dunlap  v.  Wat- 
son, ante,  *380,  note ;  also  next  note 
infra. 

(s)  Featherstonhaugh  v.  Turner, 
25  Beav.  382;  Brown  v.  De  Tastet, 
Jac.  284;  Crawshay  v.  Collins,  2 
Russ.  347.  See,  also,  Mellersh  v. 
Keen,  27  Beav.  242,  where  one 
partner  became  lunatic  and  the 
business  was  continued  by  the 
others. 

2  A  partner,  in  the  absence  of  an 
agreement  for  compensation,  is  not 
entitled  to  charge  for  services  ren- 


dered in  discharging  his  duties  as 
member  of  the  firm;  and  it  makes 
no  difference  whether  the  services 
are  rendered  before  or  after  the  dis- 
solution of  the  firm.  Brown's  Ap- 
peal, 89  Pa.  St.  139;  Cameron  v. 
Francisco,  26  Ohio  St.  190;  Hell- 
man  v.  Mendel,  8  Am.  Law  Record, 
360 ;  Kimball  v.  Lincoln,  5  Bradw. 
(111.)  316.    See  ante,  p.  774  and  note. 

Nor  is  the  rule  affected  by  the 
fact  that  the  partner  closing  up  the 
affah-s  of  the  firm  after  dissolution 
is  a  special  partner.  Hellman  v. 
Mendel,  supra. 

But  where  a  surviving  partner  is 


(0  Burden  v.  Burden,  1  V.  &  B. 
172;  Stocken  v.  Dawson,  6  Beav. 
371. 

8  Where  an  intestate  and  his  ad- 
ministrator had  been  partners  in 
building  a  mill,  held,  that  the  ad- 
ministrator had  no  right  to  retain 
of  the  assets  for  work  done  on  the 
mill  after  the  death  of  his  intestate. 
Shelly  v.  Hiatt,  7  Jones,  L.  509. 


A  surviving  partner,  in  the  ab- 
sence of  any  stipulation  entitling 
him  to  compensation,  being  ap- 
pointed receiver  at  his  own  in- 
stance, claiming  the  right  to  wind 
up  the  firm  business,  is  entitled  to 
no  compensation  as  receiver.  Berry 
v.  Jones,  11  Heisk.  206. 


902 


CU.  VI,  SEC.  II.]      CONTRIBUTION    AND    INDEMNITY. 


*381 


Indian  allowances. —  In  India  an  executor  is  allowed  a 
percentage  on  the  assets  collected  by  him;  and  a  surviving 


under  no  obligation  to  continue  the 
business,  but  does  so  at  his  own 
peril,  of  the  representatives  of  the 
deceased  partner  elect  to  share  in 
the  profits  a  reasonable  allowance 
may  be  deducted  from  such  profits 
as  a  compensation  to  the  survivor 
for  his  services.  Cameron  v.  Fran- 
cisco, 26  Ohio  St.  190. 

Where  a  firm  was  dissolved  by 
the  death  of  one  of  its  members, 
and  the  surviving  partners,  for  the 
preservation  of  the  good-will,  and 
to  enable  the  entire  property  and 
business  of  the  firm  to  be  sold  as  a 
going  concern,  continue  to  carry  on 
the  business  at  their  own  risk  until 
such  sale  was  effected,  held,  that 
the  amount  thus  saved  to  the  firm 
from  the  good-will  was  in  the  nat- 
ure of  profits,  and  that,  on  settle- 
ment of  the  partnership,  an  allow- 
ance might  be  made  therefrom  to 
the  surviving  partners  for  their 
services  in  continuing  the  business 
after  dissolution.  Cameron  v.  Fran- 
cisco, 26  Ohio  St.  190. 

A  surviving  partner  was  held  en- 
titled to  a  reasonable  compensation 
for  his  services  in  settling  up  the 
partnership  business  in  Royster  v. 
Johnson,  73  N.  C.  474,  and  Schenke 
v.  Dana,  118  Mass.  236. 

Contra,  unless  stipulated  for  by 
contract.  Cooper  v.  Reid,  2  Hill 
(S.  C),  Ch.  549;  Cothran  v.  Knox, 
13  S.  C.  496 ;  Cooper  v.  Merrihew, 
Riley,  Eq.  166;  Brown  v.  McFar- 
land,  41  Penn.  St.  129;  Beatty  v. 
Wray,  19  Penn.  St.  516;  Lyman  v. 
Lyman,  2  Paine,  C.  C.  52. 

In  Brown  v.  McFarland,  supra, 
it  was  held  that  the  executor  of  a 
deceased  partner    cannot    employ 


the  surviving  partner  for  that  pur- 
pose at  the  expense  of  the  deced- 
ent's estate,  unless  he  is  expressly 
authorized  so  to  do  by  the  testa- 
tor's will. 

In  Schenke  v.  Dana,  supra,  the 
surviving  partner  of  a  firm  manu- 
facturing weapons  of  war  was  held 
entitled  to  compensation  for  his 
personal  services  devoted,  with  the 
assent  of  the  administrator  of  the 
deceased  partner,  to  finishing  exist- 
ing contracts  with  the  government, 
and  entering  upon  new  ones,  em- 
ploying the  patents  and  machinery 
of  the  firm. 

In  Hite  v.  Hite,  1  B.  Mon.  177,  it 
was  held  that  compensation  might 
be  allowed  to  a  surviving  partner 
for  performing  perplexing  and  ex- 
traordinary services  in  settling  the 
business  of  the  firm,  but  only  to  an 
amount  barely  sufficient  to  remu- 
nerate him  for  services  necessarily 
rendered. 

Where  a  surviving  partner  con-  ' 
tinued  the  business  after  the  death 
of  his  partner,  and  settled  up  the 
business  of  the  concern,  but  no 
charge  was  made  for  compensation 
for  such  services  until  nearly  six 
years  after  a  settlement  of  accounts 
between  the  executors  of  the  part- 
ners, held,  that  such  charge  could 
not  be  allowed.  Patton  v.  Cal- 
houn, 4  Gratt.  138. 

Where  on  the  hearing  of  a  bill  in 
chancery,  praying  for  an  account 
between  partners,  it  appeared  that, 
after  one  of  the  members  of  the 
firm  had  made  a  voluntary  assign- 
ment of  his  estate  to  a  trustee,  for 
the  benefit  of  his  creditors,  another 
member  of  said  firm  paid  out  ef 


903 


^382 


RIGHTS    AND    OBLIGATIONS. 


[book  III. 


partner  who  is  the  executor  of  his  deceased  copartner  has 
been  allowed  this  percentage  even  on  the  amount  due  from 
the  partnership  to  the  estate  of  the  deceased,  (u) 

Section  III. —  Of  Outlays  and  Advances. 

Outlays  and  advances  made  by  one  partner. —  In  taking 
a  partnership  account  each  partner  is  entitled  to  be  allowed 
against  the  other  everything  he  has  advanced  or  brought  in 
as  a  partnership  transaction,  and  to  charge  the  other  in  the 

account  with  what  that  other  has  not  brought  in, 
[*382]  *or  has  taken  out  more  than  he  ought;  and  nothing 

is  to  be  considered  as  his  share  but  his  proportion  of 
the  residue  on  the  balance  of  the  account,  (x)  Although, 
therefore,  a  partner  is  not  entitled  to  compensation  for 
trouble,  he  is  entitled  to  charge  the  partnership  with  sums 
bona  fide  expended  b}r  him  in  conducting  the  business 
thereof,  (y) l     Thus,  where  the  managing  director  of  a  cost- 


the  partnership  funds  sundry  lia- 
bilities and  indorsements  of  the 
firm,  and  charged  in  his  individual 
account  the  sum  so  paid,  and  also 
charged  for  his  time  and  services 
in  collecting  and  paying  out  said 
money,  but  did  not  further  inter- 
meddle with  the  partnership  prop- 
erty, except  to  preserve  it  from 
injury,  held,  that  such  charges 
were  properly  made,  and  should  be 
allowed.  Utley  v.  Smith,  24  Conn. 
290. 

Where  a  firm  of  attorneys  made 
an  agreement  providing  for  a  dif- 
ferent mode  of  division  of  the  fees 
in  cases  unfinished  at  the  time  of 
the  death  of  either  of  them  from 
that  adopted  as  to  cases  finished 
during  their  joint  lives,  the  sur- 
vivors are  entitled  to  no  allowance 
for  winding  up  the  business  other 
than  their  share  of  the  fees  as  spec- 
ified in  said  agreement.  Denver  v. 
Roane,  99  U.  S.  355. 


(n)  Cockerell  v.  Barber,  2  Russ. 
585,  and  1  Sim.  23. 

(x)  Per  Lord  Hardwicke  in  West 
v.  Skip,  1  Ves.  Sr.  242. 

(y)  Burden  v.  Burden,  1  V.  &  B. 
172,  where  a  surviving  partner, 
who  was  also  executor,  was  al- 
lowed to  charge  expenses  actually 
incurred,  but  not  time  and  trouble. 
Compare  Hutcheson  v.  Smith,  5 
Ir.  Eq.  117,  ante,  p.  3S0,  note  (n). 

JSee  King  v.  Hamilton,  16  111. 
190;  Savage  v.  Carter,  9  Dana,  408. 

Taxes  levied  on  the  business  of  a 
partnership  form  part  of  the  ex- 
penses of  the  business,  and  when 
recovered  back  from  the  govern- 
ment are  to  be  distributed  among 
the  partners  according  to  the 
terms  by  which  the  expenses  were 
shared.  Harris'  Succession,  2  So. 
Rep.  (La.)  39. 

Advances  by  one  partner  to 
carry  on  the  partnership  business 
are  generally  on  the  credit  of  the 


904 


CH.  VI,  SEC.  III.]       CONTRIBUTION    AND    INDEMNITY. 


*382 


book  mining  company  advanced  money  for  the  purpose  of 
enabling  the  business  of  the  company  to  be  carried  on,  he 
was  held  entitled  to  be  reimbursed  by  the  company, -there 
being  no  question  as  to  his  authority  to  carry  on  the  busi- 


firni  and  not  on  the  separate  credit 
of  the  copartner.  Reimbursement 
of  advances  by  one  partner  in- 
volves, therefore,  a  settlement  of 
partnership  accounts.  Elliott  v. 
Deason,  64  Ga.  63. 

A  partner  to  whom  the  firm  is 
indebted  for  advances  made  by 
him  is  entitled,  in  a  settlement  of 
its  affairs,  to  charge  the  firm  with 
the  amount  paid  by  him  as  dis- 
count on  notes  payable  to  the  firm ; 
and  is  not  chargeable  with  the 
amount  of  a  premium  received  by 
him  on  a  draft  payable  in  gold,  if 
he  has  credited  the  firm  with  all 
he  received  on  the  draft.  Fletcher 
v.  Reed,  131  Mass.  312. 

A.  and  B.  entered  into  partner- 
ship in  the  publishing  business. 
A.  was  largely  indebted  to  B.  and 
others,  which  indebtedness  it  was 
agreed  A.  should  pay  out  of  the 
profits  of  the  business  after  the  ex- 
penditures necessary  to  keep  up 
the  stock  and  payment  of  a  stipu- 
lated sum  per  month  to  each  part- 
ner. It  was  also  agreed  between 
them  that  after  the  debts  of  A. 
were  paid  the  stock  on  hand  and 
all  of  A.'s  stock  and  fixtures  were 
to  be  equally  divided  or  the  value 
thereof  credited  to  each.  A.  in- 
duced B.  to  advance  enough  to 
pay  C. ,  one  of  A.'s  said  creditors; 
A.  failed  to  pay  B.  and  some 
others.  On  dissolution  B.  took  all 
the  stock  and  fixtures  and  claimed 
credit  against  them  for  the  amount 
due  him  by  A.,  and  also  for  the 
amount  he  had  advanced  to  pay  C. 


Held,  that  B.  was  entitled  to  be 
paid  in  full  the  amount  advanced 
to  pay  C,  and  was  entitled  to  his 
pro  rata  share  with  A.'s  said  other 
creditors  on  the  said  amount  A. 
owed  him.  Zell's  Appeal,  111  Pa. 
St.  532. 

A  provision  in  the  articles  that 
in  case  of  the  absence  of  one  part- 
ner the  other  shall  carry  on  the 
business,  but  shall  not,  without  the 
other's  consent,  incur  debts  for  the 
firm  exceeding  its  cash  assets,  does 
not  throw  on  the  managing  part- 
ner the  burden  of  the  daily  and 
necessary  expenses  of  carrying  on 
the  business,  but  merely  prevents 
his  incurring  debts  for  the  pur- 
chase of  additional  property  in  or- 
der to  extend  the  firm  business. 
Richie  v.  Levy,  6  So.  West.  Rep. 
(Tex.)  685. 

The  defendant,  while  returning 
from  California,  was  taken  sick, 
and  in  consequence  thereof  was 
subjected  to  expenses  and  loss  of 
time  after  his  return.  Held,  that 
in  accounting  for  the  net  earnings 
he  was  entitled  to  an  allowance 
for  the  expenses  but  not  for  the 
lost  time.  Brigham  v.  Dana,  ,29 
Yt.  1. 

Where  it  was  provided,  in  arti- 
cles of  copartnership  between  the 
plaintiffs  and  the  defendants,  that 
the  services  of  one  member  of  the 
firm  should  be  rendered  at  a  stipu- 
lated price,  and  such  partner  in- 
curred expenses  in  the  appropriate 
business  of  the  firm  at  Porto  Rico, 
it  was  held  that  such  expenses  were 


^382 


EIGHTS    AND    OBLIGATIONS. 


[book  III. 


ness  on  credit,  (s)     So,  where  the  directors  of  a  mining 
company  advanced  money  to  keep  the  mine  at  work,  and  it 


a  proper  charge  against  the  copart- 
nership, and  that  he  had  not  for- 
feited his  right  to  the  same  by- 
withholding  from  the  other  mem- 
bers of  the  firm  the  proceeds  of 
the  partnership  business  for  the 
period  of  one  month  after  his  re- 
turn to  this  country,  and  until  re- 
quested by  his  copartners  to  make 
a  settlement  of  said  business.  Pond 
v.  Clark,  24  Conn.  370. 

A  partner,  though  bound  to 
transact  the  outdoor  business  and 
superintend  the  sale  of  all  articles 
manufactured  by  the  partnership, 
is  entitled  to  credit  for  such 
charges  for  commissions  to  others 
for  sales  as  have  been  regularly 
entered  on  the  books  as  a  charge 
against  the  firm  during  its  exist- 
ence, unless  the  entries  be  made 
in  error  or  fraud.  It  is  the  con- 
struction placed  by  the  parties 
themselves  on  their  contract.  Pratt 
v.  McHatton,  11  La.  Ann.  260. 

In  a  proceeding  between  partners 
to  settle  their  accounts,  items  for 
clearing  and  improving  their  joint 
land  and  for  receipt  of  rents 
should  not  be  considered;  such 
items  should  be  settled  upon  a  pro- 
ceeding for  partition.  Jones  v. 
Jones,  23  Ark.  212. 

In  such  a  proceeding  the  court 
refused  to  allow  an  individual  de- 
mand of  one  partner  against  the 
other  any  further  than  to  extin- 
guish a  claim  by  the  latter  for 
partnership  funds  remaining  in 
the  former's  hands.  Jones  v. 
Jones,  23  Ark.  212. 

Where  a  partner  contracts  in  his 
individual  name,  and  makes  dis- 
bursements on    account    of    such 


contracts,  in  a  contest  with  his  co- 
partners in  settling  the  affairs  of 
the  copartnership  he  will  be  bound 
to  prove  that  such  contracts  were 
made  on  account  of,  and  for  the 
benefit  of,  the  firm  in  order  to  be 
allowed  for  his  disbursements. 
Eodes  v.  Rodes,  6  B.  Mon.  400. 

A  partner  who  undertakes  to 
wind  up  the  firm  business  stands 
in  the  place  of  an  executor,  and 
can  establish  disbursements  only 
by  vouchers  properly  authenti- 
cated. Clements  v.  Mitchell,  Phill. 
Eq.  3. 

K.  bought  of  F.,  for  the  account 
of  himself  and  W.,  certain  prop- 
erty, paying  for  it  partly  in  cash 
and  partly  by  his  notes  which 
were  indorsed  by  W.  The  business 
of  F.  was  continued  by  K.  &  W., 
and  afterwards  M.  purchased  a 
one-third  interest  in  the  partner- 
ship, being  admitted  from  the  date 
of  the  purchase,  and  signing  his 
name  to  the  notes  previously  given 
to  F.  W.  paid  one-third  of  the 
whole  purchase  money,  including 
the  amount  of  the  notes,  to  F.,  and 
K.  paid  the  balance.  Subsequently 
K.  sold  to  W.  &  M.  all  his  interest 
in  the  firm.  Held,  that  if  the  ex- 
cess paid  by  K.  over  his  just  pro- 
portion was  an  advance  to  the 
firm,  his  claim  therefor  was  extin- 
guished by  the  sale  of  his  interest 
in  the  firm.  If  it  was  an  advance 
to  M.,  W.  could  not  be  liable  in 
any  way  for  it ;  consequently  a  suit 
against  the  firm  to  recover  such 
excess  must  fail.  Kimball  v. 
Walker,  30  111.  482. 

(z)  Ex  parte  Sedgwick,  2  Jur.  N. 
S.  949. 


906 


CII.  VI,  SEC.  III.]       CONTRIBUTION    AND    INDEMNITY.  *383 

would  otherwise  have  been  drowned,  they  were  held  en- 
titled to  be  reimbursed,  although  they  had  no  power  to 
borrow  money  on  the  credit  of  the  company,  (a) 

Payments  on  account  of  debts. —  So  a  partner  is  clearly 
entitled  to  charge  the  firm  with  whatever  he  may  have 
been  compelled  to  pay  in  respect  of  its  debts,  (J)  or  in  re- 
spect of  obligations  incurred  by  him  alone  at  the  request  of 
the  firm,  as,  where  he  is  compelled  to  pay  a  bond  given  by 
himself  alone,  but  for  the  benefit  of  the  firm  and  as  a  trustee 
for  it;^)1  or  where  he  sacrifices  a  debt  due  to  himself  in 
order  to  enable  the  firm  to  obtain  a  debt  due  to  it.  (d) 

Useless  outlays. —  It  need  hardly  be  observed  that  an 
outlay  made  by  one  partner  with  the  approbation  of  his  co- 
partners and  for  the  benefit  of  the  firm  must  be 
made  good  by  the  firm,  however  ^useless  the  outlay  [*383] 
may  have  been.  For  example,  if  a  firm  purchases 
a  patent  which  is  paid  for  by  one  member  individually,  he 
is  entitled  to  charge  the  purchase  money  to  the  firm,  how- 
ever worthless  the  patent  may  ultimately  prove  to  be.  (<?) 

Useful  but  unauthorized  outlays. —  On  the  other  hand, 
if  a  partner  makes  an  improper  outlay  or  advance  on  behalf 

(a)  Ex  parte  Chippendale.  4DeG.  claimed  to  be  allowed  $500,  which 

M.  &  G.  19.     See  ante,  book  ii,  ch.  he  had  agreed  to  pay  to  a  third 

1,  §  6.     This  case,  and  others  of  the  person  for  indorsing  for  the  firm, 

same  class,  will  be  noticed  more  at  the  court  refused  to  allow  it,  no 

length    in    the    volume  on  Com-  proof  being  given  that  it  had  been 

panies.  actually  paid.     Hutchinson  v.  On- 

(6)  Prole  v.  Masterman,  21  Beav.  derdonk,  6  N.  J.  Eq.  277. 

61.     A    partner    who    negligently  The  items  for  which  an  allow- 

pays  a  debt  claimed,  but  not  due,  ance  is  claimed  must  be  proved 

cannot  charge  the  payment  to  the  with  reasonable    certainty  before 

firm.     Re  Webb,  2  B.  Moore,  500;  any  allowance  can  be  made  there- 

Mcllreath  v.   Margetson,   4  Doug.  for.     Chandler  v.  Allen.  20  Hun, 

278,  noticed  in  the  next  section.  424. 

(c)  Croxton's  Case,  5  De  G.  &  S.  (d)  Lef  roy  v.  Gore,  1  Jo.  &  Lat. 

432;  Sedgwick's  Case,  2  Jur.  N.  S.  571,  where  one  partner  released  a 

949,  V.-C.  W. ;  Gleadow  v.  The  Hull  witness  whose  evidence  was  essen- 

Glass  Co.  13  Jur.  10?0,  V.-C.  E.  tial  to  the  firm. 

1  Where,  in  the  settlement  of  a  (e)  Gleadow  v.  The    Hull  Glass 

partnership  account,  one    partner  Co.  13  Jur.  1020. 

907 


*3S-L-  BIGHTS   AND    OBLIGATIONS.  [BOOK    III. 

of  a  firm,  he  cannot  charge  it  to  the  firm  unless  his  conduct 
is  ratified  by  it,  or  unless  the  firm's  assets  have  been  in- 
creased or  preserved  by  such  outlay  or  advance.  This  last 
qualification  is  rendered  necessary  by  The  German  Mining 
Company 's  Case.  {/) 

An  outlay  which  may  have  been  very  proper  and  even 
necessary  for  the  conduct  of  the  partnership  business  can- 
not be  charged  to  the  partnership  account  if  so  to  do  would 
be  inconsistent  with  the  agreement  into  which  the  partners 
have  entered.  In  Thornton  v.  Proctor,  (g)  the  plaintiff  and 
the  defendant  had  become  partners  as  wine  merchants, 
and  the  plaintiff,  who  for  some  time  had  principally  con- 
ducted the  business,  had  expended  considerable  sums  of 
money  in  treating  customers,  and  this  was  found  to  be  nec- 
essary in  that  trade.  The  plaintiff  had  for  several  years 
kept  the  accounts  of  the  partnership,  and  in  such  accounts 
he  never  made  any  charge  for  entertaining  customers,  or 
demanded  any  allowance  on  that  account.  He  neverthe- 
less afterwards  contended  that  he  ought  to  be  allowed,  in 
taking  the  accounts  of  the  partnership,  to  debit  the  firm 
with  50/.  a  year  for  entertainments,  and  this  was  proved  to 
be  a  reasonable  sum.  But  it  was  shown  to  be  usual,  in 
cases  of  this  sort,  to  insert  some  special  clause  in  the  arti- 
cles if  an  allowance  was  intended  to  be  made,  and  the  arti- 
cles into  which  the  partners  had  entered  contained  nothing. 
more  than  a  general  stipulation  that  all  losses  and  expenses 
should  be  borne  equally.  It  "was  accordingly  held  that 
the  plaintiff  was  not  entitled  to  any  allowance,  for  he  could 
only  claim  it  as  being  a  gross  article  of  expenditure,  and 
he  was  precluded  from  charging  it  in  that  way  by  not  hav- 
ing included  it  in  the  yearly  accounts. 
[*384]  *No  allowance  for  expenses  unless  proved  to 
have  been  incurred. —  A  partner  is  not  entitled  to 
charge  the  firm  with  any  moneys  alleged  by  him  to  have 

(/)  4  De  G.  M.  &  G.   19.     See    son  v.  Smith,  5  If,   Eq.  117;  East 
ante,  book  ii,  ch.  1,  §  6.  India  Co.  v.  Blake,  Finch,  117. 

(g)  1  Anstr.  94.  See,  too,  Hutche- 

908 


OH.  VI,  SEC.  III.]       CONTRIBUTION    AND    INDEMNITY.  *38-± 

been  laid  out  for  the  benefit  of  the  firm  if  he  declines  to 
give  the  particulars  of  his  outlays;  he  cannot  charge  for 
secret  service  money,  (h) J  nor  for  general  expenses,  {i)  Nor 
can  a  partner  charge  the  firm  with  traveling  expenses  un- 
less they  have  been  bona  fide  and  properly  incurred  by  him 
when  traveling  for  the  purpose  of  transacting  its  busi- 
ness, (k) 2 

Charges  for  valuation. —  Again,  a  partner  expending 
money  for  valuations  to  carry  out  a  transaction  between 
himself  and  copartners,  which  they  afterwards  succeed  in 
setting  aside,  cannot  charge  them  with  any  part  of  what  he 
may  have  so  expended.  (I) 

Outlays  on  separate  property  of  one  partner. —  Not 
only  may  one  partner  make  outlays  or  advances  for  the 
benefit  of  the  firm,  but  the  firm  may  make  advances  and 
outlays  to  or  for  the  benefit  of  one  partner.  Under  ordi- 
nary circumstances  such  advances  and  outlays  will  be  equiv- 
alent to  a  loan  by  the  firm  to  him,  and  must  be  treated 
accordingly  in  taking  the  partnership  accounts.  But  occa- 
sionally considerable  difficulty  arises,  e.  g.,  where  there  has 

(h)  See  The  York  and  North  Mid-  in  favor  of  his  copartners  against 

land  Rail.  Co.  v.  Hudson,  16  Beav.  him,  to  guard  them  from  any  in- 

485.  jurious  consequences  of  his   con- 

1  Upon  a  bill  in  equity  between  cealment  of  facts.     Harvey  v.  Var- 

partners  to  wind  up  the  partner-  ney,  104  Mass.  436. 

ship,  one  of  them  who  neglects  or  (i)  The  East  India  Co.  v.  Blake, 

refuses  to  account  fully  for  busi-  Finch,  117. 

ness  of  the  firm,  done  by  himself  (k)  Stainton  v.  The  Carron  Co.  24 

in  a   foreign   jurisdiction,  cannot,  Beav.  356. 

as  a  penalty,  be  denied  his  reason-  2  A  partner  who,  on  going  abroad 
able  expenses  of  doing  it,  or  sums  on  business  principally  his  own,  re- 
otherwise  owing  to  him  from  the  ceived  a  compensation  of  $5,000 
firm,  or  be  charged  with  interest,  for  his  services,  was  not  allowed 
with  annual  rests  on  actual  or  esti-  to  charge  his  expenses  to  his  co- 
mated  balances  in  his  hands ;  but  partner,  who  had,  in  the  mean- 
in  estimating  the  amount,  ex-  time,  conducted  the  partnership 
penses  and  profits  of  such  busi-  business.  Mam  ford  v.  Murray,  5 
ness,    and   computing  interest  on  Johns.  Ch.  1. 

such     balances,     if    any    interest  (I)  Stocken   v.  Dawson,  6  Beav. 

thereon  is  chargeable,  care  should  375. 
be  taken,  by  making  presumptions 

909 


*385  EIGHTS   AND    OBLIGATIONS.  [BOOK    III. 

been  an  outlay  by  the  firm  on  property  belonging  exclu- 
sively to  one  of  the  partners,  but  used  by  the  firm  for  part- 
nership purposes.  In  the  absence  of  all  evidence  of  any 
agreement  upon  the  subject,  justice  seems  to  require  that 
in  taking  the  partnership  accounts  the  owner  of  the  prop- 
erty in  question  should  not  be  allowed  exclusively  to  gain 
the  benefit  of  the  outlay,  but  that  the  improved  value  of  his 
propert}7"  should  be  treated  as  a  partnership  asset,  and  be 
shared  between  him  and  his  copartners  accordingly,  (m) 

In  Burdon  v.  Barhus,  a  managing  partner  had,  with  the 
knowledge  of  his  copartner,  expended  partnership  moneys 
in  sinking  a  pit  for  partnership  purposes  on  land  which 
belonged  exclusively  to  the  latter  partner;  the  manag- 
ing partner  had  erroneously  supposed  that  the  partnership 

was  for  a  term  of  years,  but  the  partnership  was 
[*385]  suddenly  and  unexpectedly  *dissolved,  and  the  pit 

thereby  became  the  sole  property  of  the  partner  in 
whose  land  it  had  been  sunk;  but  an  inquiry  was  directed 
whether  any  allowance  should  be  made  in  respect  of  the 
outlay  in  sinking  the  pit.  (n)  So  in  Pavjsey  v.  Armstrong,  (o) 
an  inquiry  was  directed  as  to  buildings  erected  by  a  firm 
on  the  property  of  one  of  the  partners. 

Section  TV. —  Of  Debts,  Liabilities   and  Losses. 

Mutuality  of  profit  and  loss  presumed. —  In  the  absence 
of  any  agreement  to  the  contrary,  partners  are  liable  to 
share  losses  in  the  same  proportion  as  they  are  entitled  to 
share  profits,  (p)  As  a  general  rule,  therefore,  if  one  part- 
ner has  been  compelled  to  pay  more  than  his  share  of  a 
partnership  debt,  or  if,  in  properly  conducting  the  affairs 

(to)  See  ante,  p.  330.  (p)  See  Re  Albion  Life  Ass.  Soc. 

(n)  Burdon  v.  Barkus,  3  Giff.  412 ;  16  Ch.  D.  83,  where  this  rule  was 
aff.  on  appeal,  4  De  G.  F.  &  J.  42.     recognized,    but   was  held  not  to 

(o)  18  Ch.  D.  707.     Compare  the    apply  to  policy-holders  participat- 
converse  case,   Bank  of    England    ing  in  profits. 
Case,  3  De  G.  F.  &  J.  645,  ante, 
p.  330. 

910 


CH.  VI,  SEC.  IV.]      CONTRIBUTION    AND    INDEMNITY.  *3S6 

of  the  firm,  he  has  personally  incurred  a  liability,  he  is  en- 
titled to  be  indemnified  by  his  copartners  so  far  as  may  be 
necessary  to  place  all  on  a  footing  of  equality,  (q) 

Presumption  rebutted  by  evidence. —  But  it  by  no  means 
follows  that  a  person  liable  to  be  sued  as  if  he  were  a 
partner  is,  as  between  himself  and  his  copartners,  bound  to 
share  the  losses  of  the  firm;  for  his  copartners  may  have 
agreed  to  indemnify  him  altogether  from  losses,  and  if  such 
is  the  case  they  cannot  require  him  to  contribute  thereto 
with  them.  (r)  So,  where  the  promoters  of  a  company 
agree  with  the  shareholders  that  certain  preliminary  ex- 
penses to  be  incurred  in  obtaining  surveys,  reports,  etc., 
shall  not  exceed  a  certain  sum,  and  the  promoters  spend 
more  than  that  sum,  they  cannot  require  the  shareholders 
to  make  good  the  difference;  although  the  extra  expendi- 
ture ma}7-  have  been  caused  by  circumstances  which  were 
unforeseen,  and  over  which  the  promoters  had  no  con- 
trol. 0) 

^General  obligation  of  partners  to  contribute  to  [*3S6] 
losses. —  The  general  principle,  however,  that  part- 
ners must  contribute  ratably  to  their  shares  towards  the  losses 
and  debts  of  the  firm  is  not  open  to  question.  Their  obli- 
gation to  contribute  is  not  necessarily  founded  upon,  al- 
though it  may  be  modified  and  even  excluded  altogether  by, 
agreement,  (t)1    For  example,  where  there  is  no  agreement 

(q)  "Wright  v.  Hunter,  5  Ves.  792;  x  Losses    sustained    to    stock   in 

and  see  Robinson's  Executors'  Case,  trade    or    partnership  assets  pur- 

6  De  G.  M.  &  G.  572 ;  Lefroy  v.  chased  with  the  money  of  the  firm 

Gore,  1  Jo.  &  Lat.  571,  and  Hamil-  must  be  borne  by  the  firm.  Savery 

ton  v.  Smith,  7  W.  R.   173,  as  to  v.  Thurston,  1  Bradw.  (111.)  55. 

promoters  of  companies.  A.  and  B.  entered  into  partner- 

(r)  See  Geddes  v.  Wallace,  2  Bli.  ship  for  manufacturing  purposes, 

270.  under    an    agreement     that    the 

(s)  Gillan  v.  Morrison,  1  De  G.  &  former  should  furnish  all  capital 
S.  421 ;  Re  The  Worcester  Corn  necessary  for  the  purchase  of  ma- 
Ex.  Co.  3  De  G.  M.  &  G.  180.  See,  chinery  and  material  and  for  ear- 
too,  Mowatt  and  Elliott's  Case,  3  rying  on  the  partnership  business; 
De  G.  M.  &  G.  254,  and  Carew's  that  the  latter  should  superintend 
Case,  7  id.  43.  the    business,  and  that  all  losses 

(t)  Ante,  p.  368.  should    "be     borne     equally    by 

911 


*3S6  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

to  the  contrary,  it  is  clear  that  if  execution  for  a  partnership 
debt  contracted  by  all  the  partners,  or  by  some  of  them 
■when  acting  within  the  limits  of  their  authority,  is  levied 
on  any  one  partner  who  is  compelled  to  pay  the  whole 
debt,  he  is  entitled  to  contribution  from  his  copartners,  (u) 
So  if  one  partner  enters  into  a  contract  on  behalf  of  the 
firm,  but  in  such  a  manner  as  to  render  himself  alone  lia- 
ble to  be  sued,  he  is  entitled  to  be  indemnified  by  the  firm, 
provided  he  has  not,  as  between  himself  and  his  copartners, 
exceeded  his  authority  in  entering  into  the  contract;  (x)  and 
if,  in  such  a  case,  he  with  their  knowledge  and  consent 
defend  an  action  brought  against  him,  he  is  entitled  to  be 
indemnified  by  the  firm  against  the  damages,  costs  and  ex- 
penses which  he  may  be  compelled  to  pay.  (y) 

Losses  attributable  to  one  partner  more  than  to  an- 
other.—  Even  if  a  loss  sustained  by  a  firm  is  imputable  to 
the  conduct  of  one  partner  more  than  to  that  of  another, 
still,  if  the  former  acted  bona  fide  with  a  view  to  the  bene- 
fit of  the  firm,  and  without  culpable  negligence,  the  loss 
must  be  borne  equally  by  all.1  Thus,  where  A.  represented 
to  his  copartner,  B.,  that  shares  in  a  certain  company  ren- 
dered the  holders  only  liable  to  the  engagements  of  the 

them."     A.  purchased  certain  real  (y)  Browne    v.  Gibbins,    5  Bro. 

estate,  taking  the  title  in  himself ,  P.  C.  491 ;  Croxton's  Case,  5  De  G. 

and  erected  thereon  the  necessary  &  S.  432. 

buildings  and  machinery  at  his  *  Where  a  loss  accrues  to  a  part- 
own  expense.  The  machinery  was  nership  while  the  business  is  under 
damaged  by  fire.  Held,  that  this  the  sole  management  of  one  of  the 
loss  was  to  be  shared.  Carlisle  v.  partners,  this  fact  alone  is  not  suffi- 
Tenbrook,  57  Ind.  529.  cient  to  charge  him  with  the  whole 

(u)  McOwen  v.  Hunter,  1  Dr.  &  loss,  but  it  must  appear  to  have 
Walsh.  347;  Evans  v.  Yeatherd,  2  accrued  by  his  fault.  McCrae  v. 
Bing.  132 :  Robinson's  Executors'  Robeson,  2  Murph.  127. 
Case,  6  De  G.  M.  &  G.  572.  See,  On  the  dissolution  of  a  partner- 
too,  Lefroy  v.  Gore,  1  Jo.  &  Lat.  ship  by  death  the  estate  of  the  de- 
571,  as  to  provisional  directors.  ceased  is  chargeable  with  its  pro- 

{x)  Gleadow  v.    The  Hull   Glass  portion  of    all  losses  due  to    the 

Co.  13  Jur.  1020 ;  Sedgwick's  Case,  effort  to  fulfill  contracts  binding  at 

2  Jur.  N.  S.  949.  the  time  of  dissolution,  and  to  ex- 

912 


CH.  VI,  SEC.  IV.]     CONTRIBUTION   AND    INDEMNITY. 


*3SG 


company  to  a  limited  extent,  and  B.  thereupon,  and  at  A.'s 
request,  authorized  him  to  take  shares  on  the  partnership 


penses  incurred  in  the  legitimate 
effort  to  wind  up  the  partnership 
matters,  but  not  for  losses  result- 
ing from  new  business.  Tompkins 
f.  Tompkins,  18  S.  C.  1. 

If  two  parties  enter  into  a  joint 
undertaking,  and  one  of  them  fails 
to  perform  his  part  of  the  work, 
the  expense  of  having  it  done  by 
another  is  chargeable  to  him  and 
not  to  his  partner.  Stegman  v. 
Berryhill,  72  Mo.  307. 

Where  one  partner,  in  violation 
of  the  instructions  conferred  upon 
him  by  the  firm,  pays  more  for 
goods  than  he  was  authorized,  he 
thereby  makes  himself  liable  to  the 
other  membei's  of  the  firm  to  the 
extent  of  the  loss  thus  incurred. 
Gill  v.  Wilson,  2  Tex.  App.  (Civ.) 
330. 

Where  it  is  the  understanding 
between  the  partners,  upon  a  dis- 
solution, that  the  affairs  shall  be 
settled  by  one  partner,  another 
partner  will  not  be  chargeable  with 
the  value  of  property  delivered  by 
him  to  the  acting  partner.  Allison 
v.  Davidson,  2  Dev.  Eq.  79. 

One  partner,  closing  up  the  busi- 
ness of  the  concern,  is  a  trustee  for 
the  others,  and  will  not  be  treated 
as  a  debtor  to  his  copartners  for  the 
balance  of  funds  in  his  hands,  60  as 
to  throw  upon  him  a  loss  by  depre- 
ciation in  the  currency  at  the  time 
when  he  received  the  funds. 
McNair  v.  Rayland,  1  Dev.  Eq.  516. 

The  mere  fact  that  one  of  the 
partners  acts  as  the  cashier  to  the 
firm  will  not,  as  a  general  rule, 
charge  him  with  the  funds  he 
might  receive  and  disburse  in  the 
course     of     business;     otherwise 


when  fraud  is  charged.     Walpole 
v.  Renfroe,  16  La.  Ann.  92. 

A  clerk  of  a  partnership  being 
an  accredited  agent  of  the  firm, 
losses  growing  out  of  his  defalca- 
tion,  negligence,  etc.,  would  fall 
on  the  firm,  and  not  individually 
on  the  active  partner.  Roberts  v. 
Totten,  13  Ark.  609. 

Where  a  partner  leaves  the  place 
of  business  of  the  firm  to  attend  to 
private  business  of  his  own,  and 
also  to  purchase  merchandise  for 
the  firm  with  money  of  the  firm, 
which  he  takes  with  him,  and 
neither  he  nor  the  money  is  heard 
of  afterwards,  the  loss  of  the 
money,  in  the  absence  of  evidence 
showing  fraud,  negligence  or  mis- 
conduct, must  fall  upon  the  part- 
nership. Jenkins  v.  Peckinpaugb, 
40  Ind.  133. 

Where  articles  of  a  tannery  co- 
partnership provided  that  one  part- 
ner should  exclusively  superintend 
the  tanyard,  and  the  other  the 
books  and  financial  affairs,  and 
neither  intermeddle  with  the  proper 
business  of  the  other,  losses  caused 
by  a  violation  of  such  provision 
must  be  borne  by  the  intermeddling 
party ;  but  where  a  loss  arose  from 
the  employment,  by  the  book-keep- 
ing partner,  of  an  inexpert  artisan 
to  build  vats,  on  proof  that  the  yard 
partner  knew  and  assented  to  the 
act,  equity  will  consider  the  pro- 
vision waived.  Haller  v.  William- 
owicz,  23  Ark.  566. 

Plaintiff  agreed  to  furnish  the 
entire  capital  of  a  partnership,  out 
of  which  defendant  was  to  manage 
the  concern,  and  receive  one-third 
of  the  profits,  with  a  monthly  sum. 


Vol.  1  —  58 


913 


*386 


EIGHTS    AND    OBLIGATIONS. 


[book  nr. 


account,  and  it  ultimately  turned  out  that  the  liability  of 
the  shareholders  was  not  limited,  and  A.  and  B.  were  made 


for  his  personal  expenses.  From 
plaintiff's  failure  to  advance  the 
entire  capital  the  partnership  was 
dissolved,  with  a  loss  equal  to  the 
amount  advanced.  Held,  that  de- 
fendant was  not  bound  for  any 
,part  of  the  loss,  nor  the  amounts 
withdrawn  for  his  monthlj'  ex- 
penses. Bonis  v.  Louvrier,  8  La. 
Ann.  4. 

One  partner  is  liable  to  his  co- 
partner for  any  loss  occasioned  by 
his  unauthorized  indorsement  of  a 
note  in  the  name  of  the  partner- 
ship, although  the  note  be  after- 
wards paid  by  the  Qrm.  Smith  v. 
Loring,  2  Ohio,  440. 

Where  a  party  having  the  legal 
title  agrees  with  another  to  convey 
him  one-half  of  the  title  in  consid- 
eration of  his  completing  a  mill 
upon  the  property,  and  afterwards 
takes  charge  of  and  completes  the 
work,  if  he  rents  the  mill  or  could 
have  done  so,  and  refuses  or  neg- 
lects when  good,  responsible  ten- 
ants can  be  had,  he  will  be  required 
to  account  to  the  other  party  for 
half  of  a  fair  rent.  Grove  v.  Miles, 
65  111.  85. 

A  partner  who  purchases  for  the 
firm  a  large  lot  of  hogs  at  a  price 
prohibited  by  the  partnership  agree- 
ment is  liable  to  the  other  partners 
for  the  excess.  Lovney  v.  Gillen- 
waters,  11  Heisk.  133. 

A  partner  depositing  or  holding 
partnership  funds,  to  compel  his 
copartner  to  have  an  account  taken, 
is  not  liable  to  make  good  to  him  a 
loss  thereof,  ensuing  through  no 
fault  of  his  own.  Morrison  v. 
Smith,  81  111.  221. 

If  one  or  more  of  the  members  of 


a  firm  divert  the  funds  of  the  firm 
to  other  uses,  such  partner  is  lia- 
ble, in  making  up  the  account,  to 
be  charged  with  all  the  detriment 
thus  suffered  by  the  firm.  Pierce 
v.  Daniels,  25  Vt.  624. 

Where,  for  the  convenience  and 
by  the  consent  of  the  firm,  one 
partner  deposits  the  funds  of  the 
firm  in  his  own  name  and  to  his 
own  account,  and  they  are  charged 
upon  the  firm  books  to  such  part- 
ner, in  order  to  indicate  in  whose 
hands  they  are,  but  are  not  under 
the  exclusive  Gontrol  of  the  part- 
ner in  whose  name  they  are  depos- 
ited, the  other  partner  procuring 
checks  at  all  times  when  desired 
for  use  in  the  business  of  the  firm, 
the  firm,  and  not  the  partner  hold- 
ing the  funds,  must  bear  the  loss  re- 
sulting from  the  insolvency  of  the 
bank  in  which  they  were  deposited. 
Campbell  v.  Stewart,  34  111.  151. 

Where,  however,  one  partner 
mixes  partnership  funds  with  his 
own,  makes  deposits  of  them  in 
bank  in  his  own  name,  appropri- 
ates them  to  his  own  use,  assuming 
the  absolute  and  entire  control, 
and,  the  bank  becoming  insolvent, 
receives  its  notes  and  has  them  reg- 
istered in  his  own  name,  without 
the  consent  or  knowledge  of  his 
co-partner,  by  reason  whereof  the 
partnership  funds  are  lost,  such 
partner  is  responsible  to  the  co- 
partner for  his  share  of  the  fund, 
and  must  bear  the  loss  alone.  Le- 
fever  v.  Underwood,  41  Pa.  St.  505. 

Where  a  partnership  intrusts 
money  to  a  member  of  the  firm  to 
be  used  in  the  partnership  business, 
and    such    member,    without    the 


914 


CH.  VI,  SEC.  IV.]      CONTRIBUTION    AND    INDEMNITY. 


"387 


conti'ibutories,  it  was  held  that,  as  between  thetu- 
*selves,  B.  could  not  throw  the  loss  on  A.  alone,  (s)  [*3S7] 


knowledge  or  consent  of  his  co- 
partners, forms  a  new  partnership 
relation  with  another  person  to  en- 
gage in  like  business,  and  pays 
over  the  money  to  the  new  firm, 
whereby  it  is  lost,  he  thereby  be- 
comes liable  to  account  to  the 
members  of  the  old  firm  as  for 
money  converted  to  his  own  use. 
Reis  v.  Hellman,  25  Ohio  St.  180; 
S.  C.  1  Cincin.  30. 

Where  two  members  of  a  part- 
nership, formed  for  the  purpose  of 
speculating  in  lands,  loaned  money 
of  the  firm,  in  good  faith,  to  a 
manufacturer  as  an  inducement 
to  establish  mills  on  their  lands, 
whereby  the  lands  were  expected 
to  be  enhanced  in  value,  and  after- 
wards the  mills  proved  a  bad  enter- 
prise and  a  part  of  the  debt  was 
lost,  a  court  of  chancery  refused  to 
relieve  a  third  partner,  who  did 
not  assent  to  the  loan,  from  bear- 
ing his  share  of  the  loss.  Blair  v. 
Johnston,  1  Head,  13. 

When  a  partner  quits  the  part- 
nership that  he  may  buy  for  him- 
self what  the  partnership  has  a 
right  to  purchase,  or  that  he  may 
make  a  profit  for  his  own  advan- 
tage, and  to  their  prejudice,  he  is 
answerable  to  the  community  for 
the  loss  and  damage :  and  so,  if  he 
quits  at  an  unreasonable  time, 
which  occasioned  a  deprivation  of 
profits  to  the  community,  he  must 
repair  and  make  good  such  loss. 
Howell  v.  Harvey,  5  Ark.  270. 

A  partner  receiving  partnership 
property     for     sale,     and     failing 


through  no  negligence  or  fraud  on 
his  part  to  collect  the  purchase 
money  thereof,  is  not  liable  there- 
for to  his  copartners.  Peters  r. 
McWilliams,  78  Va.  567. 

A  culpable  neglect  in  one  part- 
ner in  pursuing  the  claims  of  the 
concern  may  render  him  liable  to 
the  other  partner  for  the  amount 
which  has  been  lost  by  his  neglect. 
Jessup  v.  Cook,  6  N.  J.  L..  434. 

Where  it  does  not  appear  to  have 
been  more  the  duty  of  one  partner 
than  another  to  collect  debts  due  to 
the  partnership,  and  the  partner 
who  undertakes  to  collect  them  has 
placed  them  in  the  hands  of  a  com- 
petent attorney,  and  has  acted  in 
good  faith,  he  ought  not  to  be  held 
responsible  for  the  negligent  or 
irregular  acts  of  such  attorney  (or 
other  competent  agent),  although 
the  suit  was  brought  in  the  name 
of  the  individual  partner  instead  of 
the  names  of  the  joint  owners. 
Aiken  v.  Ogilvie,  12  La.  Ann.  353. 

Where  a  partnership  has  been 
dissolved,  in  making  up  the  ac- 
count one  partner  cannot  be 
charged  with  debts  due  to  the  con- 
cern because  he  has  not  collected 
them,  or  because  he  refused  to  per- 
mit them  to  be  set  off  against  debts 
due  from  the  other  partner.  Hol- 
lister  v.  Barkley,  11  N.  H.  501. 

The  facts  that  the  books  of  a 
partnership  remain,  after  a  disso- 
lution, in  the  hands  of  one  of  the 
partners,  does  not,  in  the  absence 
of  a  special  undertaking  to 'collect 
the  debts,  render  him  liable  to  his 


(z)  Ex  parte  Letts  and  Steer.  26  L.  J.  Ch.  455. 
Bromley,  1  V.  &  B.  114. 

915 


See,  too,  Lingard  v. 


*387 


EIGHTS    AND    OBLIGATIONS. 


[book  in. 


Again,  in  Cragg  v.  Ford,  (a)  the  plaintiff  and  the  de- 
fendant were  partners,  and  the  defendant  was  the  man- 
aging partner.  The  partnership  was  dissolved,  and  the 
winding  up  of  its  affairs  devolved  on  the  defendant.  Part 
of  the  assets  consisted  of  bales  of  cotton,  and  the  plaintiff 


copartner  for  omitting  to  collect  a 
debt.  McRae  v.  McKenzie,  2  Dev. 
&  B.  Eq.  232. 

The  unsettled  claims  of  a  copart- 
nership, shortly  after  its  dissolu- 
tion, were,  by  the  mutual  consent 
of  the  partners,  placed  for  collec- 
tion in  the  hands  of  G.,  who,  after 
collecting  a  part  of  them,  paid  over 
all  the  proceeds  except  $100  to  the 
defendant,  and  the  court  found 
that  the  plaintiff  had  received 
more  than  his  share  of  the  part- 
nership property,  and  the  defend- 
ant afterwards  requesttd  G.  to  sus- 
pend making  further  collections 
that  his  account  might  be  made 
up  and  a  settlement  made  by  the 
auditors,  who  were  then  investi- 
gating the  partnership  account; 
and  that,  in  consequence  of  misun- 
derstanding the  object  and  purport 
of  the  request,  G.  ceased  making 
further  collections,  and  some  of 
said  claims  became  uncollectible. 
Held,  that  the  directions  given  by 
the  defendant  to  G.  did  not  i-ender 
him  liable  for  any  loss  which  might 
result  from  suspending  such  collec- 
tions, and  that  the  defendant  was 
not  chargeable  with  the  money 
and  accounts  in  the  hands  of  G. 
Day  v.  Lockwood,  24  Conn.  185. 

F.  owed  T.,  and  gave  him  a  note 
for  $7,000.  The  firm  of  T.  &  W. 
made  large  advances  to  F.  on  his 
individual  credit.  For  greater  se- 
curity a  letter  of  credit  to  T.  &  W. 
was  procured  by  F.  from  V.  &  O., 


on  which  T.  &  W.  made  other  ad- 
vances to  FM  amounting  to  about 
£760.  These  they  charged  to  F., 
V.  and  O.  jointly.  V.  delivered  pro- 
visions, etc.,  sufficient  to  pay  the 
debt  charged  jointly  against  V., 
O.  and  F.,  and  he  expected  thejr 
would  be  so  applied,  but  F.  and  W. 
credited  them  to  F.  individually, 
and  certain  other  payments  made 
were  so  credited  bjr  T.  &  W.,  who 
found,  in  July,  1799,  that  the  sum 
credited  F.  individually  exceeded 
his  individual  liability  by  some 
£1,200,  an  amount  more  than  suffi- 
cient to  discharge  the  joint  debt 
due  from  F.,  V.  and  O.  Against 
the  remonstrance  of  his  partner 
(W.)  T.  applied  £800  of  this  £1,200 
on  the  $7,000  note  due  him  person- 
ally from  F.,  and  suffered  the 
joint  debt  against  F.,  V.  and  O.  to 
become  barred  by  the  statute  of 
limitations,  and  lost.  In  an  action 
for  an  account,  etc.,  between  the 
partners  (W.  v.  T.),  held,  that  be- 
cause the  defendant  T.  had  mis- 
applied the  provisions  delivered  to 
the  company  to  pay  the  joint  debt 
to  the  payment  of  a  private  debt 
due  from  F.  to  him  personally,  and 
had  then  suffered  the  joint  debt  to 
become  barred  by  the  statute  of 
limitations,  and  lost,  the  amount 
of  such  joint  debt  remaining  un- 
paid was  a  proper  charge  in  favor 
of  W.  and  against  T.  Tomlioson 
v.  Ward,  2  Conn.  396. 
(a)  1  Y.  &  C.  C.  C.  280. 


916 


en.  vi,  sec.  iv.]    coxtuibotion  and  indemnity. 


:'387 


requested  that  these  might  be  immediately  sold.  The  de- 
fendant, however,  delayed  to  sell  them,  and  they  were 
ultimately  sold  at  a  much  lower  price  than  they  would  have 
fetched  if  they  had  been  sold  when  the  plaintiff  desired. 
The  plaintiff  contended  that  the  loss  sustained  by  the  post- 
ponement of  the  sale  ought  to  be  borne  by  the  defendant 
alone.  But  the  court  held  that  the  plaintiff,  if  he  had 
chosen,  might  himself  have  sold  the  cotton;  and  that  as 
the  defendant,  in  delaying  the  sale,  had  acted  honafide  and 
in  the  exercise  of  his  discretion,  the  loss  ought  not  to  be 
thrown  on  him  alone,  but  ought  to  be  shared  by  the  plaintiff. 
Loss  attributable  to  one  partner's  misconduct  or  negli- 
gence.—  But  if  a  partner  is  guilty  of  a  breach  of  his  duty 
to  the  firm,  and  loss  results  therefrom,  such  loss  must  fall 
upon  him   alone.1     As   was   said  by  the   court  in  Bury  v. 


1  See  Murphy  v.  Crafts,  13  La. 
Ann.  519;  Bough ner  v.  Black,  83 
Ky.  521,  and  the  cases  cited  in  the 
next  note  above. 

The  obligation  of  one  partner 
to  another,  in  the  management  of 
the  partnership  business,  is  the  ex- 
ercise of  good  faith  and  of  ordi- 
nary care  and  prudence,  and,  if 
loss  happens  through  the  ordinary 
negligence  of  a  partner,  he  must 
bear  the  loss.  Carlin  v.  Donegan, 
15  Kan.  495. 

Thus,  partners  having  the  care 
of  partnership  property  are  re- 
quired to  exercise  ordinary  care 
for  its  preservation,  and  are  re- 
sponsible to  their  copartners  for 
negligence  in  that  respect.  Bohrer 
v.  Drake,  33  Minn.  408;  Whelen  v. 
Harrison,  16  Phila.  143;  S.  C.  40 
Leg.  Intel.  170. 

Under  an  ordinary  bill  for  an' 
account  and  receiver,  on  reference 
to  the  master  to  state  the  account 
he  cannot  charge  a  portion  of  the 
firm  for  losses  to  the  firm  by  the 

91 


mismanagement  of  the  managing 
partner.  Fordyce  v.  Shriver,  115 
111.  530. 

Where  a  partner  is  to  be  charged 
for  the  improper  and  lumping  sale 
of  partnership  assets,  the  proper 
mode  of  stating  an  account  against 
him  is  to  charge  him  with  the  real 
value  of  the  assets  sold.  Crawford 
v.  Spotz,  11  Phila.  255;  S.  C.  33 
Leg.  Intel.  22. 

The  mere  statement  of  a  partner 
to  an  employee  of  the  firm,  or  to 
another  partner,  that  he  would  as- 
sume a  debt  due  by  an  insolvent 
to  whom  he  had  continued  to 
make  consignments  of  goods  after 
the  other  partners  had  become  un- 
willing to  deal  with  him  further, 
and  directing  all  such  accounts  to 
be  charged  to  him,  provided  he  be 
allowed  goods  at  cost,  does  not 
constitute  a  binding  contract  be- 
tween him  and  the  firm,  such  prom- 
ise being  without  consideration. 
Foster  v.  Ulinan,  3  Atl.  R.  113. 

A   partner,  requesting  the  pur- 


*3S8  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

Allen,  (b)  "  Suppose  the  case  of  an  act  of  fraud,  or  culpable 
negligence  or  wilful  default  by  a  partner  during  the  part- 
nership to  the  damage  of  its  property  or  interests,  in  breach 
of  his  duty  to  the  partnership;  whether  at  law  compellable 
or  not  compellable,  he  is  certainly  in  equity  compellable  to 
compensate  or  indemnify  the  partnership  in  this  respect."  (c) 
In  conformity  with  this  rule,  the  justice  of  which  cannot 
be  disputed,  it  has  been  decided  that  if  a  claim  is  made 
against  a  firm  for  payment  of  a  debt  alleged  to  be  due  from 
it,  but  which  is  not  so  in  point  of  fact,  and  one  partner 
chooses  to  pay  it,  he  cannot  charge  such  payment  to  the 
account  of  the  firm,  (d)     So  if  one  partner  does  that 
[*388]  *whieh,  though  imputable  to  the  firm  on  the  prin- 
ciples of  agency,  is  in   truth  his  act  alone,  and  a 
fraud  upon  his  copartners,  they  are  entitled,  as  between 
themselves  and  him,  to  throw  the  whole  of  the  consequences 
upon  him.  (<?)     So,  if  one  partner,  without  the  authority  of 
his  copartners,  wilfully  does  that  which  is  illegal,  he  must 
indemnify  them  from  the  consequences.  (,/) 

Adoption  by  firm  of  losses  not  chargeable  to  it. —  When 
it  is  said  that  losses  incurred  by  the  unauthorized,  culpably 
negligent  or  fraudulent  conduct  of  one  partner  must  be 
borne  by  him  alone,  it  is  assumed  that  his  conduct  has  not 
been  ratified  by  the  firm,  and  that  the  loss  has  not  been 
treated  by  the  partners  themselves  as  a  partnership  loss. 
A  loss  which  is  properly  chargeable  to  the  account  of  one 

chase  of  an  outstanding  title,  can-  McIIreath  v.  Margetson,  4  Doug. 

not  object  in    settlement    of    ac-  278,  where  a  payment  was  made 

counts  that  the  purchase  was  an  bona  fide  and  on  the  faith  of  false 

improper  one.     Burgess  v.  Badger,  and     fraudulent    representations. 

12  West.  Rep.   (111.)  806;  S.  C.  14  Quaere    if    the    same    rule    would 

N.  East.  Rep.  850.  apply  if  the  debt  being  due  was 

{b)  1  Coll.  604.  barred  by  the   statute  of    limita- 

(c)  See  ace.  Thomas  v.  Atherton,  tions.     See  Stahlschmidt  v.  Lett,  1 

10  Ch.  D.  185,  a  case  of  gross  neg'i-  Sm.  &  G.  415. 

gence  on  the  part  of  the  managing  (e)  See  Robertson  v.  Southgate,  6 

partner  of  a  mine  working  beyond  Ha.  510. 

the  boundary.  (/)See  Campbells.  Campbell,  7 

id)  Re  Webb,   2   B.  Moore,  500;  CI.  &  Fin.  106,  ante,  p.  378. 

918 


CH.  VI,  SEC.  V.]       CONTRIBUTION    AND    INDEMNITY.  *389 

partner  only  becomes  chargeable  to  the  firm  if  the  partners 
have  knowingly  allowed  it  to  be  so  charged  in  their  ac- 
counts, and  have  thus  taken  it  upon  themselves.1  A  strong 
instance  of  this  is  afforded  by  the  case  of  Cragg  v.  Ford,  (g) 
already  referred  to  on  another  point.  There  the  plaintiff 
and  the  defendant  were  partners;  the  defendant  had  engaged 
in  adventures  not  authorized  by  the  partnership  articles. 
The  plaintiff  protested  against  this,  but  although  the  ad- 
ventures ended  in  loss,  and  that  loss  was  charged  against 
the  firm  in  the  partnership  books,  the  plaintiff  did  not  at 
the  time  object,  or  insist  that  the  loss  should  be  borne  by 
the  defendant.  When,  however,  the  partnership  was  dis- 
solved, and  its  accounts  were  made  up,  the  plaintiff  refused 
to  allow  the  losses  in  question  to  be  charged  against  the 
firm.  But  the  court  held  that,  under  all  the  circumstances 
of  the  case,  the  master  who  had  charged  the  losses  against 
the  partnership  had  not  done  wrong;  and  exceptions  which 
had  been  taken  to  his  report  by  the  plaintiff  were  overruled. 

[*389]  *Section  V. —  Of  Interest. 

Interest  in  accounts  between  partners. —  The  principles 
upon  which,  in  taking  partnership  accounts,  interest  is  al- 
lowed or  disallowed  do  not  appear  to  be  well  settled.  The 
state  of  the  authorities  is,  in  fact,  not  such  as  to  justify  the 
deduction  from  them  of  any  general  principle  upon  this 
important  subject. 

General  rule  as  to  interest. —  By  the  common  law,  in 
the  absence  of  a  special  custom  or  agreement,  a  loan  does 

1  "When  one  partner  violates  the  estop  him  from  making  a  claim  for 

contract  of  partnership  by  paying  a  loss  against  his  partner  so  violat- 

more    for    property    than     agreed  ing  instructions.     Gill  v.  Wilson,  2 

upon,  the  fact  that  the  complaining  Tex.  App.  (Civ.)  330. 
member  of  the  firm,  under  protest        (g)  1  Y.  &  C.  C.  C.  285.     But  see 

and  with  knowledge  of  the  facts,  as  to  losses  arising  from  illegal  acts, 

takes  charge  of  the  property,  sells  the  observations  of  Lord  Eldon  on 

it,  and  with  the  proceeds  pays  the  Watts  v.  Brook,  in  Aubert  v.  Meze, 

debts  of  the  partnership,  will  not  2  Bos.  <t  P.  371. 

919 


*339  EIGHTS    AND    OBLIGATIONS.  [BOOK    III. 

not  bear  interest;  (A)  and,  notwithstanding'  many  dicta  to 
the  contrary,  the  same  rule  appears  to  have  prevailed  in 
equity.  (?)  This  rule  is,  no  doubt,  attributable  to  the  old 
notions  on  the  subject  of  usury;  but  although  the  usury 
laws  are  abolished  the  rule  remains,  and  the  consequence 
is  that  interest  is  frequently  not  payable  by  law  when  in 
justice  it  ought  to  be. 

At  the  same  time,  by  the  custom  of  merchants,  interest 
has  long  been  payable  in  cases  where,  by  the  general  law,  it 
was  not;  and  mercantile  usage  and  the  course  of  trade  deal- 
ings are  held  to  authorize  a  demand  for  interest  in  cases 
where  it  would  not  otherwise  be  payable,  (k)  In  applying, 
therefore,  the  general  rule  against  the  allowance  of  interest 
to  partnership  accounts,  attention  must  be  paid  not  only  to 
any  express  agreement  which  may  have  been  entered  into 
on  the  subject,  but  also  to  the  practice  of  each  particular 
firm,  and  to  the  custom  of  the  trade  it  carries  on. 

Interest  on  capital. —  As  a  general  rule  partners  are  not 
entitled  to  interest  on  their  respective  capitals  unless  there 
is  some  agreement  to  that  effect,  or  unless  they  have  them- 
selves been  in  the  habit  of  charging  such  interest  in  their 
accounts;  (I)1  and   even  where  one  partner  has  brought 

(h)  See  Calton  v.  Bragg,  15  East,  Pirn  v.  Harris,  Ir.  Rep.  10  Eq.  442, 

223;  Higgins  v.  Sargent,  2  B.  &  C.  where  the  decision  was  based  on 

349;    Shaw  v.   Picton,  4  id.    723;  the  terms  of  the  contract. 

Page  v.  Newman,  9  B.  &  C.  378;  iTutt    v.    Land,    50    Geo.    350; 

Gwyn  v.  Godby,  4  Taunt.  346.  Desha  v.   Smith,  20  Ala.  747;  Day 

(i)  Seo  Tew  v.  The  Earl  of  Winter-  v.  Lockwood,  24  Conn.  185 ;  Tirrell 

ton,    1    Ves.    Jr.    451;    Creuze    v.  v.   Jones,   39  Cal  655.     See,   also, 

Hunter,  2  id.  157;  Booth  v.  Leyces-  Whitcomb  v.  Converse,  119   Mass. 

ter,  1  Keen,  247,  and  3  M.  &  Cr.  38;    Moss  v.    McCall,   75  111.    190; 

459.  Brown's  Appeal,   89  Pa.   St.   139; 

(k)  See  Ex  parte  Chippendale,  4  Osborn  v.  Gheen,  3  Cent.  Rep.  762. 

De  G.  M.  &  G.  36.  Monthly  balances  in  a  partnership 

(I)  See  Cooke  v.  Benbow,  3  De  G.  accounting  do  not  fairly  represent 

J.  &  Sm.  1 ;  Miller  v.  Craig,  6  Baa  v.  new  principal,  and  interest  on  them 

433,  where  interest   was  allowed,  should  not  be  compounded.     Wells 

that  having  at  one  time  been  in  v.  Babcock,  56  Mich.  276. 

accordance  with  the  usage  of  those  A  partner  cannot  claim  interest 

who  carried  on  the  business ;  and  on  his  advances  towards  the  capital 

920 


CH.  VI,  SEC.  V.J      CONTRIBUTION    AND    INDEMNITY. 


h390 


in  his  stipulated  capital  and  the  other  *has  not,  the  [-390] 
former  will  not  be  entitled  to  interest  on  the  wind- 
ing up  of  the  partnership  if  it  has  not  been  previously 


stock,  even  though  he  took  a  note 
therefor  by  its  terms  carrying  in- 
terest. Jones  v.  Jones,  1  Ired.  Eq. 
332. 

The  law  will  not,  in  the  absence 
of  an  express  stipulation  between 
the  parties,  compel  one  partner  to 
pay  interest  to  his  copartners  on 
the  amount  by  which  their  capital 
exceeds  his.  Desha  v.  Smith,  supra. 
See,  however,  Ligare  v.  Peacock, 
109  111.  94. 

A.  and  B.  were  partner's.  A. 
furnished  more  capital  than  B., 
and  under  an  agreement  with  B. 
received  interest  on  the  excess.  A.'s 
health  failing,  B.  claimed  to  with- 
hold further  payment  of  the  in- 
terest in  view  of  the  diminished 
value  of  A.'s  services.  It  was  re- 
ferred and  settled  in  favor  of  A. 
B,  was  still  unsatisfied,  but  con- 
tinued to  use  the  excess  of  capital 
as  before,  and  it  did  not  appear 
that  A.'s  services  were  less  valuable 
than  B.'s.  Held,  that  B.  was  bound 
by  the  decision  of  the  referee,  and 
A.  entitled  to  the  interest.  Piper 
v.  Smith,  1  Head,  93. 

Where  the  articles  provided  that 
"if  the  wants  and  necessities  of 
said  business  demand  an  increase 
of  capital,  and  the  same  be  sup- 
plied by  the  said  A.  (a  partner), 
the  firm  stipulate  to  pay  him  in- 
terest therefor  at  the  rates,"  etc., 
held,  that  the  simple  fact  that  said 
partner  did  not  withdraw  the  whole 
of  his  share  of  the  profits  for  the 
first  year,  without  any  agreement 
or  notice  to  the  copartner  that  the 
capital  was  to  be  increased  to  that 
amount,  did  not  give  such  partner 


a  right  to  interest  on  such  excess. 
Tutt  v.  Land,  50  Ga.  339. 

Where  a  partnership  agreement 
provided  that  the  defendants 
should  contribute  a  certain  amount 
of  money  as  a  "  working  capital," 
and  that  such  capital  should  draw 
interest  at  seven  percent.,  and  dur- 
ing the  continuance  of  the  partner- 
ship business  more  capital  was 
needed,  and  the  defendants  ad- 
vanced it  on  the  promise  of  thefc 
copartner  that  whatever  money 
they  put  in  they  should  get  back 
with  interest,  held,  that  on  an 
accounting  at  the  suit  of  their  co- 
partner's assignee  they  should  be 
allowed  interest  on  the  additional 
money  so  advanced  as  well  as  on 
the  amount  originally  contributed. 
Gilhooly  v.  Hart,  8  Daly,  170. 

Where  the  original  articles  of  a 
copartnership  contain  no  such  pro- 
vision, it  is  not  proper,  in  taking 
an  account,  to  charge  each  partner 
with  interest  on  his  individual 
account,  and  to  credit  each  one 
with  interest  on  moneys  paid  in, 
unless  a  subsequent  agreement  to 
that  effect  is  clearly  and  satisfac- 
torily proved.  But  an  agreement 
between  partners  that  interest 
shall  be  computed  on  each  one's  ac- 
count, and  on  the  money  paid  in 
by  him,  will  not  justify  computing 
interest  on  the  individual  accounts 
from  the  dates  of  the  several 
charges  up  to  the  close  of  the  busi- 
ness, independent  of  whether  the 
amounts  drawn  out  exceed  the  just 
share  of  the  profits  to  the  respect- 
ive dates  due  the  several  partners. 
Such  an  agreement,  if  proved,  will 
21 


'390 


EIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


charged  and  allowed  in  the  accounts  of  the  firm;  (m)1  and 
where  a  person  is  paid  for  his  services  by  a  share  of  the 
profits,  interest  on  capital  cannot  be  charged  against  him 
unless  there  is  some  agreement  to  that  effect.  (?i) 2  More- 
over, where  interest  on  capital  is  payable,  the  interest  stops 
at  the  date  of  dissolution  unless  otherwise  agreed;  (o)  and 
undrawn  profits  are  not  necessarily  to  be  treated  as  bear- 
ing interest  like  the  capital,  (p) 

Interest  on  advances  to  the  firm. —  An  advance  by  a 
partner  to  a  firm  is  not  treated  as  an  increase  of  his  capi- 
tal, but  rather  as  a  loan,  on  which  interest  ought  to  be  paid ; 
and,  by  usage,  interest  is  payable  on  money  bona  fide  ad- 


be  understood  to  mean  that  each 
partner  will  be  charged  with  the 
interest  on  his  individual  account 
in  excess  of  his  share  of  the  profits, 
and  credited  with  interest  on 
moneys  advanced  over  and  above 
his  indebtedness  to  the  firm.  Moss 
v.  McCall,  75  111.  190;  S.  C.  112  111. 
493. 

(m)  Hill  v.  King,  3  De  G.  J.  & 
Sm.  418. 

1  In  the  absence  of  a  demand  for 
a  deficiency  in  the  capital  to  be 
bupplied  by  one  partner,  or  of  a 
necessity  for  its  payment  in  order 
to  carry  on  the  business,  interest 
will  not  be  charged  on  such  defi- 
ciency on  final  accounting.  Clark 
v.  Warden,  10  Neb.  87. 

Where  partners  agree  to  invest 
equal  amounts  of  money  in  their 
common  business,  and  one  advances 
a  larger  sum  than  the  other,  he 
lias  been  held  entitled,  upon  set- 
tlement, to  an  allowance  of  interest 
on  one-half  the  excess  so  ad- 
vanced by  him  from  the  date  of 
its  appropriation  to  the  use  of  the 
firm.  Reynolds  v.  Mardis,  17  Ala. 
82. 

Where  a  partnership  is  formed 

9^ 


by  three,  two  of  whom  are  to  fur- 
nish the  capital,  which  they  do  fur- 
nish, the  other  to  furnish  no  part 
thereof,  in  the  absence  of  an}- 
agreement  to  that  effect,  either  ex- 
press or  to  be  implied  from  the  con- 
duct of  the  parties,  those  furnish- 
ing the  capital  will  not  have  the 
right  to  charge  the  firm  with  in- 
terest paid  by  them  in  their  own 
names  with  which  to  carry  on  the 
business  of  the  firm.  Tapping  v. 
Paddock,  92  111.  92. 

(n)  Rishton  v.  Grissell,  5  Eq.  326, 
where  the  capital  is  borrowed  at 
interest. 

2  Tirrell  v.  Jones,  39  Cal.  655. 

(o)  Barfield  v.  Loughborough,  8 
Ch.  1 ;  Watney  v.  Wells,  2  Ch.  250. 
Pilling  v.  Pilling,  3  De  G.  J.  &  Sm. 
162,  contra,  on  this  point,  is  prac- 
tically overruled.  As  to  the  calcu* 
lation  of  interest  where  the  capital 
is  payable  b}r  instalments  with  in- 
terest, see  Ewing  v.  Ewing,  8  App. 
Ca.  822. 

(p)  Din  ham  v.  Bradford,  5  Ch. 
519.  See,  also,  Rishton  v.  Grissell, 
10  Eq.  393,  as  to  interest  on  arrears 
of  a  share  of  profits. 


CX  VI,  SEC.  V.]      CONTRIBUTION    AND    INDEMNITY. 


*390 


vanced  by  one  partner  for  partnership  purposes;  at  least 
when  the  advance  is  made  with  the  knowledge  of  the  other 
partners.  (q)x     The  rate  of  interest  given  in  such  cases  is 


(q)  See  Ex  parte  Chippendale,  4 
De  G.  M.  &  G.  36.  See,  also,  Oiny- 
chund  V.  Barker,  Coll.  on  Partn. 
231,  note ;  Denton  v.  Rodie,  3  Camp. 
496.  But  see,  contra,  Stevens  v. 
Cook,  5  Jur.  N.  S.  1415. 

lSee  Baker  v.  Mayo,  129  Mass. 
517;  Morris  v.  Allen,  14  N.  J.  Eq. 
44;  Hodges  v.  Parker,  17  Vt.  242; 
Berry  v.  Folkes,  60  Miss.  576  (an  ad- 
vance to  the  firm  by  one  partner 
for  the  other).  See,  also,  Cheever 
v.  Lamar,  19  Hun,  130. 

Advances  by  partners  for  the 
benefit  of  the  business  do  not  draw- 
interest  unless  the  intention  that 
they  shall  do  so  shall  be  inferred 
from  usage  or  circumstances,  or 
unless  upon  an  understanding  be- 
tween the  partners.  Godfrey  v. 
White,  43  Mich.  171;  Prentice  v. 
Elliott,  72  Ga.  154.  See,  also,  Lee 
v.  Lashbrooke,  8  Dana,  214 ;  Camp- 
bell v.  Coquard,  16  Mo.  552  (as  to 
rate  of  interest). 

A  partner  who  is  to  be  paid  in- 
terest on  moneys  advanced,  but 
who  receives  most  of  the  money 
arising  from  the  business  as  it 
comes  in,  cannot  justly  draw  in- 
terest on  funds  in  bis  own  posses- 
sion that  are  practically  identical 
with  his  advances ;  but  an  arrange- 
ment by  which  he  is  allowed  in- 
terest on  excess  of  advances  over 
receipts  without  compounding  is 
proper.  Wells  v.  Babcock,  56  Mich. 
276. 

As  to  commissions  and  interests 
on  overpayments  by  surviving 
partner  to  himself  as  administra- 
tor of  a  deceased  partner,  see 
Frazier  v.  Frazier,  77  Va.  775. 

923 


An  ordinary  partner,  though  en- 
titled to  interest  on  his  advances, 
cannot  claim  conventional  interest 
without  his  copartner's  written 
agreement  to  pay  it;  nor  is  such 
an  agreement  proved  in  an  ordi- 
nary partnership  by  a  charge  of 
conventional  interest  in  the  books 
kept  by  the  partner  claiming  it, 
and  in  the  accounts  rendered  from 
time  to  time  to  his  copartner. 
Mourain  v.  Delamre,  4  La.  Ann.  78. 

Articles  of  copartnership  be- 
tween plaintiffs  and  defendants,  in 
a  bill  in  chancery,  brought  for  the 
settlement  of  a  copartnership  ac- 
count, stipulated  that  the  plaintiffs 
were  to  furnish  the  funds  and 
credits  necessary  for  conducting 
the  partnership  business,  and  that 
"all  accounts  paid  by  either  party 
for  necessary  disbursements  in  the 
business  of  the  company  were  to 
be  charged  to  the  concerns"  A 
committee,  to  whom  the.  cause 
was  referred,  found  a  balance  of 
$1,597.16  for  interest  in  favor  of 
the  plaintiffs  on  disbursements 
made  in  the  year  1850.  It  appeared 
that  in  1854  the  defendant  was  in- 
formed of  the  result  of  such  busi- 
ness; at  all  times  had  access  to  the 
accounts  on  the  partnership  book 
in  which  he  was  interested,  and 
sometimes  inspected  them,  but 
made  no  objection  to  such  charge 
until  the  hearing  of  the  cause  in 
1857.  Held,  that  it  was  then  too 
late  for  the  defendant  to  object  to 
such  charge  of  interest  for  the 
first  time.  Pond  v.  Clark,  24  Conn. 
370. 


*301  EIGHTS   AND    OBLIGATIONS.  [COOK    III. 

simple  interest  at  five  per  cent.,  (r)  unless  a  different  rate  is 
payable  by  the  custom  of  the  particular  trade,  (s)  or  has 
been  charged  and  allowed  in  the  books  of  the  particular 
partnership,  (t) 

Interest  on  overdrawings  and  balances  in  hand. —  Inas- 
much as  what  is  fair  for  one  partner  is  so  for  another,  and 
the  firm,  when  debtor,  is  charged  with  interest,  it  seems  to 
follow  that  if  one  partner  is  indebted  to  the  firm,  either  in 
respect  of  money  borrowed,  or  in  respect  of  balances  in  his 
hands,  he  ought  to  be  charged  with  interest  on  the  amount 

so  owing,1  even  though  on  the  balance  of  the  whole 
[*391]  account  a  *sum  might  be  due  to  him.  (u)    Except, 

however,  where  there  has  been  a  fraudulent  reten- 
tion, (a?)  or  an  improper  application,  (y)  of  money  of  the 
firm,  it  is  not  the  practice  of  the  court  to  charge  a  partner 
with  interest  on  money  of  the  firm  in  his  hands ;  (s)  for 
example,  under  ordinary  circumstances  a  partner  is  not 
charged  with  interest  on  sums  drawn  out  by  him  or  ad- 
vanced to  him.(a) 2    In  a  case  (b)  A.  and  B.  were  partners ;  A. 

(r)  Ex  parte  Biguold,  22  Beav.  also  a  receiver    appointed  by  the 

167;  Troup's  Case,  29  id.  353.     See,  court. 

also,  Hart  v.  Clarke,  6  De  G.  M.  &  (y)  As  in   Evans  v.  Coventry,  8 

G.  254*  De  G.  M.  &  G.  835. 

(s)  As  to  compound  interest  in  the  (z)  See  Webster  v.  Bray,  7  Ha. 

case  of  bankers,  see  Bate  v .  Robins,  159,  where  interest  on  balances  in 

32  Beav.  73;  Ferguson  v.  Fyffe,  8  the  hands  of  the  defendants  was 

CI.  &  Fin.  121.  asked  for  but  not  given.     See,  too, 

{t)  As  in  Re  Magdalena  Steam  Stevens  v.  Cook,  5  Jur.  N.  S.  1415; 

Nav.  Co.,  Johns.  690,  where  six  per  Turner  v.  Burkinshaw,  2  Ch.  488. 

cent,  was  allowed.  (a)  Cooke  v.  Benbow,  3  De  G.  J. 

1  See  Gridley  v.   Conner,  2  La.  &  Sm.  1 ;  Meymott  v.  Meymott,  31 

Ann.  87.  Beav.  445.     See  the  case  in  the  next 

(u)  See      Beecher    v.    Guilburn,  note. 

Moseley,  3.  2  In  taking  partnership  accounts 

(x)  As  in  Hutcheson  v.  Smith,  5  the  question  whether  interest  shall 
Ir.  Eq.  117,  where,  however,  the  be  allowed  or  disallowed  must  de- 
partner  retaining  the  money  was  pend  on  the  circumstances  of  each 

(b)  Rhodes  v.  Rhodes,  Johns.  653 ;  but  better  reported  in  6  Jur.  N.  S. 
600. 

924 


CH.  VI,  SEC.  V.J      CONTRIBUTION    AND    INDEMNITY. 


*391 


died,  and  his  son  and  executor,  0.,  succeeded  him  in  partner- 
ship with  B.  B.  afterwards  retired  in  favor  of  his  own  son, 
J).  At  the  time  of  B.'s  retirement  a  considerable  sum  was 
due  to  him  from  A.'s  estate  in  respect  of  moneys  drawn  out 


particular  case.  Gyger's  Appeal, 
62  Perm.  St.  73;  Buckingham  v. 
Luil lam,  29  N.  J.  Eq.  345:  Rebill 
v.  Tague,  114  Pa.  St.  82.  Interest 
will  be  disallowed  before  dissolu- 
tion and  allowed  after  dissolution 
on  overdrafts  made  by  one  partner 
where  there  are  special  circum- 
stances. Buckingham  v.  Ludlam, 
supra. 

As  a  general  rule,  interest  will 
not  be  allowed  upon  partnership 
accounts  until  after  a  balance  is 
struck  on  settlement  between  the 
partners,  unless  the  parties  have 
otherwise  agreed  or  acted  in  their 
partnership  concerns.  Gilman  v. 
Vaughan,  44  Wis.  646;  Gage  v. 
Parmalee,  87  111.  330 ;  Brown's  Es- 
tate, 11  Phila.  127  ;  McKay  v.  Over- 
ton, 63  Tex.  82;  Taylor  v.  Peterson, 
1  Idaho,  513;  McCall  v.  Moss,  112 
111.  493;  Sweeney  v.  Neely,  53  Mich. 
421 ;  Cooper  v.  McNeill,  14  Bradw. 
408;  Osborn  v.  Gheen,  5  Mack. 
(D.  C.)  189.  See,  also,  McCormick 
v.  McCormick,  1  Neb.  440;  Brown's 
Appeal,  89  Pa.  St.  139;  Turner  v. 
Turner,  5  So.  W.  Rep.  (Ky.)  457 ; 
Baker  v.  Mayo,  129  Mass.  517 ;  Brad- 
ley v.  Brigham,  137  Mass.  545.  In- 
terest was  allowed  in  Campbell 
v.  Coquard,  6  So.  W.  Rep.  (Mo.) 
360;  Donahue  v.  McCort,  70  la. 
733. 

Or  unless  it  appears  that  the  part- 
ner having  such  balances  has  made 
a  profit  by  retaining  them.  Colgin 
v.  Cummins,  1  Port.  148. 

Or  there  has  been  great  delay  not 
satisfactorily  accounted  for.    Coo- 


per v.  McNeill,  14  Bradw.  408;  Rus- 
sell v.  Green,  10  Conn.  269. 

Money  collected  by  one  of  the 
partners  after  dissolution,  upon 
notes  belonging  to  the  firm  and  set 
apart  as  money  of  the  firm,  may  be 
held  by  him  until  a  proper  settle- 
ment can  be  made  with  his  part- 
ner; and  he  not  being  responsible 
for  the  delay  in  accounting,  and 
having  kept  the  money  separate 
from  his  own  funds  and  made  no 
profit  on  it,  is  not  chargeable  with 
interest  upon  it.  Holloway  v.  Tur- 
ner, 61  Md.  217. 

In  the  settlement  of  accounts 
between  planting  partners  com- 
pound interest  will  not  be  allowed 
by  either  party  unless  it  is  shown 
by  positive  evidence  that  the  party 
charged  with  interest  had  accepted 
the  account  as  thus  made,  or  had 
directly  or  tacitly  acquiesced  in  the 
charge  of  annual  interest  to  be 
considered  as  capital  in  each  ensu- 
ing account.  Bayley  v.  Becnel,  36 
La.  Ann.  490. 

Where  the  evidence  shows  an 
understanding  that  interest  should 
be  charged  each  partner  on  all 
sums  withdrawn  by  him,  and  that 
interest  should  be  credited  to  each 
on  all  sums  advanced  by  him  to 
the  firm,  and  such  charges  and  en- 
tries are  accordingly  made,  the 
interest  so  charged  and  credited 
cannot  be  set  back  on  the  books  so 
as  to  change  the  result  except  by 
the  consent  of  all  the  partners. 
McCall  v.  Moss,  112  111.  493. 
Where  a  partner  agrees  in  writ- 
925 


'1 


RIGHTS    AND    OBLIGATIONS. 


[BOOK    III. 


by  A.  This  sum  was  treated  as  a  debt  of  the  new  firm  of 
C.  and  D.,  and  had  not  been  paid  off.  B.  having  died,  his  ex- 
ecutors clair.ied  interest  from  the  time  of  his  retirement; 
but  the  claim  was  disallowed  on  the  ground  that  no  agree- 


ing to  exhibit  a  partnership  ac- 
count on  a  certain  day  and  make  a 
settlement,  and  on  that  day  refuses 
and  withholds  the  books,  he  is 
properly  chargeable  with  interest 
from  such  day  in  any  balance 
found  against  him  on  a  bill  for  an 
account  up  to  the  date  of  the  first 
decree.  Scroggs  v.  Cunningham, 
81  111.  110. 

While  it  is  a  general  rule  that 
one  partner  is  not  chargeable  with 
interest  on  moneys  of  the  firm  in 
his  hands  until  a  balance  has  been 
struck  or  an  accounting  had,  yet 
where  one  partner  kept  the  ac- 
count books  and  knew,  or  ought  to 
have  known,  the  precise  amount  in 
his  hands  belonging  to  the  firm, 
and  made  at  one  time  what  pur- 
ported to  be  a  full  statement  of 
the  business,  which  was  incorrect, 
held,  that  there  was  no  error  in 
charging  him  with  interest.  Di- 
mond  v.  Henderson,  47  Wis.  172. 

In  general,  where  articles  of  co- 
partnership permit  the  partners  to 
withdraw  certain  sums  annually, 
without  containing  any  stipulation 
in  regard  to  interest  thereon,  inter- 
est will  not  be  allowed.  Miller  v. 
Lord,  11  Pick.  11. 

Where  heirs  were  allowed  to  sur- 
charge and  falsify  a  partnership 
account  between  their  intestate 
and  the  defendant,  interest  was  re- 
fused on  the  errors  in  the  accounts, 
which  were  owing  to  the  mistakes 
of  both  parties,  there  having  been 
no  want  of  good  faith  and  no 
habit  of  charging  interest  between 


the  parties.  Dexter  v.  Arnold,  3 
Mas.  284. 

An  entry  as  to  interest  on  yearly 
balances  in  the  books  is  presumed 
to  have  been  made  with  the  assent 
of  all  the  partners,  and  binds  each 
as  if  made  by  himself.  Pratt  v. 
McHatton,  11  La.  Ann.  260. 

On  sums  received  by  a  partner 
during  the  course  of  business  he  is 
not,  in  Louisiana,  liable  for  interest 
under  Civil  Code,  2829.  He  is 
liable  only  from  a  liquidation  of 
the  partnership,  as  a  defaulter,  un- 
der Civil  Code,  2984.  Hillisberg  v. 
Burthe,  6  La.  Ann.  170. 

Where,  on  the  dissolution  of  a 
partnership,  a  balance  is  found  due 
from  one  partner  to  the  other,  and 
the  former  retains  it,  he  is  liable 
for  interest  from  the  time  of  disso- 
lution until  payment.  Honore  v. 
Colmesnil,  7  Dana,  199;  Bowling 
v.  Dobyns,  5  id.  434;  Taylor  v. 
Young,  2  Bush,  428;  Holden  v. 
Peace,  4  Ired.  Eq.  223;  Sanderson 
v.  Sanderson,  17  Fla.  820 ;  S.  C.  20 
id.  292.  See,  also,  Sanders  v.  Scott, 
68  Ind.  130;  Wells  v.  Babcock,  56 
Mich.  276. 

A  partner  who,  on  the  dissolution 
of  the  partnership,  holds  the  assets 
and  property  of  the  firm,  and  is 
intrusted  with  the  duty  of  winding 
up  the  affairs  of  the  partnership, 
is  chargeable  with  interest,  as  be- 
tween himself  and  his  copartner, 
if  he  mingles  the  money  of  the 
firm  with  his  own,  or  neglects  un- 
reasonably to  settle  his  account. 
Dunlap  v.  Watson,  124  Mass.  305. 


926 


CU.  VI,  SEC.  V.]      CONTRIBUTION    AND    INDEMNITY. 


191 


ment  to  pay  interest  had  been  entered  into,  and  the  claim 
was  opposed  to  the  course  of  dealing  between  the  partners 
themselves. 


The  fact  that  upon  dissolution 
the  partners  agree  that  each  should 
give  the  other  demand-notes  with- 
out interest  for  balances  found  due 
between  them  does  not  deprive 
one  partner,  who  subsequently  re- 
covers a  judgment  against  the 
other  for  a  sum  not  paid  him  on 
the  settlement  by  mistake,  of  in- 
terest on  his  claim,  and  interest 
runs  from  the  date  of  the  settle- 
ment. Donahue  v.  McCosh,  30  N. 
W.  R.  14. 

Where  complainants,  members 
of  a  partnership,  had  just  grounds 
for  filing  a  bill  against  their  copart- 
ner for  a  dif  solution  of  the  partner- 
ship, and  a  large  balance  was  found 
due  to  them,  the  defendant  should 
be  decreed  to  pay  interest  from  the 
time  of  filing  the  bill,  and  the 
costs;  and  where  no  objection  to 
the  amount  allowed  the  auditor 
was  made  in  the  court  below,  al- 
though such  amount  appears  very 
extravagant,  and  no  proof  or  data 
appears  in  the  record  by  which  the 
court  of  appeals  can  correct  it,  the 
court  will  not  undertake  to  fix  the 
amount.  Moon  v.  Story,  8  Dana, 
226. 

On  a  bill  by  one  partner  against 
another  for  an  account,  after  a  dis- 
solution, it  appeared  that  the  com- 
plainant never  advanced  any  cap- 
ital, and  that  his  whole  interest 
consisted  in  his  share  of  the  profits 
of  the  concern.  Held,  that  though 
the  defendant  continued  the  busi- 
ness' after  the  dissolution  as  before, 
the  share  of  the  complainant  not 
being  paid  to  him,  he  should  pay 


interest  to  the  complainant  on  his 
share,  and  not  a  share  of  the  profits 
which  accrued  subsequently  to  the 
dissolution.  Reybold  v.  Dodd,  1 
Harr.  401. 

Partners  resided  in  different 
places,  and  a  large  balance  due  to 
the  partnership  had  accrued  in  the 
hands  of  one  of  them  in  1827,  but 
no  account  was  rendered  by  either 
during  the  existence  of  the  part- 
nership, which  dissolved  in  1830. 
No  settlement  nor  attempt  to  ob- 
tain a  settlement  was  then  had, 
and  the  debtor  partner  died  in  1832, 
and  no  settlement  was  had  until 
1837.  Held,  that  the  parties  had 
been  both  remiss  in  their  duty,  and 
that  the  estate  of  the  debtor  part- 
ner was  not  chargeable  with  inter- 
est on  the  balance  due  until  the 
settlement  in  1837,  when,  al- 
though the  suit  was  pending,  the 
amount  due  was  ascertained  and 
might  have  been  paid  into  court. 
Beacham  v.  Eckford,  2  Sandf.  Ch. 
116. 

A  surviving  partner  is  liable  for 
interest  on  a  balance  in  his  hands 
from  the  time  when  the  business 
might  have  been  settled  up.  Hite 
v.  Hite,  1  B.  Mon.  177. 

As  to  claims  for  payments  of 
usurious  interest  in  the  settlement 
of  accounts  between  a  survivor  and 
the  estate  of  a  deceased  partner, 
see  Berry  v.  Folkes,  60  Miss.  576. 

As  to  when  a  partner  who  man- 
ages the  firm  business,  and  has 
never  made  a  final  account,  is  lia- 
ble for  interest,  see  Crabtree  v. 
Randall,  133  Mass.  552. 


927 


*392  EIGHTS    AND    OBLIGATIONS.  LB00K    Ilr- 

Interest  where  firm  claims  what  has  been  obtained  by 
one  partner. —  Where  one  partner  claims  a  benefit  obtained 
by  his  copartner,  and  succeeds  in  establishing  his  claim,  the 
claimant  is  charged,  as  the  price  of  the  relief  afforded,  not 
only  with  the  amount  actually  expended  by  his  copartner 
in  obtaining  the  benefit,  but  with  interest  on  that  amount 
at  the  rate  of  51.  per  cent,  (c)  On  the  other  hand,  if  one 
partner  has,  in  breach  of  the  good  faith  due  to  his  copart- 
ners, obtained  money  which  he  is  afterwards  compelled  to 
account  for  to  the  firm,  he  will  be  charged  with  interest 

upon  the  amount  at  the  rate  of  41.  per  cent,  (d) 
[*392]  *Confused  accounts.— "Where  a  partnership  has 
been  dissolved  by  the  death  of  one  partner,  and  the 
surviving  partner  keeps  the  accounts  in  such  a  way  as  to 
render  it  impossible,  until  after  the  lapse  of  a  considerable 
time,  to  ascertain  the  balances  due  to  himself  and  his  de- 
ceased partner,  neither  the  surviving  partner  nor  his  repre- 
sentatives can  claim  interest  on  the  sum  ultimately  found 
due  to  him  or  his  estate,  (e)  x 

(c)  See  Hart  v.  Clarke,  6  De  G.  tell  the  true  state  of  accounts,  held, 
M.  &  G.  254.  See,  too,  Perens  v.  that  every  presumption  to  his  dis- 
Johnson,  3  Sm,  &  G.  419.  advantage  was  proper,  and  that  he 

(d)  See  Fawcett  v.  Whitehouse,  1  was  properly  chargeable  with  in- 
R.  &  M.  132.  terest  upon  any  money  found  due 

(e)  Boddam  v.  Ryley,  1  Bro.  C.  C.  from  him  to  the  firm,  though 
239 ;  2  id.  2 ;  and  4  Bro.  P.  C.  561.  there  had  been  no  balance  struck. 

1  Where  one  partner  had  charge     Dimond    v.   Henderson,   2  N.    W. 
of  the  firm  books,  and  they  were    Rep.  N.  S.  73;  S.  C.  47  Wis.  172. 
kept  so  that  it  was  impossible  to 

928 


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